Banking and Fintech: A Symbiotic Relationship of Innovation

In an interview with Muraleedhar Ramapai, Executive Director at Maveric Systems, we delve into the dynamic landscape of banking and fintech, exploring the evolving relationship between traditional banks and fintech companies, their symbiotic partnership, and the role of innovation in shaping the future of the BFSI sector. With over two decades of experience in banking, quality engineering, and management consulting, Ramapai provides valuable insights into the challenges and opportunities that lie ahead for financial institutions. Join us as we navigate the intricate world of digital transformation, customer expectations, and the relentless pursuit of excellence in the realm of banking technology. Excerpts:

Can you elaborate on how the coexistence of traditional banks and fintech companies has evolved in recent years, and what benefits this partnership brings to the BFSI sector?

Structurally, banks and Fintechs operate on different philosophies shaped by their business models and approaches. Let’s look at some of the key differences.

First, let's talk about regulatory compliance. Banks are subject to extensive regulatory requirements, especially retail banks that accept deposits as a source of cash. They are heavily regulated in all aspects of operations, including those unrelated to the sources and uses of cash from the public.

Next, there's the issue of legacy. Banks are often seen as legacy institutions with established processes. Many years of computerization within banks, using a one-size-fits-all approach, have led to numerous stand-alone, 'siloed' legacy applications. These applications can disrupt the user experience in multiple ways. Overhauling technology for a large bank is not only expensive but also risks further deterioration of the customer experience.

Another difference is in leadership. Most banks are still led by experts who have a deep understanding of finance. However, technology, including data, AI, and digital solutions, often takes a backseat as a secondary expertise.

Lastly, there's the pursuit of comprehensiveness. Most banks focus on cross-selling and upselling as the key drivers of growth.

In contrast, Fintechs, especially those that do not accept public money, are less regulated. They typically use newer, more agile technologies and are led by technocrats for whom finance is a secondary expertise. Most successful FinTechs, especially during their initial hyper-growth stages, are laser-focused on solving specific problems for their customers.

Both approaches, that of traditional banks and that of FinTechs, create a symbiotic relationship between them. Some successful partnerships between FinTechs and banks have resulted in exemplary success stories, covering areas like customer onboarding through video and AI, robo-advisory services, payments, loyalty programs, and more.

However, potential conflicts arise when FinTechs become ambitious and start competing for the same customers, or when banks attempt to reimagine themselves as Fintechs with banking licenses. In such cases, the symbiotic relationship can shift towards a competitive or even predatory one."

Could you share specific examples of how your retail business banking technology specialists have contributed to enhancing operational efficiency for financial institutions?

We have played critical roles in ensuring many digital banking transformations in multiple countries around the globe.  The transformations range from building new omnichannel banking platforms to very focused solutions for addressing a specific product build-out.  We live our promise of “Accelerating Next in Digital Baking”.  There are many examples, but bound by confidentiality agreements, I can only list a few here.

• For a large wealth manager focusing on the extra high net-worth segment in one of the richest countries in the Middle East, we have been able to increase customer confidence in their service through multichannel personalized portfolio analytics.  This freed up the high-end wealth managers to focus more on research and meaningful conversations with the customers, while customer experience was enriched with an empowered platform that addressed all their information requirements for decision-making and governance.
• For a Fortune 50 bank, we have automated a data quality framework that assists them in ensuring timely regulatory reporting with minimal human intervention.  This reduced the risk of being fined by the federal authorities while freeing up critical and rare regulatory expertise, making them available for more important tasks like attending to changes in the regulatory framework, and safer banking practices.
• We have delivered a self-service analytics portal for a large transnational bank in Asia for their corporate customers, leading to the operational efficiencies of managing large corporate accounts and improving the treasury decisions of their customers.

As customer expectations continue to evolve, how does Maveric Systems enable banks to stay ahead by leveraging innovation and cutting-edge technologies?

Our motto is to “Accelerate Next in Digital Banking”.  We take business thinking from banks, cutting-edge product and platform thinking from FinTechs, and high-tech innovation ideas from PureTech leaders like AWS and Azure to create the best for our customers. From FinTechs we understand how advanced technologies are used in solving financial problems, we learn how banks are thinking about advancing banking, and also partner with emerging and existing PureTech leaders to use their offerings in our solutions.  

The focus always is to partner with both FinTechs and Banks and learn from both to have an intelligent osmosis of business ideas and emerging technologies to arrive at best practices.  This core is complemented by investments in labs that focus on solving futuristic challenges using emerging technologies. We invest heavily in training our Associates to ensure that they are focused on upskilling themselves through continuous learning.  

With your experience in banking, QE, and management consulting, how have you witnessed the digital transformation landscape evolve since Maveric Systems was founded?

Maveric was set up with a singular focus of helping banks use technology to emerge as leaders in the markets they operate.  According to us, the digital transformation of banks is getting into its 5^th Version.  Version 1 was the introduction of technology in banks.  Though the first reported use of a computer in a bank dates back to 1955, it was in the 90s when banks actually started using technology.  Version 1 was all about computerizing the operations. The use of digital technology was limited to the efficiency of operations.  In Version 2, the banks started front-ending technology with customers. Two critical changes at this time were the use of ATMs and Credit Cards. This led to the need for banks to start interacting with customers outside the branches, though the branches remained the most critical channel. In Version 3, Mobile and Internet Banking emerged as two significant channels, however, they remained independent of each other.  The current mature Version 4 is about omni-channel banking, while Version 5 is about ubiquitous banking.  

Like telecom, power, or roads, banking will also become embedded into other aspects of our day-to-day lives.  Banks will invest more in knowing the customers with extreme intimacy and compete with other stores of customer information and intent, and specialize in super personalized offerings partnering with other service providers.

We are right at the cusp of an interesting banking transformation where customer wishes will become an instant command for the service providers.

In today's rapidly changing technology landscape, what key challenges do you foresee for banks and fintech companies in maintaining a harmonious and productive coexistence?

Bill Gates famously opined in 1994, “Banking is necessary, Banks are not”.  This sums up the relationship between Banks and FinTechs.  The demarcation between Banks and FinTechs is fast fading.  Banks these days attract executives from BigTechs and bet big on technologies, while FinTechs have started offering finance, financial advice, payments, risk coverages, etc.  Rather than co-existing, they will merge and morph into something more meaningful for customers. In many cases it will be organic which may start with partnerships leading to exclusive tie-ups and finally a merger. In some cases, it may lead to inorganic hostilities.  

We are currently in the peaceful co-existence phase where banks are sizing up the partners, and learning about newer ways of customer interactions, while FinTechs are eyeing the banks’ large customer base and low cost of capital.  Most relationships are ‘win-win’ focussed.  In India itself, there are many formal alliances ranging from complimenting services, increasing reach, embedding analytical offerings, and the like.

What philosophy drives you and your team at Maveric Systems to continually push the boundaries of innovation and excellence in the BFSI technology space?

Banking is one of the most critical services on which we are dependent. We are a committed bunch of professionals looking at making banking simple for the banks’ customers and making the business safer and profitable for the banks while embracing the ever-evolving changes. The objectives we want to drive are not going to be possible without taming emerging technologies.  Hence, we have created an ecosystem where business thinking and technology developments critique each other constructively and evolve into something bigger and better. Each Maveric is in her pursuit of accelerating the next for banking, and this collective commitment is what gets us going.