While banking institutions often view financial technology companies as competitors, there is an untapped opportunity for both sides to work more closely together, said bank executives at a March 11 South By Southwest panel discussion on innovation.
Small institutions benefit from partnerships that help build technological resources and expertise, while larger institutions — which are far more active in financial technology today — can leverage partnerships for targeted services and solutions, the executives said. South by Southwest, or SXSW, is an annual event in Austin, Texas that draws a range of media, technology and business executives to network and discuss cross-industry topics.
"There is an enormous unexploited opportunity in the financial services market to bring the talent and toolsets [from fintech] and do it at scale for the smaller institutions," said Jennifer Wilson, chief digital officer at Hancock Whitney Bank. In most cases, the 5,500 U.S. banks not operated by the 10 largest firms in the country lack the resources and executive expertise to build in-house technological solutions, she noted.
From a funding perspective, almost all of the $9 billion in total U.S. fintech funding transactions in 2018 came from large technology and financial corporations, according to data compiled by S&P Global Market Intelligence. Alphabet Inc., Andreessen Horowitz LLC and SoftBank Group Corp. represented the three largest investors in the space, each putting up over $1 billion in aggregate funding rounds. The top 10% of funding rounds accounted for over 50% of total funding.
Many large institutions consider fintech solutions providers competition rather than potential partners, said Andreas Bubenzer-Paim, Bank of the West's head of technology banking. But he suggested both sides could benefit from working more closely with each other.
"We are actively on the lookout to work with fintechs" to solve specific tech and customer service problems, Bubenzer-Paim said.
Meanwhile, fintech partners benefit from access to data, which is particularly valuable for artificial intelligence platforms, he said.
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