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McKinsey Report: “It is time for banks to catch up or fall behind”

Spanish banks are looking closely at financial technology (Fintech). They are investing in Fintech startups, launching seminars and other programs to promote them, creating joint ventures, reaching agreements to transfer clients and even creating innovation laboratories. Why all the activity?

A recently published report by McKinsey & Company warned traditional banks of the potential risks posed by technology companies entering the financial sector. In the study, The Fight for the Customer, McKinsey noted that: “Fintech startups are a real threat to traditional banks. Between 20 and 60 per cent of their earnings are at risk due to reduced margins and market share lost to new competitors”. The report explains that banks have the choice of fighting technology companies or joining them, recommending the latter to learn from them, find ways to work together and to learn to think digital.

This advice has been taken by the majority of international banks including the more traditional ones.

 

The four largest Spanish banks have taken some first steps to move closer to sources of technology

Santander: has created Santander Innoventures as technology risk capital fund based in London. It has already invested in several financial startups, such as Kabbage (SME lending), iZettle and Mycheck (mobile POS payments) and Ripple (peer-peer cross-currency settlement), amongst others.

BBVA: through BBVA Ventures, has invested in Prosper (personal loans platform) and in the financial advisers Personal Capital. It has also created the BBVA Innovation Centre with the aim of moving closer to the so-called “innovation and business ecosystems”.

La Caixa: has created Caixa Capital Risc, a venture capital company. It has also invested in Peer Transfer (finance for overseas study expenses) and organises the Millenial Finapp Party to encourage innovative mobile apps for financial services.

Bankinter: created the Bankinter Innovation Foundation and has made several investments in Fintech startups, such as Captio (travel expense management) and Coinffeine (peer-peer bitcoin exchange platform).

Crowdlending and Peer-Peer loans between private individuals and companies are two of the growth areas within financial technology identified by McKinsey as potential new entrant competitors to parts of traditional banking. At MytripleA, we welcome the interest of traditional banks in the possibilities of FinTech. Throughout the world, banks are encouraging digitalisation and trying to adapt their services to these new technologies. Traditional banks do not have the same agility as young, focused businesses to adapt to change and naturally they want to learn from Fintech startups and try to adapt their own business models to capture these new markets. It remains to be seen who will create the greatest value from the changes that will inevitably become part of the industry – Fintech startups or traditional banks!

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