Competition from FinTech startups keeps big suppliers on their toes

Big suppliers in the financial technology space are becoming more agile because of competition from startup technology companies.

Fintech startups are hot on the heels of the traditional IT suppliers, who are having to change the way they do business with banks, said Derek White, chief design officer at Barclays.

White said the big technology companies are talking about how to act more nimbly, how to innovate and how to disrupt themselves.

“They also recognise the need to work with startups, as the potential threat to the large partners becomes more and more real,” he told Computer Weekly at Accenture’s FinTech Innovation Lab last week.

White said organisations, such as Barclays, are streamlining their sourcing processes so they don’t inflict 400-page contracts on startups that are more traditionally associated with large suppliers like IBM.

“How do you create a partner relationship for the level of engagement you’re doing?” he asked.

“As that is becoming more and more real, we are seeing changes happening across the large suppliers,” he said. “They’re changing their engagement models with us as they seek to become more agile themselves.”

The large suppliers are even asking Barclays for advice on how to become more agile after the bank launched it mobile service PingIt in just seven months. “We have articulated the model as to how we acted as a startup internally to disrupt ourselves and we’re starting to industrialise that,” said White.

“I can count five large technology companies all of the names you would imagine have come to Barclays and have asked how we are doing it,” he said.

Alistair Grant, EMEA CIO at Citi has also noticed how startups are keeping the big suppliers on their toes.

He said while Citi likes to work with startups, it still works with all the big IT players, who have really put in the effort to improve relationships with customers.

He said banks used to have to just accept a new release when a big supplier made an update, but now they are trying to understand customer roadmaps to personalise their services.

“Even our operational and organisational structure has to a degree been driven by the next product that’s available,” said Grant. “They would say: ‘it’s available you’ll have to take it’, and we would have to change everything to fit with that new product - that’s completely turned around now.”

But Grant also said he has noticed this behavioural changed since the financial crisis.

“Major suppliers, such as the banks, were looking for more value from their investments – I’m still looking for more value from my investment. We won’t automatically change equipment at a point in time, just because there’s a release, there has to be major benefit for me before I do that, I’m expecting more from my assets and expecting partners to be much more creative and innovative.”

Grant and White were mentors as part of this year’s FinTech Innovation Lab as well as mentoring startups during last year’s programme. Both are big advocates for startups because of their innovative ideas and agile working methods.

“There’s a lot that comes out of this programme,” said White. “FinTech is an exploding white hot space at the moment, and the gathering of the titans of the financial industry to work with startups in a truly open environment building the future of FinTech is amazing enough in itself.”

Barclays is launching its own 24,000ft startup escalator space in partnership with Microsoft Ventures, while Citi also has global innovation centres and collaborations spaces.

But Grant said banks are still taking a bigger chance when choosing to work with a startup as you don’t know whether it will be robust enough.

“Companies outside the financial sector may find it easier,” he said. “But we’re heavily regulated and don’t want to fall foul of any of those regulations. Is it easier to invest with a top ten big supplier, it may take a little longer and cost more, but you know what you’re going to get.”

Grant mentioned PixelPin as a particular standout company in this year’s Lab. The startup provides an alternative to traditional password protection. PixelPin lets users log in using a photo of their choice, by touching on four ‘passpoints’ to log in to applications. The company claims this new solution reduces phishing, hacking and fraud, while increasing customer engagement and reducing dropout rates.

“I can see that really taking off, whether it’s them or something similar,” said Grant. “I can see that alternate way of managing your passwords.”