As large banks embrace FinTech start-ups and their advanced technology rather than compete against them, both parties aim to eliminate the “middle man” in financial services transactions. This “middle man” is a metaphor for the different steps of customer interaction that technology has removed to make banking more efficient. However, in the hyper-speed environment from which bank - start-up integrations emerge, a new middle man - between these parties has become necessary.
Large, established banks feel the pressure of time as they struggle to hold on to older systems while integrating new digital services created by start-ups while also holding on to a loyal customer base and reputation. HSBC is still recovering from a systems crash last weekend which delayed 275,000 customer payments - advanced start-up technology would most likely have helped avert the crisis. Intense competition between banks in product development also adds to the critical nature of time. After being introduced to bitcoin, big banks have gone in the alterna-currency direction - Barclays just became the first bank to recognize Bitcoin transactions while others are working on their own cryptocurrency (e.g. Citibank's Citicoin) using Bitcoin's blockchain technology.
The digital solutions developed by start-ups are being integrated with the banks to optimize efficiency but banks are discovering that finding the right "fit" with start-up companies around the world can be time consuming and difficult. Start-ups, on the other hand, that have developed new solutions are trying to find their place in the overall ecosystem -the inter-competition to partner with a bank is fierce. While the middle man was inefficient in the bank-customer interaction it is increasing efficiency in the start-up-bank relationship.
Demonstrating the rise of this middle man last weekend KPMG International announced that they signed an exclusive advisory alliance with Matchi, on online portal that connects financial institutions with a selection of digital innovators around the world. Barclays, AIB and Standard Bank are other lenders also partnering with FinTech companies through Matchi and more are following. Perhaps start-up solutions can eventually erase the new FinTech middle man too?