The Future of Banking - From FinTech to TechFin





In our data-driven world, the commodization of technology is a driving force behind the financial technology (‘FinTech’) space. Yet, for over 40 years, the mantra “follow the money” has been the traditional brick-and-mortar upon which financial firms stand. With the likes of Uber, Amazon, Samsung, and Ant Financial disrupting the financial services market, it’s time for banks to be ‘data-driven’ or risk falling by the wayside.

While the speed at which Big Data, analytics, machine learning, and artificial intelligence are making waves is impressive. It is the increasing number and variety of new entrants into the financial sector making the current period of FinTech stand out. It’s these new entrants, typically non-financial service organizations with customer bases on financial law and regulation, which have set the bar for data-driven businesses in the financial sector.

Loosely known as TechFins, established tech firms entering the world of finance can often be characterized by their ability to leverage data. They’re bridging the gap between immense amounts of data once gathered simply for marketing purposes toward a more customer-centric experience within the frameworks of their primary business and into financial services.

What TechFins Are and Are Not


It may seem logical to assume TechFins are simply an enhancement of FinTechs, but they’re progression is more complex. Rather, it is an entirely new type of market altogether. Originating in the tech space with a focus in e-commerce environments, these organizations are connected to a number of clients both consumers and business. Very often they have blended the roles of marketing and finance within the well of data available to them to enhance their customer experience offerings.

As TechFins grow, their established international networks and the data they already provide to financial services firms may showcase opportunities to offer services directly to their customers. Their ability to reduce transaction costs, provide a more comprehensive dataset, and thereby improve decision making results in increased inclusion for those previously outside the scope of larger institutions. This change in the financial services environment puts SMEs, consumers, and those in the developing and developed world who are struggling on a more even playing field.

In cautionary measures, TechFins may unwittingly put established regulations at risk. For example, discretion over client assets, taking deposits, pooling assets, or simply the solicitation of clients may fall out of the scope of financial service regulations within the TechFin sector creating confusion as to whom the rules apply.

Leveraging Data in the Financial Services Sector


While customers may balk at giving away information in some sectors, they give it freely in the world of TechFin. The value of traditional production is exceeded by the value of data in which data is the new currency. This new valuation creates a pressing need to adequately regulate ‘data intermediaries’ both in the TechFin and the FinTech space to protect current and future customers.

It is a balancing act, according to one thought leader in the digital space, who posits the digital world has the right infrastructure to manage data. But, financial institutions need to reinvent themselves by letting go of distribution through paper channels and moving to distribution of data.

Risk and Reward


Risk analysis from regulatory inquiry reveals systemic risk because TechFin data is essential for a financial institution or if it provides data for several institutions. To guard against leaks, hacks, and other reckless or criminal misuse of data, systemic risk prevention measures must be considered and applied.

For many banking institutions, a data-driven strategy may fall outside their comfort zone. However, many banking leaders understand what’s happening and what needs to happen to lead their institutions in the TechFin space. This includes recommending banks have a strong data management program behind the scenes.

Other thought leaders in the financial services industry know data and analytics insights are the defining piece of the space. They understand the need to map and capture customer’s intended and actual behavior across products and channels to improve the customer experience and design what it is the customer wants.

The sentiment of the changing face of the financial services and tech within the space, may best be defined by Anthony Thompson of Atom Bank who said, “Everything we do will be driven by data. Using data analytics and predictive technologies, we will help customers know what they want before they even think about. We are in the data business as much as we are in the banking business.”

While many thought leaders in the banking and financial industry, understand and are driving the conversation, it’s interesting so many institutions have not found consistent ways to create a data-driven culture. Do you want to help change that?

Take a look at our latest Credit Risk jobs here.

For the East Coast and Mid-West teams please call 212-796-6070, or email newyorkinfo@harnham.com.

For the West Coast team call 415-614-4999 or email sanfraninfo@harnham.com.

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