Increasing Competitive Advantage with Fintech

Selim Tastan, Head of Digital Transformation and Innovation, Kuveyt Turk Participation Bank

The general opinion that emerged after the financial crisis of 2008 was that Fintechs would completely disrupt the banking sector and even take over and destroy banks. Fintechs was also believed to be sufficient to capture the entire market share of banks by using digital and innovative technologies, focusing on and specializing on a single product, service, or business model, responding quickly to customer demands, launching their products in an agile manner and acting independently of regulations.

The recent years have shown us that unique characteristics that differentiate Fintechs from banks are not enough for Fintechs to grow. It was understood that the financial experience, customer base, financial stability, and capital requirement in banks but not in Fintechs were the biggest obstacles for the growth of Fintechs. Fintechs with innovative business models and banks with substantial capital, customer base, and experience considered to be rivals have started to gather around the collaboration.

Thanks to the collaboration by Fintechs, a great opportunity has emerged for banks that have advanced both technology and digitalization domains. Banks that gained a competitive advantage and sustainability in the market with the use of Fintechs’ products and services outperform their rivals that have not penetrated the market with innovative digital products.

Surely, some banks still believe that Fintechs as rivals and refuse to cooperate with them. It is not difficult to see that they will be deprived of competitive advantage and negatively affect their future competitiveness. Cooperation with Fintechs will bring significant gains to both banks and Fintechs and will be one of the critical factors determining our bank’s future position.

Banks that gained a competitive advantage and sustainability in the market with the use of Fintechs’ products and services outperform their rivals that have not penetrated the market with innovative digital products

In this direction, as Kuveyt Turk Participation Bank, we plan to continue and increase the number of Fintech collaborations by using robust API technological infrastructure. Our bank’s Fintech strategy is based on two essential principles. First, we rely on our custom-made Fintech onboarding framework. Second, we aim to be in the position of offering platform banking for Fintechs or technology startups.

We developed a Fintech onboarding framework to evaluate Fintech startups based on the bank’s strategy, business requirements, and expectations, along with technical, risk, control perspectives. We present Fintechs, contributing value to the bank, to the senior management team to decide whether or not the collaboration with Fintechs is possible. Using the framework, we assessed more than 100 startups and presented more than 25 startups to the bank’s senior management. We successfully onboarded five Fintechs. We currently have six ongoing projects to be completed until the end of 2020.

Platform banking is defined as banks that integrate services from other Fintechs to enhance their existing offering. In the platform banking model, the bank owns the customer and integrates services from Fintechs.

The first goal in platform banking is to create alternative revenue models in Turkey’s financial sector by developing APIs available for Fintechs. As a bank, we contribute to the development of the ecosystem by meeting the demands and needs of Fintechs through the platform banking model. We plan to strengthen our leading position in the sector by being the bank preferred by Fintechs and the first to apply when needed. To do this, we know that while providing a quality of API infrastructure, we should be in a role that has good relations with Fintechs and develops APIs according to the ecosystem’s needs.

Moreover, we want to be pioneers of banking platforms in Turkey. Our strategy here is to provide financial or non-financial services, meeting customer needs and expectations through the API banking platform rather than developing each product and service with our IT resources.