If there was one key takeaway from FinovateEurope in London this February, it was that the vast majority of fintech firms have changed their approach toward working with financial institutions and, for that matter, larger incumbent vendors. The focus is now less on “disruption” (whatever that means) and more on partnership. The biggest buzzword/concept of the event therefore appeared to be “white labelling”—taking these startup vendors’ tech and putting your own brand on it. In this manner, the financial institution or incumbent vendor gains innovation, and the startup gains credibility (albeit behind closed doors) and income.
The response of many capital markets firms’ IT departments has been to view fintech with a rather suspicious eye. The initial boom in fintech investment resulted in much hype about disintermediation of financial institutions, and this, unsurprisingly, meant that many in the industry have been wary of working with these startups. By offering a white-labelling arrangement, however, these startups appear instead to be helping incumbents update their technology without competing with them.
Unfortunately, the horror of navigating the procurement process remains the same for startups due to the increased importance of vendor risk management in an industry focusing (rightly) on operational risk. They must still undergo rigorous financial scrutiny and risk assessments to prove they will remain in the game long enough to either be snapped up by a larger vendor or gain enough organic mass to become large vendors themselves. Check out our reports on vendor risk management and innovation for more on those topics.
In the meantime, the white-labelling approach definitely makes these vendors appear less threatening to an industry that sometimes struggles to innovate, especially in the back office. No doubt, the abundance of financial institutions in attendance at FinovateEurope took note of this potential opportunity, though I expect that many were also looking for fintech investment opportunities to add to their portfolios.
In any case, make sure to look under the hood of your vendors’ or service providers’ shiny new offerings to see if any of this year’s startups managed to make an impact.
We’re looking forward to the next Finovate event: FinovateSpring in San Jose, California, May 10-11, 2016. Register here and enter promo code Aite20 to get a 20% discount.