Financial institutions are addressing FINTECH on a continuum. Some are adopting a defensive approach, viewing it as a means to protect what they already have. Others are on the attack, looking to grow. This means financial services companies are choosing to build FINTECH solutions in-house, sourcing third-party FINTECH solutions, partnering with FINTECH companies in order to develop and tailor specific solutions or acquiring FINTECH companies outright to accelerate their move into the space. There is no one right way to proceed. Rather, financial institutions are exploring all options along the continuum simultaneously with an eye to the future and business objectives.

Getting started Develop a strategic vision for a digital future. Envisioning the future during a time of massive transformation is a complex process, and many end up getting bogged down in small details. Instead, organizations should look to answer four questions:

1. What will we be famous for?

2. What role do we want to play in our clients’ lives?

3. Where should we play?

4. How can we win?




Responding to these questions will likely have significant implications for the organization’s business model and culture and therefore for the way they identify new fintech capabilities to support their aspirations. Understand that not all institutions are going to win in the role they play today as a product or service provider, and that the time to invest in significant transformation opportunities is now.



The build option allows organizations to define the scope of their innovation initiatives, design tailor-made products and create buy-in among users over the course of the innovation initiative. However, very few financial institutions have the time, resources, capacity and agility to be able to focus on FINTECH innovation efficiently and effectively. Internal capabilities around design, agile ways of working, a cultural disposition to embrace change are required as well as core technical competencies around data analytics and cyber security that can evolve and respond to the changing nature of the marketplace.


Many FINTECH companies are looking to sell or license their technologies to financial institutions. The benefits include: reduced cost of innovation and access to established solutions, talent and innovation capacity. However, in order to make the most of this option, financial institutions are evolving their procurement processes to accommodate taking on the capability from small, startup fintech companies that can help them solve problems in specific areas.


For financial institutions looking for custom solutions, there are a growing number of FINTECH and other technology companies with the capacity to white label a product or service for them that they can then brand and sell. The benefits include: prescribed costs, a diversified approach to innovation and the ability to test value and fill product/service gaps. Among the key challenges are less control than developing these products internally, the need to integrate this innovation structure within the business and to share revenue.


While buying or investing in FINTECH companies can be an effective way to leapfrog over the development process by acquiring access to FINTECH capabilities, financial institutions are still working to find the best ways to evaluate a purchase or investment. Only 31 percent of survey participants that plan to buy or partner with FINTECH companies have a well-defined framework for evaluating opportunities. At the same time, 60 percent of these companies use their internal strategy team to source opportunities — a strategy that may not involve a strong due diligence process without an objective evaluation framework.


Over the past 2 years, there has been a distinct trend toward collaboration and partnership with respect to how financial institutions approach fintech opportunities and challenges. The resource intensity of the build approach and the challenges of procurement (integration, culture misalignment, risk management, the time needed to achieve synergies) are likely the reasons many financial institutions have focused instead on a partnership or collaboration model for fintech innovation — a trend expected to accelerate in the future. For good reason: the partnership approach brings with it a more rapid speed to market for fintech solutions, while being less costly and resource intensive. Partnering also creates an opportunity for collaboration and mutual reward. For example, alternative lending platforms are partnering with banks and financial institutions and enjoying the benefits of a cross-referral of clients. Fifty-five percent of the financial institutions surveyed currently partner with fintech startups, while 38 percent partner with non-competing financial institutions, 32 percent partner with scale players that are not financial institutions, and 26 percent with technology giants. Just 14 percent of survey respondents are partnering with their competitors. In the next 12 months, financial institutions are looking beyond startups, with 46 percent planning to partner with other scale players that are not financial institutions and 38 percent planning to partner with non-competing financial institutions. Only 18 percent plan to focus on potential partnerships with competitors.



Long-term, two-thirds of respondents do not expect to partner with competing financial institutions — a view that could limit their options. There are a number of fintech-related developments that would benefit from collaboration across competitors, such as blockchain, which would require consistent rules across organizations in order to implement on a large scale.

Five keys to creating an effective partnership

While partnering offers numerous benefits, including access to talent, enablement of a portfolio approach and increased speed to market, it is not a straightforward process. Organizations that have established partnerships have found themselves mired in roadblocks, from lacking the APIs required to enable seamless integration to the time-consuming benefits, including access to talent, enablement of a portfolio approach and increased speed to market, it is not a straightforward process. Organizations that have established partnerships have found themselves mired in roadblocks, from lacking the APIs required to enable seamless integration to the time-consuming process of establishing governance structures and risk management processes. Without strong guiding principles and a strategy for managing partnerships, it is highly unlikely that financial institutions will be able to achieve the full value that working with fintech companies can provide.

