Collaborating with Fintech’s drives transformation and accelerates change

By André Casterman, Chief Marketing Officer at INTIX, the data management fintech.

There are various ways for financial institutions to benefit from advanced technologies and business models provided by so-called FinTech’s. For those still hesitating to make the step, one approach is to start collaborating with FinTech’s that help them in a non-instrusive, incremental way thereby limiting business risks.

We heard it: “Bank – FinTech collaboration is the way to go”

Whereas most of the early FinTech talks included fears of so-called disruption, a change in mindset occurred during the last year as most FinTech’s realised that the shortest path to revenue generation is to partner with banks rather than competing against such established and trusted institutions. Over the last 18 months, multiple deals between banks and FinTech’s have been announced demonstrating not only the viability but also the strategic importance of such collaboration.

Whilst this “collaboration” theme comes as a change vs. the early days, it is actually not new at all. Financial institutions have been using third-party software solutions for the last 4 or 5 decades. What is really new thanks to FinTech’s is that incumbent institutions can now easily take advantage of very advanced ways to drastically improve or, when desired, to re-invent their businesses. The recently hyped FinTech – Bank collaboration approach offers indeed various growth opportunities. Making it happen is however easier said than done. Let’s focus on execution.

Options for banks to work with FinTech’s

To keep it simple, I propose to consider two collaboration options as per figure 1:

  • Option 1 – Incremental. In this first prudent approach, banks take advantage of FinTech propositions to improve or extend their existing and proven business models. Immediate benefits include incremental product enhancements, operational efficiency, cost reduction and improved user satisfaction. In this case, FinTech propositions are usually software solutions introducing advanced technologies. The low risks come from the absence of impact on existing business models and practices. Also, as some FinTech technologies integrate very smoothly in legacy environments, process improvements as well as reduction in costs, risks and time to market is to be expected. Such option offers a path to major efficiency increases and product enhancements
  • Option 2 – Radical. In this second approach, banks partner with FinTech’s to re-invent their business or to create a new business line. This requires a far more bullish mindset and an ambition to develop new markets such as additional geographies and/or underserved client segments. It could also aim at introducing a new way to serve existing clients using technology and data as key enabler. Assuming the bank’s risk appetite is as high as the RoI of the prospective opportunity, banks will consider taking a stake in their chosen FinTech partner, to join the governance and to benefit from future valuation. We have recently seen such shareholding deals where large banks are taking stakes in trade-related platforms aiming to become business-to-business market places.

Figure 1. Path to Bank – FinTech collaboration

The bulk of financial institutions being risk averse, they favour taking an incremental approach as described above (Option 1). One business area where such Bank – FinTech collaboration delivers tangible benefits is related to Big Data, or Data Management as I favour to name it.

Go “Incremental” with FinTech for Data Management … much value, no risk

As Alex Ross, Futurist and Author puts it in his recent book: “Data is the raw material of the information age”. Financial institutions that fail to take advantage of their client transaction data miss a huge opportunity to match emerging client needs. They ought to understand that data represents a new type of economic asset feeding top management decision making. As the nature of innovation is changing, data becomes a decisive factor in the success or failure of businesses. McKinsey & Company also spotted the importance of data in a recent report including: “Big Data and advanced analytics will virtually affect every part of the economy, especially financial services”. Some banks are using analytics to gain an edge in a cutthroat environment—by improving risk assessment and predicting customer behaviour.

Collaborating with FinTech’s on data management is a low risk / high reward opportunity for banks. Data management technologies help address two major hurdles that all banks face today to make use of their client data:

  • Access to the many legacy systems: many internal transaction processing systems make it difficult to extract data whilst the transaction information they hold is critical for both operational and business teams
  • Data uniformity across silos: there is no uniform view of client and transaction data as institutions have not aligned disparate data sources given the complexity of the task. Data aggregation and interpretation becomes either highly manual or impossible to achieve cost efficiently.

FinTech companies do offer financial institutions advanced data management technologies to access, scan and interpret various data sources and data sets, and deliver on the Big Data priority.

Collaborating with INTIX on data management

Banks that collaborate with INTIX succeed to address internal legacy issues. They achieve this by adding the INTIX Big Data technology layer within their IT environment. This is done in a non-intrusive way with the agility, creativity, time to market and price point that are expected from fintech companies.

McKinsey & Company: “Big Data and advanced analytics will virtually affect every part of the economy, especially financial services.”

INTIX helps financial institutions become data-centric organisations and help them transform their client transaction data into a strategic asset. With INTIX, data becomes accessible, comprehensible and intelligible.

André Casterman, INTIX concludes: “Data Management technology helps financial institutions increase the Return on Investment on their legacy systems. No need to replace them, absolute need to leverage their data. This is where use of the INTIX technology will make a huge difference.”

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