Banks vs Fin-Tech Start-Ups and the Digital Transformation Race

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22 October 2014
Juan Mazzini
The digital transformation in financial services is about the move from the physical to the virtual world, from person-to-person interaction toward person-to-machine or machine-to-machine. It is Celent’s view that Integrating and coordinating among disparate and siloed delivery channels will be critical to satisfying ever-increasing customer expectations. This in part encompasses looking at how financial institutions relate with their customers and ecosystem, but also about the underlying infrastructure and processes required to provide a digital experience. It also encompasses re-thinking how a branch should look like and what services it should provide as an integral part of the customer experience. In this context I had the chance to moderate a panel during last week Next Bank Americas. With the participation of Hugo Nájera Alva - Head of Digital Banking at BBVA Bancomer, Miguel Angel Fañanas - Director of Corporate Customers and Multinationals in Telefonica Mexico, Héctor Cárdenas - CEO and cofounder of Conekta (, and Martin Naor - partner and CEO of Infocorp, we discussed about the digital transformation in the financial industry. What an excellent moment to do it, along with the BBVA Open Talent that looked into promising fin-tech and digital life start-ups. I wanted to take this opportunity to share with you some of my take aways from this panel:
  1. Banks have a harder time reconciling digital with their legacy platform and infrastructure, and how they have been doing business for many years. Fin-tech start-ups instead are born digital, without any legacy, but they need to be careful not to build one for themselves as they grow.
  2. Technology doesn’t seem to be the constraint for becoming digital, neither is budget. Banks have much more resources and still we are seeing some interesting start-ups in different aspects of banking disrupting with much better digital propositions. Banks instead need to push the digital concept across the organization, and very tied to the concept of innovation, they need to make fundamental changes in the culture of the organization. This is what banks such as BBVA are trying to do though their Innovation Centers, open API’s, Hackatons and fostering an ecosystem of fin-tech startups in Americas and Europe, and why they partner with Next Bank to propel those.
  3. Digital also needs to reach to those customers that are still analog. This requires banks to re-imagine their branches and provide solutions that leverage the digital components but understanding the customer engagement required. Banks are quite better positioned than fin-tech start-ups in terms of physical presence, though it is no longer acceptable for banks to continue to open (or update) branches under the old branch paradigm.
  4. Banks need to better understand what customers really want, and that is not necessarily other financial product, but maybe help with administering their finances, banks helping them to save money, helping SMEs make more business, even expand globally. These are the type of issues fin-tech start-ups are tackling today. Banks have tons of information but they need to become smarter in how they use it and what new services can they offer to their customers. It is also important to look at how customers use technology in their everyday life to find ways of making banking more convenient.
  5. You just don’t claim that you are going to be more digital and then magically wait for that to happen. There is a lot of effort involved. In cases such as BBVA, acquiring Simple is part of such effort. Understanding the bank limitation in terms of its culture is also important to define what is feasible and what not. Reaching out to understand what the ecosystem is doing, actively engaging and participating to come up with a better digital vision has become an imperative today.
Overall and subjacent to the digital transformation race there is still an open debate whether fin-tech start-ups are a partner or a threat to banks. My take is that they are more a threat than a partner in the long run, but they need each other in this initial stage so partnering seems a good starting point. In the long run banks should incorporate those ideas that work; otherwise they will be cornered to a role where they just process transactions for those companies that dominate the relationship with the customer. The implications of this scenario are daunting for banks. What do YOU think?


  • Juan, Excelente review.

    We not olny have to think about this fin-tech startups as a threat to finantial traditional industry (or if you want to see this new players from the customer side, as a leverage for customer experience), huge companies such as Google or Facebook can make the retail banking upside down.


  • Your thoughts are odd given that banks have been digital for several decades. You may mean that Banks are not embracing new channels. Again not earth shattering given they have legacy customers transacting on these platforms.

  • Banks however have the established compliance piece in place to leverage against enhancing customer relationships as well as some emerging opportunities in the financial world, example the Jobs Act which, when implemented in force by the SEC for the general public will require a robust need for authentication of potential participants on the equity side. Branch infrastructure, for example, will be a great way to facilitate obtaining market share for this opportunity if considerable resources are dedicated to driving and funneling customer attraction via that channel to meet that compliance. With that however is the understanding that this can back-fire if too much exposure occurs (into new innovation), as banks have the resources to compensate for any negligence, losses, risks, and general negative impact against the customer base. Too much too soon is a valid concern. I would say however Banks need to adopt a culture and put actual bodies unaligned to current banking channels and primarily focused for innovation with a more ‘start-up’ perspective. Once a valid business case has been validated, leveraging the rest of the bank in a cross-functional manner could reap extreme scale as if it were simply a FinTech going to market without those existing relationships and stakeholders, focused for centralized profitable.
    In alignment to the article, it appears banks can leverage current existing infrastructures & resources for competitive advantage that the FinTechs cannot. BBVA's acquisition of Simple is a valid approach to capturing innovation and leveraging it across its customer base, integrated into its internal core processes. I would not agree that this task is so daunting for banks if they truly understanding how they are much more capable than FinTechs, however as time has proven innovation has consistently come out of necessity and scarcity of resources, which in itself is added value.

    Many thanks,


  • Thanks for your comment Emiliano. Adding to your point about big players from outside the industry, it just makes the scenario even more daunting. In history, industries that have been disrupted have started by denial ("This will not happen to me", "these are not really competitors", etc...) to see them turned upside down at the end. I believe that in every challenge there is an opportunity, but it all starts with accepting the challenge. After that, the road only gets bumpier, but what a lot of fun!

    I know about the excelent initiatives at Banco Galicia with Eminent and Move; congratulations on those!

  • Thanks for your comment Arthur. I totally agree. What I indicate as daunting is the scenario where banks relinquish to interacting directly with the customer in a digital environment that is today better understood by fintech start-ups and non traditional players than by banks (in average).

  • Thanks for your comment Bee. They may seem odd, but I am looking to the banking that is ahead, not the banking as we know it. I am looking to new players such as Apple in payments, or Moven and Simple providing a better banking experience. I am looking to fin-tech start-ups that hook into the Open APIs banks are providing and come with much better ideas and use of the existing information. Digital is not just about channels but also about customer interaction, customer experience. Why banks can't do what those start-ups can? What will banks loose if they do not jump into the digital transformation race with all they have? I do not want banks to dissapear; I expect this to be a wake up call. I also expect to see another way of banking.

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