When Fin-Tech meets the Bank
The Industry of Financial Technology (FinTech, in short) has increasingly accelerated in recent years and for good reason.
Statista company assessment predicts that in 2017, North American banks' investments in new technologies will reach 19.9 billion dollars! Even here in the local market, Bank of Israel established the Inter-Ministerial Committee in order to promote the use of advanced payment so as to decrease the gap of the domestic banking market and adopt the innovation that exists just around the corner.
While regulators around the world are beginning to come to terms with innovation in payments and also implement some solutions in their favor, regulators and banking systems are not inherently open to changes and have hard and fast rules; hence the regulatory world is still the big barrier of this industry.
First, let’s try to understand what falls under FinTech and how it is best to approach the bank, whether it is in favor of clearing, partnership or guidance.
Who is Fintech?
In many cases, start-ups and companies do not recognize that they are actually FinTech, treating the financial part as secondary and not as part of the core product. They look at the classic payment process of funds transfer to clients while ignoring other financial elements; such as the possibility of depositing funds into the payment system in order to use them at a later time.
Under the umbrella of the FinTech, sit companies that are using technology in order to streamline the payment process. These can be in the following areas:
* Loans and fundraising such as MicroLoans or Crowdfunding
* Shared economy patterned Marketplaces
* Virtual currencies
* Security and Fraud prevention solutions like Biometric or Tokenization tools
* Non-bank payment infrastructure as Underbanked as Uncarded
Once you have tested your company and defined it as FinTech, the next step is to know the business environment in which you enter.
How does the world of classic payments work? Who the major players? What terminology and definitions of the relevant regulators and credit organizations are?
Understanding the business environment corresponds to a market survey - it gives a snapshot where your company is located and enables the development of a strategic plan to enter the correct nieche. It's important to understand who of those actors are in highest interest to implement the product or service and which of them will be competing.
This process is also important in the first stage of patenting (Provisional) to keep your offer as unique as possible from its initial stage.
Most companies will find that in order to get money from the customers they need to join an acquiring bank. This will allow them to integrate into the classical clearing system. The strategic plan must include: the best way to present the venture to the bank, what is presented and how. It is important to understand that the banks are working in a strict regulatory framework and the challenge is to include new business models into existing frames. This is a challenge especially in FinTech Innovation, because additionally, there is also access to funds.
If so, before arriving at the bank, a thorough investigative work must be done, while additionally, thinking how the company fits in harmoniously within the legacy payment system. This is the most important thing. The Bank appreciates thorough background work and will take into consideration the best methods. The challenge lies in finding the area in which the FinTech feels he can really offer innovation and the bank feels highly comfortable in working with such a company.
The largest credit card organizations invest in FinTech and also open their API's and clearing systems in order to enable innovation within the Visa/MC network. By examining ways to join them, such as: Visa Europe Collab, StartPath Global Plan of MasterCard, as well as the incubators of banks like Citibank or LeumiTech, you will reach naturally targeted initiatives in payments.
Finally, see below a Fintech map with categorization and lots of logos: