Accenture’s
not talking about outsourcing so much these days, but can pitch a
strong digital message, says CEO Pierre Nanterme which resonates across the
Atlantic when Andy Murray, British tennis ace made headlines recently and this
time it’s off the court by teaming up with Seedrs, an up-and-coming British
crowdfunding platform through which small companies sell stakes in themselves.
Approximately
4000 fintech startups are active with a dozen of them being valued at over $1
billion .Most being tiny though they are growing fast. Lending Club, the
biggest fintech lender, has arranged $9 billion of loans since launching in
2007 compared to $885 billion of credit-card debt in America alone. While fintech
groups do business in the billions Banks deal in trillions. Few in Silicon
Valley or Silicon Roundabout want to take on that heavily regulated bit of
finance. Many admit they depend on the Bank. After all, you need a bank account
to use most fintech services.
1. Fintech target only the opportune areas in
the Bank and the associated complicated process aligned to them without
targeting something end to end.
2. Fintech are not monoliths as there is a
clear distinction between the fintech startups that have built systems they
want to sell to banks or that require banks to work with them, such as Aire and
GoCardless, and fintech startups set up to compete directly with the banks,
such as Ratesetter and TransferWise.
3. FinTech companies are extracting the most
profitable portions of the banking model, leaving banks stuck with high
overhead and less profitable products. Around half of all (retail) bank
customers are unprofitable already as Banks follow a loss leader pricing
strategy
Fintech companies have constraints apart from scale and size in
terms of
1. They are not well-staffed and suited to deal with consumers'
financial services needs as they have desks to deal with technical-support issues
& to displace banks, it will take a lot more than just “technical
support."
2. Banks also have a major edge over startups when it comes to cybersecurity.
The implication is that since smaller tech firms cannot afford to make that
kind of investment, they will remain beholden to banks.
Bankers and Silicon Valley types are fond of framing their
rivalry over the future of financial services as ‘A winner-takes-all game’. That’s
certainly is not what is the result of
the ‘Bankers and Silicon Valley’ rivalry rather it’s a story of two sides surviving one another — and may even needing
each other.
While
the Banks will be left to deal with infrastructure and regulatory issues thereby
allowing the Fintechs to free up money and resources to concentrate on
developing new technology. The Fintechs don’t expect to get charters in US,UK,
Canada, New Zealand, Australia or
elsewhere and here is where the banks are needed but at the back end. “The banks and fintech firms
are settling into a pattern of mutual dependence and the ‘Balance of Power’
getting reflected in Banks’ pouring investments into innovation labs and acquiring customer-friendly
startups.
"Banks are
recognizing now that the only way forward is with tech companies that own the
customer experience," Brett King, the founder and chief executive of mobile
money-management service Moven, said in a characteristically bold declaration.
Besides for Banks’ it’s difficult to innovate fast when you are a brand as apart from reputational risk there are a range of rules
an established financial institution must adhere to – everything from
regulation to security. To recoup their resulting market losses and mitigate
the threat of FinTech insurgents, traditional banks and other legacy players in
the financial sector are discussing a range of strategies, including charging
more for low-margin services, closing bank branches to cut costs, and the most
substantial one- Acquiring, Partnering
& Launching/Funding FinTech companies.
Last
year Barclays launched their own fintech incubator and Santander set up a fund to invest in fintech companies, while this year Visa Europe has launched an
accelerator called Collab.
Rhydian Lewis, CEO and founder of the
peer-to-peer lender RateSetter believes that
Banks don’t yet know how to incorporate innovations into normal business. For
that reason, he says, fintech start-ups generally don’t have to worry about having their ideas copied or stolen by
banks: “Good intentions are not enough, banks need to change their ability to
take new innovation to market if they want to see a return on their investments
in the fintech community.”
As
customer expectations extend beyond categories, successful solutions must move
beyond silos. The environment it operates in, the devices on which it works,
the winning themes - they could all be redundant in a longer time-to-market.
Enterprises must hence focus on quick execution of ideas, in stark contrast to
how they have traditionally operated. Digital Transformation moves to a
different beat as it is in a space where forces driving the ecosystem are in a state of constant flux.
Infosys , Indian
outsourcing major has made two acquisitions – that of Panaya and Kallidus – but
the total value of these acquisitions is less than $ 0.3 Billion. This doesn’t
even match the incremental cash flow the company has got in just one financial
year. According to Infosys, its liquid assets stood at $ 5.50 billion on March
31, 2015.Wipro has gone in the same lines and bought ‘Designit’ and sits on a
cash pile of over $2 billion. Accenture has acquired ‘Chaotic Moon’, ’PacificLink’
and ‘Bright Step’ to consolidate its digital capability is a space of less than
a month.
Accenture’s
early investment in digital services capabilities continues to pay off with the
firm reporting a 30% increase in digitally-derived revenues for its latest
quarter ending March 2015.Is this the beginning of ‘outsourcing being a progressively
a less talked word if not a ‘dirt’ word? With cash stock piles and a few
Fintechs of approximately 4000 valued at over a Billion USD its shopping time
for outsourcers.
Burning cash
is another thing.
