Banks and financial technology innovators should work hand-in-hand instead of view each other as rivals.
That was the main theme during the Kyiv Post’s Tiger Conference Fintech panel discussion on Dec. 5, which was organized in partnership with Alfa Bank.
Banks are traditional “old-school” service structures with the ability to invest, whereas financial technology enterprises are innovative yet struggle to find seed money. The two can and should help each other out, the panelists agreed.
“(Banks) are unable to innovate, and it’s clear to me that the only way we can benefit from fintech is to bring in fintech ideas from the outside,” Ivan Svitek, general manager of Alfa Bank Ukraine, said during the panel discussion. “So we have to create an ecosystem that makes it interesting for fintech to work with us.”
If not, the banks will most likely lose money, time and create a major headache for their own teams.
This was the situation with Alfa Bank, Svitek said.
“We had experience of trying to create a fintech lab (probably a couple of hundred people working there) and it ended in a fiasco,” he said. “In the end, we chose a different path.”
While the banks “lack focus” on micro strategies, fintech leaders tend to focus only on one product at a time, Svitek said.
“I look at how I spend my time – everything from compliance to regulation, corporate business, operations issues, audits,” Svitek said. “(Banks) are absolutely not focused, we’re unable to innovate.”
PayForce CEO Ivan Istomin who was also one of the speakers agreed. Banks initially viewed financial technologists as competitors or simply small players with little relevance. But the situation has been changing.
“Currently (banks) see them as partners, they still don’t understand how to work properly with these partners, but at least they’re trying to… find a way.”
What banks and financial technology enterprises should concentrate on is the business-to-business segment instead of the business-to-customers segment, which is already served by quite advanced financial technology.
“Business-to-business customers also want their business banking processes running as smoothly within the business-to-customers segment, so I think there are a lot of opportunities and a lot of room for development and cooperation between fintech and banks,” Istomin said.
Both Istomin and Svitek see untapped opportunity in the small- and medium-sized business sector since this is a category of clients who are always looking for advancements. The segment is “completely underserved,” Svitek said.
But to do that, the Czech-born banker says that Ukraine should learn from the United States.
“It’s a whole microsystem,” he said. Startup training clubs, coach volunteers, angel investors and private equity funds all make it possible for startups to grow into companies.
“There is a whole infrastructure for taking an idea and making it into something big, but I don’t think this is something that can be forced by Ukraine’s central bank,” he said. “But unless this microcosm is created, there is no future.”
Svitek’s bank created an innovation lab center where it invited various startup teams to work on projects. The bank provides mentorship and seed money “and if we like the idea then we integrate them into the bank, but we always… keep them separate.”
Michael Kratochvil, CEO at BudgetBakers and CEO at Czech Fintech Association, says that fintech startups have about three to six months during which they must launch their innovation. If not successful, they die off.
To have more chances to succeed, startups should think globally.
“Force the teams to think globally from day one,” Kratochvil said at the panel.
Istomin suggests startups partner with local banks and companies since they give them access to their customer base.
As for banks, they should place equal emphasis on finding good financial technology ideas and the quality of the team executing the idea.
“I look for a certain level of maturity,” Svitek said. “We’ve been (looking) at fintech as something completely new. No, fintech is an old-school business, it has maybe 10 percent that is new but everything else is really old-school. So when I look for new teams, I look at their ability to solve old-school problems.”
