Partnerships are Not the Future of Fintech
Ten years ago
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Digital, NEO, Open Banking, Open Finance
Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking
Forbes | Andrea Tinianow | Oct 18, 2019
Fnality, a London-based company is banking on blockchain technology to usher in an era of digital financial markets. They are betting that the financial markets are going to tokenize. Fnality intends to be there when that happens. In fact, they intend to spur the transformation.
According to Fnality’s chief executive officer, Rhomaios Ram, “if the markets are moving to a new model, they will need a secure infrastructure for digitizing payment and settlement on a global basis. We are creating a new financial market infrastructure, a new payments system [for wholesale banking].” Wholesale banking refers to lending and borrowing between banks, or with large customers such as the government, pension funds, and big corporations.
Ram continues, “our two areas of focus right now are establishing a digital currency capability in each currency, and coordinating and orchestrating with business applications, such as tokenized exchanges, issuance platforms, collateral and trade finance, that want to use this new payment functionality.”
Backed by a consortium of financial institutions, including some of the world’s most important banks: Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, Mitsubishi UFJ Financial Group Inc., Mizuho Bank, Ltd, Nasdaq, Sumitomo Mitsui Banking Corporation, State Street Corporation, and UBS, Fnality will offer the Utility Settlement Coin (USC). Notably, the USC will be fully backed by cash collateral held in accounts at central banks around the world. To start, the USC will represent five different currencies: U.S. dollar, euro, UK pound sterling, Japanese yen and Canadian dollar. The cash collateral ensures that the value of the USC remains stable, while the Fnality platform enables interoperability through its connection to any blockchain network or legacy system.
See: Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT
Ram notes that the Fnality platform will not supplant systems that are currently in place for traditional banking. Their plan is to create a financial infrastructure to serve the digital marketplace that is to come. The USC will allow banking participants to engage in exchange for value transactions, to include cross-currency transactions, without many of the traditional intermediaries and their associated costs. Banks will be able to clear and settle transactions virtually instantaneously, improving efficiency, and reducing cost and risk.
Michele Curtoni, VP Digital Product Development & DLT at State Street says, “increased interest in digital assets [is] underpinning the evolution of wholesale financial services, [which] creates a need for digital cash in the form of cash on ledger. We believe Fnality is proposing a solution to [meet] this need. Fnality stands out as it is focused to provide a wholesale, multi-currency and instant payment solution leveraging a counterparty risk-free payment model. These properties meet our requirements for a successful model. Digital assets such as the ones proposed by Fnality have potential to deliver improved settlement efficiency, reduced risk and better client experience.”
Participating banks will deposit cash collateral with Fnality’s account at the central bank, providing the backing for the USC on the Fnality platform. They may leave a specified amount in the account, or add currency to the account on an as needed basis. Ram suspects that banks will measure their liquidity needs each day. And, since USC can be held and used 24/7, it will likely impact the way banks manage their liquidity and change the way they settle foreign exchange.
The idea for Fnality started at the end of 2015. At the time, Clearmatics, which provides the design of the blockchain system, and UBS considered how to enable efficiencies in the financial markets. They created a consortium to explore the idea, and Ram joined as its chair.
See:
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Bank/Fintech Partnerships: The Fad Is Over
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New Regulatory Framework for Canadian Retail Payments Coming in 2019
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JP Morgan is rolling out the first US bank-backed cryptocurrency to transform payments business
The Linklaters law firm has been advising on the project since its inception, first as legal counsel to the consortium of banks and now with respect to the legal/regulatory implications of the USC and the Fnality platform. Harry Eddis, Global Fintech Partner, Linklaters, offers that
“the march towards digitalizing assets can only succeed with equivalent digital payment rails. USC is the payment rail solution at scale, utilizing blockchain technology to vastly improve settlement discipline.”
Ram explains, that “if you are going to tokenize finance and trade settlement, you will also need to tokenize the payment system. Tokenized markets have three essential ingredients: tokenized assets, tokenized new exchanges or price discovery mechanisms, and a tokenized means of payment. To do this, the cash leg of the payment must have the same credit quality of a central bank, and it must allow for settlement finality.” Those became the two fundamental design goals in the creation of the USC.
There are many in the crypto sector who thought that payment systems would be transformed by cryptocurrencies such as ether and bitcoin, but that doesn’t seem to have occurred for numerous reasons, chief among them their volatility. Stable coins, such as Tether or Maker’s Dai, have also proliferated as a potential solution for digital payments. But they too have not been widely adopted on an enterprise basis.
