What’s this all about?
Just over 100 years ago, the telephone faced infrastructural challenges in becoming what it is today: the most-owned, most-used device. Once associated with ‘adversary’, fintech is becoming more mainstream and many incumbent banks are relying on partnerships to innovate without overcoming the heart of their own infrastructural challenges: their core system. In our latest article, we explain why we don’t see ourselves as fintech, but rather as banktech.
Read on if you:
- Want to understand the difference between fintech and banktech
- Are interested in learning more about why we see ourselves as banktech
- Have an eye to the future of banking
At the height of the Spanish flu, it had been 42 years since Alexander Graham Bell made the very first phone call. Yet in 1918, the telephone was still largely considered an amusing toy – a luxury for the rich. So, in order to widen its appeal, telephone companies began marketing it as a saviour for those in quarantine.
Their efforts were so successful that the telephone took off in ways they hadn’t imagined (picture the equivalent of Zoom weddings and you’re on the right track). But they soon faced a singular problem: their infrastructure depended on highly trained operators who made each connection between the caller and recipient, and who were not immune to sickness. As the flu spread, telephone companies were instead forced to plead with customers: “will you please restrict your use of the telephone to calls that are absolutely essential?”
Fast-forward to today, just over 100 years later, the telephone in its ‘smartest’ form (so far) is the most-owned and most-used device. Many of us use it to spend a large portion of our day absorbed in digital reality for both professional and recreational purposes.
With a global pandemic causing massive disruption, those businesses with a lacklustre focus on digital have had to up the ante. Even restaurants and coffee shops have quickly had to dive into e-commerce strategies where possible.
Move to digital on the up
In banking, the move to digital was inevitable, but it has been hastened. According to a report by Sifted, even Asia, ahead of Europe in the move from cash to digital payments thanks to super-apps like WeChat Pay, has seen an acceleration in its digital banking trend.
You might have had a sense of familiarity, reading about telephone companies under pressure from a system that can’t cope with the evolving demands of the time. And indeed, banks are no strangers to infrastructure-related challenges.
The discrepancy in levels of innovation between established banks and their fintech competitors is something we’ve covered in previous articles. Unsatisfactory mobile experiences have already led to many consumers using neobanks as a supplementary layer to their old bank. That’s not to mention the lack of flexibility in dealing with, for example, payment breaks during the COVID-19 pandemic.
This is not an article about bank bashing though. That’s not what LEVERIS is about. We don’t see ourselves as a fintech competitor, setting out to destabilise, replace or topple old banking businesses.
In February 2020, Chris Skinner wrote about a statement by Deutsche Bank: “banking is what we do and technology is how we do it”.
We see ourselves in the latter half of that sentence: we enable the ‘how’ of banking far removed from the shackles of legacy technology. We see ourselves not as ‘fintech’ but ‘banktech’. Here’s how we make that distinction.
What is ‘fintech’?
Fintech [noun], early 21st century: an abbreviation of financial technology.
In its broadest definition, fintech is an umbrella term for every aspect of technology and innovation in financial services, both B2C and B2B. Some include traditional financial institutions within the fintech bracket, while others distinguish it as having a distinctive aim to compete with traditional methods of delivering financial services.
A decade ago, fintech wasn’t something people were talking about. But cloud computing, artificial intelligence, the mobile phone network, open banking and the use of APIs to provide plug-and-play code have had a transformative impact on the industry. Fintech has become synonymous with fast-moving startups using innovative technology to offer cheaper, accessible, digitised financial services or focus on a specific process.
The term ‘techfin’ has also come into use. This refers to technology companies – typically big tech firms such as Apple, Google, Amazon, Facebook, etc – seeking to deliver financial services on the back of their own existing technologies in pursuit of one incredibly valuable resource: data.
Is Fintech vanishing?
Fintech is becoming more mainstream. Skinner says in his article that, soon, there won’t be a distinction between banking and fintech.
We’re already starting to see the relationships between banks, fintechs and big tech evolve from adversarial to collaborative – albeit, in places, somewhat guarded.
We’ve seen some notable acquisitions by established players (with 2019 fanfared as a record year of fintech deals, and mergers and acquisitions), while others have launched new challenger brands.
Skinner says: “What this means in reality is that banks will imitate, emulate and integrate fintech business models, products and services into the banks’ business models, products and services.”
That’s already happening, too. Citigroup launched its Citi FinTech initiative back in 2016, focused on developing prototypes of solutions like facial recognition for mobile banking.
On the other hand, another writer foresees a transition from a fintech era to an open banking era in which fintechs won’t vanish, but they will operate differently. They won’t need to partner with incumbents, many of whom have concentrated on partnerships as an approach to innovation as opposed to doing something truly transformational. What banks should focus on instead, he says, is providing a working infrastructure.
This is where banktech comes in.
What is ‘banktech’?
Banktech does exactly what it says on the tin: banking technology – technology for banks.
Going back to that Deutsche Bank statement, in 2016, we at LEVERIS set out to build the ‘how’ (the technology) so banks can get on with the ‘what’ (the business of banking).
Our aim was to build a modern, digital banking and lending platform based on architectural principles that are standard in other industries; one which can be built and launched fast, and operated and changed without introducing legacy issues; one which can enable innovation and partner with best-in-breed.
The result? A modular, API-driven, end-to-end, software-defined platform with a single customer view.
Think of it as the engine while fintechs are the tinted windows and low profile wheels. Most banking software provides financial institutions with a mechanical engine that needs care and when broken, must be taken apart in order to diagnose the issue.
Modern platforms are like a Tesla. Any problem is a system bug that can be fixed remotely, any upgrade carried out through software. Check out our whitepaper on software-defined banking for a more detailed explanation on how that works.
Imagine if banks could focus on banking...
What would have happened if the development of the telephone had been cut short by inadequate infrastructure? Life would certainly be a lot different now.
As financial services and indeed all industries become more digital, banks need an engine that can power next-generation experiences – think individualised products developed on data, cloud-native so able to cope with volume, cost-effective, fast and flexible from its core.
That’s why we consider ourselves as banktech, to provide the means to make that happen.
If modern digital banking is what you want to do, our technology is how you do it.