Fintech and Banks

It is generally accepted that banking world including retail, commercial, private banks and investment banks are playing catch up with the recent technological advances and have a number of legacy systems and platforms with various levels of technology. In the race to implement these bolt -on systems to achieve a particular business objective at the time, often little thought has been given to its architecture and how it fits in with the overall system architecture of the firm.

Furthermore, from my own personal experience, the sheer size of the portfolio, complexity of the operations and requirements, the banks have made large projects of switching one system to another. This challenge is further compounded by having different lines of business and different asset classes with their own front to back flows and processing requirements. Such legacy systems are a financial drag to the banks, both in terms of direct costs such as licensing fees, maintenance contract costs and often human resources cost associated with processing and working with them.

As well as customers, banks have business knowhow and experience. The advantage of the banks cannot be underestimated as it cannot simply be transferred across.

Fintech firms on the other hand have the technology to meet ongoing and often complex requirements of the banks. Fintech provides a unique technological transformation opportunity to the banks across different business lines to do away with their legacy, inefficient and costly platforms and replace with state-of-the-art infrastructure.

Going forward, I believe the most likely operational model would be one of collaboration between banks and Fintech firms where banks provide the business information, know how, processes and requirements and Fintech provide a coherent and well-designed architecture of the bank infrastructure.

However, the challenges cannot be underestimated as security, controls and complexity of some of the operations need to be clearly mapped to the new infrastructure.