Fnality’s strategy of engaging directly with central banks is promising. The Bank of England’s governor, Mark Carney famously expressed that “consortia, such as [Utility Settlement Coin] . . . can drive efficiency and resilience in operational processes and reduce counterparty risks in the system, unlocking billions of pounds in capital and liquidity that can be put to more productive uses.”
That’s what Fnality is counting on.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Bank/Fintech Partnerships: The Fad Is Over
Forbes | Ron Shevlin | Oct 14, 2019
Partnerships are Not the Future of Fintech
“Bank/fintech partnerships are crucial to the future of banking” has become a widely accepted meme in the industry.
In a recent study from Finextra, 81% of bank executives surveyed said that collaborating with partners was the best strategy to achieve digital transformation. They’re going to be disappointed.
The vast majority of banks are not well suited to partnerships:
- Larger institutions may have the resources to identify, vet, and enter into partnerships, but their size and organizational complexity makes operationalizing and scaling partnerships difficult.
- Smaller institutions typically don’t have the resources or skills needed to identify, vet, and enter into any meaningful number of relationships. Operationalizing partnerships often requires integration into core apps which can be a challenge for smaller institutions.
Then there’s the issue of corporate culture which, in many banks, is not conducive to partnering with outside entities. The Competing Values Framework developed by Cameron and Quinn helps explain why–some cultures are more control-oriented than collaborative.
Partnerships Are No Piece of Cake from the Fintech Perspective
Brett King, founder of fintech Moven told me, “The biggest barrier to bank/fintech partnerships is banks’ procurement departments. They treat us like small IBMs and hammer us with performance and risk clauses that would kill us if we let them.”
See: 10 Key Issues For Fintech Startup Companies
Echoing that sentiment was Philippe Gelis, CEO of fintech Kantox, who wrote, “Inside banks, there is also no single decision maker. You need to convince multiple stakeholders that the partnership makes sense, that it will create significant extra value for both parties, and that the risk of cannibalization is low. Once that’s done, you then need to convince their compliance department, IT team and legal.”
What does this all add up to? According to Dr. Louise Beaumont from Publicis.Sapient:
“For banks, partnerships won’t generate the quantum leap they need to move beyond a decades-old, product-centric mentality to deliver next-generation financial services that consumers deserve. At best, they may gain a workable solution that squats awkwardly in the existing infrastructure and brand. At worst, banks will fail to deliver any noticeable difference to customers beyond a flurry of press releases.”
Industry Participants Will Be Connected, But Not in the Form of Partnerships
This isn’t to say that banking industry participants (e.g., institutions, fintechs, and vendors) won’t be highly interconnected–they will be. But one-to-one partnerships won’t be the predominant form of connection. The most prevalent ways to connect will be:
Platforms. Amazon is a platform. There are over five million marketplace sellers across all Amazon marketplaces (more than one million new to Amazon in 2019 alone). They’re hardly “partners” with Amazon. According to a Forbes article titled Digital Platforms Are Eating Banking, there five types of digital platforms taking over the banking world: 1) Megabank API toolkits; 2) Marketplace platforms; 3) Analytics platforms; 4) Business banking platforms; and 5) Core integration platforms. Platforms provide a plug-and-play capability that enables participants to interact, transact, and integrate without partnership or one-to-one contractual arrangements.
See:
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No banking charter? No problem. Fintech companies team up with small-town banks
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Introducing the Convergence Ecosystem
Open banking. Consulting firm EY defined open banking as: "Online banking and financial services enabled through consumers' ability to offer third-party providers access to their personal bank account data and payment initiation." This type of connection enables the sharing of data between parties without a contractual agreement (i.e., partnership) or transactional capability (like a platform provides).
[Banking]-as-a-service. The term BaaS is often used interchangeably with open banking, but I’m using the term here to describe what fintechs like Harvest (wealth management-as-a-service) or StreetShares (lending-as-a-service) provide to banks. These arrangements are somewhere between a partnership and a traditional vendor relationship. The BaaS fintech provides a “service” to the financial institution–in these examples by offering a product or service to the market–but with non-traditional service level agreements and support requirements.
Alliances and consortia. Partnering with each other may be a better starting path to partnering with fintechs. Examples include Alloy Labs Alliance, a shared innovation lab and accelerator, and CU Ledger, a credit union service organization focused on distributed ledger technology.
