Financial institutions find themselves under constant pressure following continuous innovation enabling new challengers, changing consumer preferences and increasing scrutiny from regulators.
Launching fin-techs spinoffs
Prompted by these pressures, a growing number of established financial institutions are launching their own fin-tech spinoff or digital bank. A flexible and agile speedboat spun off from the robust but slow parent institution or cruise ship.
This concept of launching speedboats combines the best of two worlds: the resources and experience of an established institution with the technology and culture of a fintech. Operating independently these spin-offs are able to deliver significant results in a short period of time, free of the legacy technology and thinking which often anchors their parent organisations.
This is a strategic move that allows institutions to swiftly enter new markets and geographies, test and change products and try new technologies at a fraction of the time and cost of large transformations. Learnings are fed back into the larger organisation, allowing them to gather market insight.
An example of this is New10, ABN AMRO’s newly launched fintech, which provides fast and fully digital loan loans to Dutch SMEs. New10 went from concept to launch in just 10 months.
This growing trend has emerged over the past 12 – 18 months and we expect it to gather pace globally in 2018.
Going beyond Monoline in 2018
In the new year, we expect more fin-techs that were once disruptors with unique monoline offerings, finding themselves challenged by their initial business model, internal development and new players.
As a direct result of their success, their business needs have evolved to focus on growth and diversification and their technology has to evolve in order to support these objectives.
To keep growing at the same pace as before, we see these fin-techs seeking out new technology to help drive their journey and support their long-term strategy. This is an opportunity for them to capitalise on momentum, focus on customer experience while leveraging best of breed technology to deliver seamlessly.
Emergence of composable architectures
We believe fin-techs and traditional institutions are moving in a different direction than normal in the next 12 – 24 months. Instead of internal development, they are shifting their operating models to an API-driven ecosystem, building a modular or composable architecture.
This allows them to attain speed, both in execution and time to market as well as business agility, giving them access to the technology required to be relevant and competitive in a changing market. Why craft an architecture in stone, when you can build it with interchangeable blocks, replacing and connecting component parts as needed?
Apart from flexibility, this composable approach also prepares organisations for innovation and the next market shift letting institutions focus on innovation and the customer instead of ‘keeping the lights on.’