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Posted on November 3, 2017

Who will lead the FinTech Transformation?

Heracitus of Ephesus (c. 500 BCE) claimed that “clinging is unnatural and is what causes people to suffer.” Was he thinking about the major players in banking during the rise of FinTech? The majors, such as Citi, Wells, JPM, and others are quickly building their FinTech capacity so as not to be disrupted and suffer as Heracitus warned.

According to Kenresearch, the US FinTech industry is anticipated to grow at a rapid pace between 2016 and 2020 to USD 8.0 trillion in 2020. This is incredible, exciting, and also scary if you’re on the wrong side of this transformation. The big banks are quickly trying to build capacity internally to protect against predictions such as “The last personal check in the US will be written sometime in 2018.” This was quoted in 2013, and although unlikely to come true, statements such as this, combined with the large bets VCs are making, they can create a sense of urgency for financial institutions.

In the below chart, the venture capital firms are bullish on FinTech and its potential.

The majors have started to invest money and resources. The below chart (pulled from select industry research) shows how a few of them are building a talent base to create some of their own products, as they seek to change the status quo of financial services.

Firm Minimum number of employees dedicated to FinTech in the U.S.
Citi 313+
FIS 155+
Wells Fargo 126+
Fiserv 121+
Visa 102+

It looks as if Citi is taking this transition the most serious, with more than 300 employees focused on FinTech in the U.S. alone, nearly triple Wells Fargo.

The story of how they launched the practice was featured in a June 2016 Fortune article by Stephen Gandel. “The week after being put in charge of Citigroup’s consumer banking business last year, Stephen Bird went to Silicon Valley to meet with venture capitalist Marc Andreessen and other tech luminaries in hopes of gaining insight on how to counter the challenge from “fintech”—the rapidly proliferating class of technology startups bent on disrupting every facet of the traditional financial services business. Together they represent perhaps the No. 1 threat facing large banks today. It was Salesforce.com CEO Marc Benioff who gave him the idea. Benioff told Bird that he could never hope to change the culture or operations of a banking behemoth, with $1.8 trillion in assets, all at once. But if he put together an elite group within Citi, one that could operate with startup-like speed and agility, he might just get somewhere. Bird decided that to push big changes inside the company, he would first need to think small.”

A few of the initiatives Citi has undertaken:

  • Citi has a dedicated FinTech division – Citi FinTech
  • Their FinTech products include a new set of features for U.S. Retail Bank clients that make us the first global bank to integrate banking and wealth management on mobile
  • The product was developed in-house; there was no outsourcing
  • Citi has opened a global application programming interface (API) developer hub, granting registered outside developers from fintech companies and consumer brands access to its APIs across eight categories, including account management, peer-to-peer payments, money transfer to institutions, Citi rewards, investment purchases and account authorization.

Meanwhile, Wells Fargo is behind, but trying to play catch-up

  • Wells Fargo runs a startup accelerator for innovative companies in FinTech
  • Wells Fargo offers Bank Innovation products; does not specifically sell its products or services as “FinTech

My money is on Citi, as they are investing enough resources, have made real traction, and are doing it the right way- with their own SWAT team. The future is FinTech and we hope to join Citi in leading the way.

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