by Joseph Young
Samsung, South Korea’s largest conglomerate corporation, recently released a report in regards to the impact of fintech and blockchain on financial services firms and their business structures.
As stated by a Business Insider research paper, 60 percent of major banks and financial institutions have expressed their willingness to either partner with or acquire fintech startups to embrace emerging innovative solutions. While banks in Asia are more eager to acquire fintech firms, Latin American banks are more likely to collaborate with them.
On Samsung Insights, business and financial expert Phil Britt emphasized the importance of acquiring a fintech company for banks and the potential benefits it can provide for the enhancement of traditional business model structures and IT systems.
Blockchain and fintech solutions appeal to a larger portion of the rising number of millennials, due to their cost-efficiency, simplicity in user interface, robust security, and flexibility.
The capability of conventional banking systems is very limited in terms of the range of services they can provide due to compliance and regulatory responsibilities. Since banks and major financial institutions are strictly overseen by a central authority, their operations often turn out to be expensive, inefficient, and prone to vulnerabilities.
Thus, banks have begun to acquire and partner with fintech startups to offer innovative services on top of their core operations. One major benefit of a fintech startup acquisition Britt describes is, how it enables large financial establishments to control customer relationship while offering fintech services under its brand.
“By acquiring a FinTech company, a financial services firm can offer the technology under its own brand while also continuing to control the customer relationship,” wrote Britt.
Essentially, Britt and other research organizations like McKinsey & Company state that the failure to house or embrace fintech companies pose significant risk in customer relationship loss, which can be damaging to the brand and reputation of financial establishments.
For instance, Samsung SDS recently invested in a blockchain startup called Blocko, a South Korean blockchain deployment service provider, to deepen their understanding of the technology and exploit its potential in various areas of Samsung’s core operations.
It is more effective financially and economically to invest in a startup that has been involved in the blockchain and fintech industry and continues to follow the trends in the market rather than establishing a completely new research department for experimental and implementation purposes.
Like Samsung, a fintech startup acquisition allows banks to offer innovative solutions on top of its existing services, with millions of users globally. While doing so leads to a major restructuring of their internal systems and business models, experts such as Britt and reputable research institutions including CB Insights and McKinsey & Company believe that an overhaul of traditional financial structures is necessary to meet the demands of the rising number of millennials.
“Banks must think hard about how best to organize to support the five preceding imperatives, asking what organizational structure and decision rights will most effectively support a data- and insight-driven operating model, a distinctive customer experience, digitized processes for greater efficiency, and next-generation-technology deployment,” wrote McKinsey’s New York and Vancouver directors Miklos Dietz and Somesh Khanna.
Ultimately, experts and researchers state that banks and financial institutions will be forced to rethink and restructure their business models, either by partnering with or acquiring emerging fintech and blockchain startups.