How fintechs are shaping the future of finance
One of the world’s largest online API events – APIX – was recently organised and hosted by connectivity and integration expert, Sensedia. Run over three days, APIX attracted some of the world’s leading tech specialists and strategists, all keen to share their perspectives.
Here, Patricia Haynes – VP, tech ops and delivery, Zopa bank, Tadas Bakutis – CTO at banking services/payment provider, Connect Pay, and Elliott Locke – co founder/CEO at expat wealth management platform, Abroaden, discuss how to build a sustainable partner ecosystem, how fintechs integrate services/enhance the user experience and what the financial sector will look like in 10 years time. Event Chair is Sesh Ram, Sales Director, Sensedia.
Sesh: Finance is undergoing a profound transformation and fintechs have played an increasing role in shaping the financial and banking landscapes. From what we have been experiencing, fintech ecosystems are improving democratic collaboration and technological advancement. So how can you build a sustainable partner ecosystem?
Patricia: The best place to start is with your own internal teams, ensuring you’re able to facilitate hybrid or remote collaboration. 15 years ago we wouldn’t have considered it possible to complete the final stages of building and launching a bank without an onsite presence, but due to the challenges of the pandemic during 2020, this is exactly what we did.
Technologists have been working at least partly remotely, probably more than most industries, for a number of years already. So when we went into lockdown it was a smooth transition. We had access to communication and software development tools such as Slack, Github and Zoom etc – tools we were more used to than those outside a tech environment.
Adjustments however, still had to be made; one of my top priorities was to take what we had and improve them and how we communicate. This involved everything from adding extra tools for engineers to be able to pair remotely, so it seemed they were sitting next to each other in the office, to improving the tech we sent to everyone’s homes, enabling them to be as present as we needed them to be.
As the personal and working lives of colleagues and wider groups merged, tech allowed people to innovate at the kitchen table, outside their 9-5 boundaries, and give their best when they were at their best, instead of within a fixed time period.
The biggest thing we’ve had to learn is to make that extra effort and over communicate – particularly because there are other external/internal teams and dependencies. The chit-chat that spawns information-sharing and learning by osmosis can almost disappear in a remote or hybrid situation so it’s important to nurture it.
Internally, this can mean making the most of forums, like Chapters. We have a ‘tech all hands’ forum which is invaluable in bringing in new ideas, sharing innovation across a wider audience and giving people the chance to put their hands up and ask for help to solve a challenge or problem.
In the past we may have asked colleagues in the office for feedback but now we can go onto forums and share our tech community’s learnings across our network of partnerships, creating a wider collaborative community. There are more opportunities to learn, build strong partnerships and have that tech conversation.
The finance landscape
Sesh: Having looked at how to support and build a tech community, most banks understand innovation is inevitable, and even larger banks appreciate the benefits of working with fintechs. So what will be the next key technologies/experiences shaping the competitive landscape of finance?
Tadas: Banks are acutely aware of how innovative fintechs are and during my 20 years in the financial services sector, I’ve seen changes in how banks are starting to collaborate with fintechs, share their working spaces through innovation hubs/communities and implement ideas from external sources.
In the future there will be greater demand, via collaboration and integration, for technology that can support the bigger financial institutions. As a small start-up, we’re already working with eight partners which shows you don’t need to create everything on your own. Historically the larger banks ran everything, including the maintenance of their own systems, but in this new age of fintechs, separate companies and their component technology take responsibility for Anti-Money Laundering, personal identification etc.
APIs and security
Smaller fintechs focus on creating the functionality and scalability to support the user experience, and going forward, there’ll be more dependency on this. Technology that allows partners to scale up and grow together in real time and in a secure way – such as APIs – will be vital, particularly as the tech that used to exchange data between banks is now obsolete due to cloud computing.
Security is a key component of technology and must be included within a growth strategy; paying for everything today is seamless and at the centre of this is integrating tools to support the user experience. Fintechs can propose ways to easily integrate services and share everything that’s needed to build a platform to support a b2b and b2c client base.
Wealth management and fintechs
Sesh: With digital tools transforming the way people approach finance, wealth management is the next financial service that will be impacted by fintechs. We’re already noticing an emerging new generation of investors that expect a wealth management experience, so how do you see wealth management providers and fintechs working together to deliver the best experience?
Elliott: In the wealth tech and wealth management sector, technologies have developed in parallel. If you look at the history of wealth techs, trading apps and robo advisers came out in 2010and their common link was they were built directly as regulatory entities, so were brokerages, licensed by local market authorities.
Wealth tech 2.0
Over the past 10 years the process expanded, similar to Open Banking, where new guidelines were drawn up for payments, account information and general finance services provision. I call it wealth tech 2.0. Instead of coming to market, directly regulated, wealth techs and fintechs are providing additional services which deliver what retail investors want – an experience built for them through a trusted source of information. Trust is crucial as we’re asking people to make an investment and build a 20/30 year relationship that will help them save and meet their long-term financial goals.
We create trust by working through the user experience and language (we cannot understand our audience without the right language). And it’s the tech that enables us to plug into different verticals. At Abroaden, for example, we build on the stack of a regulated provider so we don’t have to spread resources and focus on compliance and regulation. We meet our obligations, but we don’t need a department to ensure we do this; instead we focus on how we build the user experience. We listen to our users, test our products and new features, work on marketing, look at what does and doesn’t work and really build the service. We focus on a specific niche – expats – and this target audience approach is common in the wealth tech sector.
What’s really cool is the APIfication of the financial stack. For financial services and entrepreneurs it enables users to plug into any tool that may help their business. For example, in investing and money, psychology and how we interact with our finances and how they interact with us, is hugely important. To be able to plug an emotional intelligence trainer into your platform, through an API, transforms the service you’re able to deliver, adding value. And the great thing is you don’t have to be an expert in this vertical.
The ability to take raw data feeds from APIs and turn them into something useful, something clients really want, with the right design is fantastic. This is where the value lies and in the future more wealth techs will become niche. Wealth will be more impacted by APIs because this sector has to build long term relationships; banking is more transactional
Finance in 10 years
Sesh: What will finance look like in the next 10 years?
Patricia: It will be more customer centric – customers are more demanding now. Over the last 10 years apps have promoted the growth of fintechs and wealth techs, and this is an area where the larger financial institutions have lagged behind.
Tada: Innovation and change will cause turbulence in the sector, but in 10 years it will settle down and in 20/30 years times these market disruptors will be viewed as ‘the old fintechs’. The focus now is on improving the user experience, giving more value and making day to day activities easier, more seamless.
Elliott: If we believe in the statement ‘in the future every company will be a fintech’, it means embedded finance has won the fintech wars – if it is such a thing! In 10 years time, companies that are not fintechs will have more fintech tools, like Apple deciding to offer buy now, pay later. Those who win customer trust and excel in delivering the customer experience will be those who have carved out and own a niche. One size fits all will no longer exist; it’s either going to be part of a non-financial services stack or someone you really trust and need.
Sensedia helps companies become more digital, connected and open through its technology platform and expertise in APIs and Microservices. Whether integrating channels or creating ecosystems and modern multi-cloud/hybrid architectures, innovative enterprises rely on Sensedia as a partner in API management, Microservices, Service-Mesh and Open Banking, and for rapid legacy integration.
Sensedia is present in Brazil, the UK, Ireland, Peru, Colombia, Mexico, Germany, Spain, Switzerland and Lithuania. www.sensedia.com