Developing FINTECH partnerships requires a significant amount of time and effort of part of financial institutions — both to identify the right FINTECH companies with whom to partner, and to ensure the resulting partnership is structured so that both parties can achieve their desired objectives. Looking at how leading companies approach partnerships, five key themes emerge. These include:

  1. Focus: Leading companies know what goals they want to achieve or issues they want to address through fintech and potential partnerships with FINTECH companies. When looking for opportunities, leading financial institutions start with the problem rather than the technology to ensure there is demand for a solution and that any solution provides the required value. Before attempting to ‘plug and play’ a FINTECH solution or partner into their organization’s operations, they work to ensure activities are well aligned in order to reduce integration challenges.
  2. Evaluation framework for FINTECHs: Creating and using strong evaluation frameworks are an important part of ensuring that any FINTECH partnerships are well positioned to achieve specific outcomes. Leading companies use frameworks aligned to their business strategy, specific pain points, and desired outcomes, in addition to the specific characteristics of the FINTECHs being evaluated (e.g. the quality of the FINTECH company’s management team, the alignment of its strategic objectives with your own, its technology capacity, the scalability of technology solutions, potential integration challenges, and cultural differences).
  3. Outside the box thinking: In today’s constantly evolving FINTECH environment, effective partnerships can be established with a variety of different organizations, from FINTECH startups and technology giants to companies in ancillary industries, to actual business competitors. Leading companies look beyond traditional boundaries to form partnerships, forging alliances with companies well beyond their own sector in order to leverage insights, solutions and opportunities.
  4. A global mindset: FINTECH innovation is evolving in unique ways in many different geographies as a result of their unique skills bases, innovation centers, government priorities and collaborations. Leading companies often have a presence in key FINTECH ecosystems in order to stay on top of signals of change and to help identify potential partners from outside their local jurisdictions. For example, Canada’s CIBC, the National Australia Bank and Bank Leumi of Israel have formed an alliance in order to leverage joint innovation to improve the customer experience for all three banks. CIBC and the National Australia Bank have also partnered on a blockchain project.
  5. Experienced advisors: When it comes to identifying and establishing partnerships, many leading companies have a network of advisors who can supplement their existing skills sets and provide assistance with both evaluating partnership opportunities and with managing the legal and risk management issues that might arise during the development and execution of any partnership arrangements.

Focusing on front office and back office

Over the past few years, two-thirds of financial institutions have focused their FINTECH initiatives on solving front-office, customer-facing, issues while 25% have focused on improving back-office effectiveness and efficiencies. Given the number of customer pain points related to financial services, this focus comes as no surprise. Customer-facing initiatives are expected to remain high on the innovation agenda of financial institutions in the future. However, the value of fintech driven improvements to the back office can’t
be understated.


Technologies like cloud computing, blockchain, robotics and cognitive learning are all helping to deliver a step change, in the cost base of banks. In a low growth environment, these types of changes will become more and more important.

As back-office focused FINTECH matures, we’ll see even more companies taking a holistic approach in order to ensure they are not missing some of the broader benefits that FINTECH provides.

Most exciting FINTECH technologies over the next 3 years When it comes to the next 3 years, technologies related to data analytics and big data are expected to attract the most attention from survey respondents. 76% of insurers, 65% of banks, and 58% of asset management companies ranked data analytics as one of their top two emerging fintech technologies of most interest, while API technologies and robotics/robo advisors also ranked high in this area. Not surprisingly, as a result of changes associated with PSD2 and other similar open banking regimes, banks are the most interested in APIs, with 60% noting it as a top area of interest. While blockchain has received a significant amount of attention over the past 12 months, looking forward it was only ranked as a significantly high technology of interest for companies in the asset management space — where 35% ranked it as a key area of interest. 36% of asset management companies also ranked artificial intelligence as a top technology of interest, as did almost one-quarter of insurance companies. Insurers meanwhile showed a much stronger interest in technologies related to IoT, than either banks or asset management companies. Insurers are more interested in IoT because of the value of gathered data in providing more bespoke underwriting, pricing and propositions to customers. Connectivity allows insurers to become risk partners with their clients, protecting them through the prevention of accidents and potential issue notification, rather than simply providing protection after the event in the form of a claim.

The road ahead

At the rapid rate the industry is evolving, financial products and services — and the technological infrastructure underpinning financial institutions — will look remarkably different in a decade compared to how they look today.

The past 5 years have introduced a level of disruption never experienced before. The ability of emerging fintech companies to quickly gain traction in the global financial services market is forcing financial institutions to evolve to remain competitive. They must adopt the customer-centered innovations and back-office solutions that will help them provide a more tailored, value-added customer experience. New competitors (both in the shape of FINTECH startups and technology giants responding to opportunities to add value) as well as new solutions are catalysts for change in an industry long defined by tradition. From AI, automation, and augmented reality to the cloud, IoT and data analytics, FINTECH is transforming the financial services status quo. Financial institutions that take the time to define their FINTECH strategy and align it to their business goals, will be best positioned to help forge the future of financial services.