Continue to the full article -> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Open Banking Era Starts in Australia (Feb 2020)
Sky News | Robin Scarborough, Deloitte Digital | Oct 14, 2019
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Inflection point:Seven transformative shifts in US retail banking
McKinsey & Company | Oct 2019
Ten years ago
10 years ago, the US retail banking industry was in the depths of the global financial crisis, with many one-time leading institutions struggling to survive.
Since then, after bringing in billions in fresh capital, US banks have made a return to stable ground and greater liquidity. Despite this progress, aggregate return on equity is at the lower bound of sustainability, and the industry’s price-to-book value is about 1.4, not far above where it stood in 2009.
Customer trust has improved from the downturn but is still well below pre-crisis levels. Though most banks were able to avoid unsettling challenges in the following ten years, few were able to break out and significantly outperform the industry.
Now, however, several major forces are accelerating the evolution of the US banking industry–the encroachment of new competitors, rising expectations from customers on service levels and corporate responsibility, and an intensifying war for talent—and promising to make doing business more challenging in the coming ten years.
Further, US banks have yet to go through the restructuring that has already swept European and Asian markets, where a majority of services are delivered digitally. In this report, we describe seven transformative shifts reshaping US banking. The current state of US retail banking can be thought of as an inflection point for the industry.
Coupled with the difficult macroeconomic environment, and political and economic uncertainty, the seven shifts will decisively alter the operations, economics, and efficiency of US retail banking.
See:
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No banking charter? No problem. Fintech companies team up with small-town banks
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What does the future of banking look like, according to the experts?
Banks face a steep climb
To rank the relative performance of companies, McKinsey uses the Power Curve, which measures value created in terms of economic profit (defined as firms’ returns less their cost of capital). From 2010 to 2017, we assessed close to 2,400 companies across multiple industries on the Power Curve and found two surprising results. First, companies ranking in the top 20 percent generated more than 30 times the profit of those in the middle 60 percent, while the lagging firms made only marginal economic profit. Second, the curve is broadly stable over time, and a company’s position on it is persistent: between 2010 and 2017, only 1 in 12 companies rose from the middle ranks to the top of the Power Curve, while approximately 40 percent of companies in the bottom third stayed there.
Continue to the full article --> here
Download the 15 pg PDF McKinsey & Company research -> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Exclusive: Fintech firm Revolut to hire 3500 staff in global push with Visa
Reuters | Lawrence White | Sep 30, 2019
LONDON (Reuters) - British-based digital banking app Revolut is set to hire around 3500 staff as it expands into 24 new markets thanks to a new global deal with payments giant Visa Inc, the two companies said on Monday.
Revolut, one of a breed of new digital-only account providers taking aim at traditional high street banks, has grown at breakneck pace since its launch in July 2015 and now boasts more than 8 million customers.
The deal with Visa expands an existing agreement between the two firms and will see Revolut expand from its current markets of Europe and Australia to open in the United States and Singapore by the end of this year, with Canada and Japan to follow, Revolut said.
Revolut will then launch in other Latin American and Asian markets but does not have a fixed timeline, its chief executive and founder Nikolay Storonsky told Reuters.
“We are around 1500 people now and by summer next year we plan to be around 5000,” he said.
The expansion into new markets will be subject to Revolut getting the necessary regulatory approvals.
The deal is not exclusive but will see at least 75% of all Revolut cards carry Visa branding rather than that of rivals such as Mastercard Inc.
The global push could see Revolut double or triple its customers in the next year, Storonsky said.
See:
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The lending revolution: How digital credit is changing banks from the inside
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Visa Makes Its Second Investment Into a Crypto Startup
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The future of Asia: Asian flows and networks are defining the next phase of globalization
He told Reuters that Revolut’s average customer holds around 1000 euros in their account, giving a total deposit balance of around 8 billion euros ($8.74 billion) currently, a minnow compared to global banking giants like HSBC and JPMorgan with trillion-dollar-plus deposit totals.
But, along with its peers, Revolut has shocked incumbent banks into upping their digital game, as customers flock to Fintechs with their slicker apps, money management tools and attractive offers on foreign exchange.
Revolut’s rapid growth in recent years has not been without hiccups. It faced media reports about a cutthroat work culture and questions from Britain’s financial watchdog earlier this year about its sanctions-checking systems.
Revolut said at the time it has never failed to meet its legal or regulatory sanctions requirements.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Incumbents, consumer complacency barriers to innovation in Canadian banking
Betakit | | Sep 27, 2019
Wednesday at the #ElevateTechFest Money Stage, BetaKit’s Meagan Simpson spoke with three FinTech disruptors about open banking and the barriers faced by innovators looking to shake up Canada’s financial system.
