My experience working with banks — Balázs Faluvégi
Bank — Fintech cooperation. A topic many experts in the industry love to talk about, but somehow there are only a few good examples to show. I’m not an expert of this issue by any means, I only have some experience at a couple of banks / asset managers + one extensive one with MKB Bank. It didn’t start today.
In 2015 we had an idea: create a robo-advisor for retail clients who are interested in Socially Responsible Investing.
In the summer of 2016, after market research and some early experiences, we decided to do the same for banks and other financial institutions, because we realized that there are many more possibilities to cooperate with them. We had new technology and agility, they had the legal frameworks and customer base. From a B2C concept, we switched to more of a B2B + B2B2C approach.
Later that year, MKB Bank announced a fintech academy and competition. We applied, and were accepted because we had a great team, and an MVP. The prize was the possibility of joining their newly founded acceleration program run by MKB Fintechlab. This was the first ever fintech incubation batch in Hungary, and probably in the region.
At the same time, we also got into PwC Poland’s Startup Collider, and took part in their 3 months program in Warsaw. It was a valuable experience, we learned a lot and received many high profile contacts from the Polish market, but MKB’s Fintechlab was even more useful for us. The reasons are super simple:
- Fintechlab had a Bank behind them with real motivation for going into digital.
- They provided us many contacts and meetings within the Bank, not only with the highest executives or the digital leaders, but all relevant departments. There was no such thing as a closed door for startups inside Fintechlab.
- All the mentors from the Bank and the Fintechlab staff understood what a Bank — Fintech cooperation needed to achieve to be considered a serious approach.
With this help we saved a lot of time and effort. Still it wasn’t an easy path, even after the acceleration program finished.
From the beginning, we have always really liked the “open bank” or “Bank as a Platform” concept. It makes sense for financial institutions from the business perspective, but we learned the hard way, that sometimes other departments have other incentives.
In medium or large sized organizations, there are several different departments that don’t have perfectly overlapping interests. This is not their fault, they are just doing their jobs, and these kind of checks-and-balances actually work really well in a conservative banking environment.
There is a very good reason banks need to be defensive in most cases. While financial services (payments, insurance, wealth management, bank cards, etc.) are getting a bigger slice of the whole cake, taking deposits and giving out loans are still some of the most important jobs a financial institutions do on a day-to-day basis. In other words: they receive money from their customers and loan it out to others. This results in a huge leverage and risk for banks. If somewhere between 5–20% of the borrowers fail to fulfill their payback and interest obligations, a bank is in a huge trouble. On top of that, financial institutions are hit by more and more cyber attacks each year, plus data handling regulations (GDPR should ring a bell) are also becoming increasingly important for them.
Innovation is never as easy as it seems, and this is especially true in the financial sector, with its strict regulations, and high leverage risk. You have to address all these risks during your sales and implementation process, and each department has their own responsibility to handle these risks. The best is to be prepared for these issues as early as possible during the meetings. I have to admit, we failed to do this properly several times at the beginning.
There were two critical factors to building up a good Bank — Fintech partnership in our case, after the first trials.
- Finding an innovative leader of a business-oriented department, who became the internal champion for us. It’s important to note, that even though we had several internal champions already, they were all amongst the digital leaders of the organization, which meant, that they couldn’t help us alone in building up a mutually useful business case. To find our special internal champion though, it was crucial to hold the first meetings with him together with these digital leaders.
- Making a series of workshops, where all of the relevant departments of the Bank were present each time. During these 1–2 hour sessions on various topics we got to know everyone’s needs and could thus build up the new business concept, not to mention trust, among the participants.
After the workshop series, 2 months of negotiations followed. Mostly, it wasn’t about the price, but rather the timing and parameters of the system. When the final agreement on these parameters had been reached, 4 months of legal work started, including going through the legal and purchasing departments of the Bank. As I learned, this process is very similar in each financial institution’s case.
When the development and implementation started, follow-up was also super-important. This time, we were prepared, we reacted on time, and the weekly meetings proved really useful for both sides.
Soon thousands (and a little later maybe tens of thousands) of retail clients of the Bank will be able to enjoy the benefits of digital wealth management’s speed and efficiency, while keeping the human touch with their advisors, and also receiving information on their portfolio’s social responsibility + it’s impact and financial performance. Even though the whole process took more than a year, we couldn’t have realized this goal alone. We hope we can be a nice example that keeps proving that Bank — Fintech partnerships can work for all stakeholders.
Balázs Faluvégi
