Delivering business-driven innovation

Sudhir Pai, chief technology officer, Capgemini Australia

They are representative what the Economist in 2013 referred as “a wave of financial technology firms, many of them just a few years old, that are changing the ways in which people borrow and save, pay for things, buy foreign exchange and send money. In doing so they are finding and mining rich seams of profit, challenging the business models of existing institutions and inflating a bubble of excitement among investors that technology and the internet are about to change banking for good.”

The early success of Palantir and company led to the perception that these startups are out to eat the incumbent financial institution’s lunch. Respondents to the 2016 PwC Global Fintech Report estimate this number at 20% of banks and payments business by 2020, and 22% for insurance, asset management and wealth management.

Figure 1: Areas of disruption by Fintechs

PwC: areas where fintech disruption happens

Source: 2016 PwC Global Fintech Report

Fast-forward to 2017 and we are hearing a different story. All told from the perspective of incumbents, regulators, technology companies and startups, there is consensus collaboration may be the best way forward.

The wakeup call

Startups recognize that they know what the customer want but don’t have the customer base (aka reach), a trusted brand, and don’t have the resources to scale their business – geographically or just the size of the opportunity – for example, how would a startup approach Indonesia’s 132.7 million Internet users or 106 million active social media users or 371.4 million mobile phone users?

Where and when convergence happens

So the realization is that working together is the best way forward.

In this exclusive interview with Fintech Innovation, Sudhir Pai, chief technology officer at Capgemini Australia discusses some of the situations incumbent financial institutions find themselves in when trying to evaluate a potential partnership with a startup. He talks about the value of a curation index in helping assess the prospective startups impact to the incumbent’s innovation ambitions taking into account issues like cultural fit, regulation, or what happens after PoC.

“Starting small is great but after you get passed the proof of concept or experimentation, what do you do next? Do you integrate these people into your organization, and if yes – how? In some of the most successful organizations, it starts with a committed, strong leadership that drives the necessary cultural shift within the enterprise,” observed Pai.

Speaking at the Google Cloud Next conference, Darryl West, Group Chief Information Officer at HSBC, hinted that HSBC’s own digital transformation is about “driving a cultural shift within the business to make this really work. You have to adopt an agile methodology, a dev-ops mindset, and you need to be able to recruit and retain talented people who understand how to use these new technologies and work in this way.”

Capgemini's Pai believes that a business-led innovation conversation is critical for the success of any digital transformation initiative. “If the business unit’s plan and focus area aligns with the innovation plan and focus area that’s the time when you can see the convergence happening,” he concludes.