“I think we need to own the fact that we frankly didn’t get our shit together soon enough.”
The panel featured Daniel Eberhard, founder and CEO of Koho, a Toronto-based challenger bank, Alexandra Nuth, managing director of ATB’s new digital offering Brightside, and Saud Aziz, strategy and operations manager of Canada for Revolut, a UK-based challenger that is currently expanding to the Canadian market.
See:
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Open Banking: What’s Really at Stake
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Open banking has a big branding problem, government’s public opinion research suggests
Revolut is one of a number of UK-founded challenger banks, including Starling and Monzo, that have popped up in recent years to offer an alternative to traditional banking. The UK, in fact, is known as having a competitive environment for challenger banks to thrive. The UK has adopted open banking much more quickly than other nations; In 2016, the United Kingdom Competition and Markets Authority required the nine largest UK banks to allow licensed startups direct access to their data.
Eberhard said the regulatory environment across the pond in Canada has made it much more difficult to thrive as a challenger bank, as regulators have prioritized managing system risk over creating a competitive environment.
Open banking is meant to give consumers more control by allowing their banks to distribute their personal data to third parties through the use of open application programming interfaces (APIs). One of the goals of open banking is to foster a more competitive and innovative financial ecosystem and proponents of open banking claim it allows financial companies to improve their offerings and customer engagement, and create new channels for digital revenue.
One of the specific advantages to UK challenger banks over their Canadian counterparts is the ability to receive an electronic money institution licence (EMI), which allows PayTech and FinTech companies to offer specific and common financial operations, including money remittance services, process payment transactions, and direct debit or credit transfers.
No such licence exists in Canada, and this inability to operate means companies like Koho need to rely on partnerships with incumbent institutions to move their customers’ money. Aziz said regulators need to understand that Canada shouldn’t have a binary framework between existing as only either a bank or not a bank.
See:
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What does the future of banking look like, according to the experts?
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NCFA Letter to Ontario Economic Development on Burden (Jan 2019)
Outside of Canadian regulations that also make it extremely difficult for startups like Koho and Revolut to get banking licences, challenger FinTech’s like Koho have faced direct roadblocks from incumbent financial institutions. Eberhard referenced a tweet that he shared over the summer, regarding a Koho employee being blocked by CIBC from transferring funds to their Koho account, with the bank flagging that Koho could be associated with “scams.”
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Sibos London 2019: Banks that fail to embrace APIs ‘face existential threat’
FSTech | David Adams | Sep 24, 2019
FinTechs could usurp banks to become the primary providers of consumer and business services if the incumbents fail to embrace Application Programming Interfaces (APIs) as a means of reforming and reinvigorating business processes.
This was according to Citi’s Tony McLaughlin, who has responsibility for emerging payments business development and treasury and trade solutions at the bank.
He told delegates at Sibos in London that
Open Banking is not a regulation or compliance project, but “a test case as to whether our industry will move into the 21st century”, inviting delegates to “acknowledge the gap between the digital expectations that businesses and consumers have for banking and the reality of banking” and to face up to the fact that financial services will be embedded into digital platforms in future. -- Citibank, Tony McLauglin
He urged banks to embrace Open Banking in full, by creating the APIs that will be used on those technology platforms and collaborating on the development of global standards for API use and security.
McLaughlin’s message was echoed elsewhere at the conference, including during an interesting panel discussion featuring experts at Bank of America Merrill Lynch, Lloyds Banking Group, BNP Paribas Securities Services and ClearBank, talking about how and why each was using APIs.
BNP Paribas Securities Services global head of digital client experience Paud O’Keefe described the challenges that a long established bank faces in trying to make full use of APIs -
“We’ve got legacy systems, we’ve got siloed data” - and stressed the need for banks that have poured money into enhancing data management capabilities in recent years to get the most out of those investments. -- BNP Paribas Securities Services, Global Head
But he also insisted on the importance of making the most of APIs.
“If you don’t have that real-time access to your data, that ability to communicate with your peers and FinTechs, you’re not going to be at the table,” O’Keefe said. “You’ve got to have API-enabled systems.”
Continue to the full article --> here
Related:
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Designing a data transformation that delivers value right from the start
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Open banking has a big branding problem, government’s public opinion research suggests
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While Canada debates, others are commercializing our most valuable asset: data
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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