The Convergence of Traditional & Emergent Fintech


In a few weeks time, about 8,000 bankers and their vendors fly into Geneva for SIBOS (the annual “gathering of the tribes” that is organized by SWIFT each year in a different city around the world).

The bankers who fly in want to understand technology. The Traditional Fintech vendors want to sell them technology.  In many ways, SIBOS is not much different from decades ago when I attended with my Misys hat on.

Thanks to the tremendous efforts of Innotribe, Emergent Fintech (aka disruptive  Fintech aka the exciting stuff) has increasingly taken center stage at SIBOS. Sessions about Blockchain were oversubcribed.

However as we discovered at SIBOS in Singapore last year, it was mostly two different echo chambers. Traditional Bankers and their vendors spoke to each other and Emergent Fintech ventures and their investors agreed that disruption was coming.

A lot has changed in a year. Both Traditional and Emergent Fintech have changed and there is some convergence in the middle. That change is leading to more productive conversations. As both parties reach the same Level 3 of Partnership maturity, fruitful conversations can take place.

Level 3 of Traditional Fintech partnership maturity

1.0 was selling Perpetual Licenses. It was a great way to bootstrap a business as you got cash upfront. All the risk and all the reward went to the customer/bank.

2.0 was SAAS, priced per seat per month. VCs loved SAAS because a) the revenue visibility was better and b) it was very hard to bootstrap. This took away technical implementation risk but left business execution risk.

3.0 priced on a transactional revenue share basis. This is genuine risk/reward sharing. Traditional Fintech vendors are looking at this model as a) it could enable better revenue scalability – their revenue grows as their customers grow – and b) they can become a platform for consumer facing Fintech ventures. Many Emergent Fintech ventures are also moving to this model as they want distribution; to them, this is B2B2C.

Level 3 of Banks partnership maturity

1.0 Incomprehension, disdain and fear. This looks scary and strange. Either banks think that “its just hype and will soon pass”, or they think “this will destroy our business”. In both cases, the result is inaction.

2.0 Engagement via Corporate Venture Capital, Hackathons, Sponsored Accelerators and Innovation challenges. This is a safe way to engage and understand Emergent Fintech, but is only a prelude to doing a real deal and the actual deals banks do today are mostly at Level 1&2 of the Traditional Fintech partnership maturity.

3.0 Partnerships on a transactional revenue share basis. The vendor really becomes a partner, sharing risk and reward. Banks can move into new lines of business without waiting for IT to build something or a big capital budget to be approved.

When both vendors and the banks get to Level 3, productive conversations can take place and real deals get done.

Disconnect between Labs and Reality

Many big banks tell a great story in their Corporate Venture Capital, Hackathons, Sponsored Accelerators and Innovation Challenges, but then some of their real customers (who maybe Fintech savvy) contrast that with the actual experience they get in the real world. Banks who respond honestly say “these things take time”, but the pressure from Neobanks and other Emergent Fintech is increasingly taking away that luxury of time.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

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