Banks can compete and collaborate with big tech

With large technology companies beginning to offer financial services, banks are well-positioned to both compete and collaborate with big tech.

“[In corporate banking], the line between competitor and cooperator doesn’t exist,” said Leda Glyptis, chief client officer at 10x Future Technologies, at Fintech Week London.

Big techs have come under scrutiny from regulators that their vast influence could create financial stability risks or market dominance in certain products. Glyptis believes banks are well-positioned to manage those risks while also still collaborating with them.

“In the back-end banks will do business together or sell to each other here and compete elsewhere. There is absolutely no issue with both managing that and keeping the compliance and risk separated.

“If you look at any big bank, they actually already have the mechanisms to manage a multifaceted relationship. Institutionally we know how to navigate, we just haven’t done that with new entrants before.”

The relationship between banks and tech providers has become more complex as banks open up a larger proportion of their tech stacks to third parties.

“The relationship has changed”, said Kate Rosenshine, global cloud lead at Microsoft.

“It’s no longer, a vendor saying, ‘I’ll sell you something and I’ll see you in five years or I’ll hear about it if you’re not happy.’ It’s more ingrained.”

As corporates move away from legacy systems like on-premise servers, firms are choosing cloud providers, like Amazon AWS or Microsoft Azure over hosting their own servers, requiring a more sustained relationship.

“The trust in [someone else] handling some of your most sensitive technology is a big deal and that doesn’t come overnight,” said Rosenshine.

Traditional banks remain cautious with who they partner with because the financial services they offer form part of the backbone of the economy, said Adizah Tejani, who works across partnerships and product innovation at HSBC.

“We have to make sure that we keep our customers safe, regardless of which type of technology partnership we’re looking at. We need to make sure that we consider the risks and make sure that we are compliant to all of the different stakeholders that we have across the world.”

But the pandemic has highlighted traditional banks can move at speed to implement new tech if need be. They have in most cases successfully accelerated their digital offerings to ensure business continuity through expanded offerings in digital authentication tools and more streamlined digital transactions.

“The high street banks, the incumbents, the people we’ve liked to call the dinosaurs for so long, have actually really upped their game,” Glyptis said.