Global venture investment in FinTech grew by 11% to $17.4 billion in 2016, clearly signifying that the digital revolution has arrived in the financial services sector. It is the first time China with $7.7 billion of investment outpaced the US with $6.2 billion. What is interesting is the number of deals in which the investments were made with China at 28 deals and the US at 650 deals.

The year 2014 was the starting of this rhetoric change. Fintech became the common ideology linking technologists in finance against the old system and people started listening to new brands who could provide cheaper, quicker, online solutions to their problems. As entrepreneurial ambition and consumer demand was set free by regulatory change, even the holy grail of financial services – a banking license – became not just tangible but a reality. Consumer-facing fintech firms, armed with an implicit understanding that they represent the very best of ideological intentions, boomed.

As banks and financial institutions globally navigate the transformation trail, there’s no doubt that new entrants such as fintech and e-commerce giants are bringing fresh and innovative ideas and services to a marketplace of eager consumers.


2017 looks like a very promising year for fintegration, i.e., how banks embrace innovations from the broader fintech ecosystem to benefit customers. Big banks have established customer relationships and risk management expertise that many startups lack, while many fintech have developed simplified experiences that reduce customer pain points. By combining the strengths of banks and fintech, they can partner to deliver innovative products more quickly to more customers than ever before.

Exploring and facilitating such partnerships to drive change will require financial institutions to recognize that they are dealing with a whole new category of third-party service providers. Such initiatives will need to be more experimental and collaborative in order to rapidly solve specific problems and address evolving needs as disruptive changes keep rewriting the rules for doing business.

Banks will need to figure out how to augment their traditional sourcing and procurement practices in ways that are more conducive to working effectively with smaller fintech companies in a more-agile, experimental environment where the change is low cost, low risk and quick.


One guarantee is that the rate of change is going to accelerate in an incalculable way in 2017. 2017 will make 2016–which was really the convergence point of artificial intelligence, machine learning, voice interactivity–look like slow motion. The acceleration of the rate of change will be like a compression of 2014 to 2016–all that took place, compressed into one year. What this means is, banking, payments, and retail shopping has been upended.

Big banks that are prepared to engage with fintech will also need to adopt a very strategic approach that addresses two key perspectives. First, they need to have in place strategic priorities for the changes and new services or models they need to implement. This includes identifying capability gaps that need to be filled or addressed by the bank itself or a fintech relationship. Banks should also explore and assess opportunities that transcend the immediate ecosystem in terms of future capabilities or services.

The need to remain forward-looking amid the constantly changing landscape will remain critical, meaning banks need to be committed to the innovation trail. Many organizations have set up or are turning to innovation labs, incubation hubs and accelerators that provide crucial links between financial institutions and fintech. An accelerator or incubator can provide crucial support in providing ideation, exploration, experimentation and piloting of certain opportunities or solutions.


2017 is the year that where machine learning and data analytics moves beyond the hype and actually starts delivering results. Online lenders in particular are going to start using online information from providers like Yodlee, where there’s going to see the biggest impact is services that are focused on the underserved customers, because you really don’t need machine learning to help a customer with a 750 credit score.

KPMG recently launched mLabs, a new fintech accelerator connecting seven Australian mutual banks with 14 fintech startups that want to identify and develop commercial solutions to business challenges. KPMG’s mLabs is designed to drive various commercial outcomes for participants, whether designing and launching new digital products and services, enhancing the customer experience or improving internal efficiencies. There should be no doubt that with this advancement we will see more incidents like the one where fraudsters will target mobile wallets and apps to get at payment card data, ATM fraud will mount especially as we see Financial Institutions expand Cardless ATM applications on mobile devices and through digital wallets.

Banks are, thus, in a position to better connect customers and merchants together, and there is a lot of innovation that will happen next year that will help banks better connect merchants and consumers… I see the bank as a great connective tissue between these two groups and it rarely ever gets used that way, but I think data analytics are the technology under the hood that banks need to turn outward and monetize.


While many schemes exist to support innovative startups from concept to early funding, much more can be done to bridge the gap between ideation and the commercialization of innovations. banks are creating new businesses within their existing structures that adapt and collaborate to meet these new opportunities and make better use, faster, of their enduring source of competitive advantage—customer insight.

By Humneet KAUR

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