A senior Barclays PLC executive hit out at suggestions that the bank has been slow to innovate and is sitting back while smaller, more nimble financial technology companies grab business opportunities.
The lender is eager to innovate both from within and via partnerships with fintechs, but has to prioritize safety over speed of innovation because of its size, said Ian Rand, CEO of business banking.
"As a large institution, we get a lot more regulatory scrutiny. Doing things right every time gets much more important when you are a certain size. If we make a mistake, it matters more," Rand said at the Fintech World Forum in London.
"When you get bigger, the cost of doing things wrong is very high," Rand said, adding that the financial services world is littered with examples of companies that have expanded quickly but struggled to keep pace with regulatory norms and the demands of customer service after a growth spurt.
"We see N26 being challenged on the quality of its customer service, and we all remember what happened when Wonga grew ahead of its ability to meet regulatory requirements," he said.
German fintech N26 faced a grilling from the local regulator, BaFin, in April over allegedly ignoring fraudulent activity and deficiencies in customer service. Payday lender Wonga went into administration in August 2018 after a slew of customer compensation claims put its solvency on the line.
What is being solved?
Barclays receives frequent pitches from fintechs looking to partner in its small and medium-sized enterprise banking division, and is looking for one thing in particular, according to Rand.
"I could fill my diary with meetings with fintechs that want to work with us on SME banking. A lot want to speak first about their tech solution. But what we are looking for is fintechs that can truly understand what the clients need. Will reducing the time taken to carry out a certain thing from 30 minutes to 10 seconds really solve a problem for a small business?" Rand said.
It was fintech MarketInvoice Ltd.'s pitch that centered on a common problem being faced by smaller businesses — the late payment of invoices — that won over Barclays, Rand said. The U.K. lender bought a minority stake in the company in 2018.
"We didn't talk about the product or the tech to begin with. We talked about the problem that businesses were having with late payment," he said.