Banks must engage with the booming fintech startup community to benefit from the fast pace of innovation or risk their business being disrupted by more agile companies, Royal Bank of Scotland’s CEO for commercial and private banking has claimed.

“Financial technology in recent years has been incredible, and the pace of change is amazing. But it presents us all with a real challenge – how do we recognise, nurture and develop the innovators of tomorrow, wherever they may be,” said RBS’ Alison Rose, speaking at the bank’s London headquarters for the investor day of the third, Accenture-led FinTech Innovation Lab. 

Investments in fintech firms have trebled to more than £8bn, says Accenture. Image: iStock/mikeinlondon
Investments in fintech firms have trebled to more than £8bn, says Accenture. Image: iStock/mikeinlondon

She pointed out that the bank has been engaging with startups in a variety of ways, with staff stationed in Silicon Valley tasked with tapping into local developments, providing office space for UK startups, while the bank has also partnered with new peer to peer lending firms Funding Circle and Assetz capital to provide finance to SMEs. 

“RBS and the other banks now have teams dedicated to innovation and R&D, but we are all aware that we don’t know where the next big disruptor of technology is going to come from," Rose said. "It could come from anywhere: an incubator or accelerator, a university or even someone’s garage, and anywhere in the world. So we need to make sure that we are tapping in to all of those areas so that we are aware of what that new disruptive technology may be.”

She added: “This industry will be completely different in five years' time.”

Rose’s comments followed the publication of research from Accenture that shows global fintech investments trebling last year to £8 billion, with Europe – and the UK in particular - leading the way in terms of growth.

However, the research - launched ahead of 13 fintech startups pitching to a room of representatives from major global banks - also showed that the spike in interest in fintech firms presents a challenge for established lenders if they are to remain relevant in future as digital technologies threaten to overhaul business models.

The survey of 25 senior banking executives showed that 44 percent do not believe their bank invests enough in innovative technologies, while 40 percent believe their business is ‘too slow’ to deploy new technology. Furthermore, four out of five respondents believe their organisation lacks the relevant skills and culture to succeed in the ‘digital age’.

Nevertheless, they are increasingly becoming open to wider collaboration – with all expressing a willingness to work with organisations outside of their business to boost innovation.

“Banks understand that this is not a question of opportunity or threat – this is an opportunity and a threat,” said Julian Skan, managing director at Accenture, also speaking at the event.

“There is a recognition that the key things required to meet the opportunity and threat are openness, collaboration and investment.”

The 2015 Fintech InnovationLab (UK) finalists in full:

Atsora provides financial institutions with innovative tools for small business owners. The core product, Momentum, is an integrated online and mobile application used for business planning, monitoring cash-flow and growth forecasting.

Cytora uses web-based data to provide real-time geopolitical risk assessments to organisations that operate in volatile, emerging or complex markets. The solution allows users to customise their risk assessment to capture information relevant to their businesses and includes alerts for immediate updates when conditions suddenly change.

Duco is a technology company that helps financial services firms control and manage complex data. Its web-based reconciliation service, Duco Cube, enables non-technical staff to identify discrepancies in trades, transactions or reference data across different data sets, within minutes.

Pontus Networks helps businesses increase the performance of their computer systems. Its flagship product, PontusVision Threat Manager, enables different types of business software to run more efficiently and nearly three times faster.

Ripjar’s platform provides real-time social media monitoring and data analysis. Using proprietary natural language processing, deep learning algorithms and visualisations, Ripjar’s platform allows organisations to make sense of the growing number of external data sources.

Torusware enables businesses to increase the processing speed of their IT systems, whether these systems are hosted on the cloud or implemented on premise. For instance, trading systems, which need to exchange information in nanoseconds, can experience unpredictable high-load at specific times, such as when exchanges open or close, and Torusware ensures low latency responsive times during these critical periods.

xWare42 is a software developer whose core product, xPay, allows banks to give customers additional information about their purchases. For instance, payment details on a bank statement can be enriched by adding information such as receipts, addresses, opening hours, service numbers and other details about the retailers. This gives customers a more helpful picture of their purchases while allowing banks and partner retailers to offer personalised discounts and encourage further transactions.