Changing the relationship between banks and fintechs with Dan Baker

Self-proclaimed payments geek, Dan Baker, head of payment rails product at J.P. Morgan, speaks to The Payments Association’s Kate McKenzie about evolving payments landscape

What trends are you seeing in the changing relationship between banks, fintechs and regtechs?

Collaboration and partnerships between banks and fintechs have never been as strong. Partnerships are the key to unlocking new business models and growth opportunities in the payments industry.

A bank’s value proposition lies within its ability to send reliable, scalable, safe payments and we already have a broad reach allowing us to service a wide range of customers and clients.

In comparison, fintechs offer agile and targeted solutions, which can offer unique value to niche audiences. When banks and fintechs work together, they create innovative solutions with global potential.

For example, J.P. Morgan has partnered up with Findroids, a Scandinavian fintech. Findroids transforms the user experience for treasury teams including building API connectivity between banks and ERP systems. Launching a proposition of this nature would have been challenging without the expertise of the Findroids team.

How would you like to see banks and fintechs work better together?

Banks and fintechs are working together well, but there is always room for improvement and we can learn from each other.

Fintechs have embraced agile very well because the operating model is technology, thus product and operations working together to solve client problems.

Banks often work in specific lines of business, with product sending requirements to tech versus getting tech directly connected to clients. This is something we are evolving on at J.P. Morgan and I think as an industry we can learn more from fintechs’ operating models.

Right now, we hear a lot about new opportunities related to payment ecosystems, platforms, marketplaces, apps and super apps. Treasurers are utilising APIs, AI, and other new technology to effectively and efficiently navigate increasingly complex payment flows associated with those opportunities. Especially as businesses are evolving to direct consumer offerings.

For treasurers, we are seeing the pendulum move from partnering with banks to partnering with a bank that has a network of fintechs. Given the various customer buying journeys which can take place this can become very complex.

Therefore, having a centralised approach via a banking partner helps treasury focus on connecting across lines of business on payments decisions; while also collaborating externally to know where to embed their offerings, which marketplaces to focus on, which platforms to engage with and much more.

By partnering together, banks and fintechs can offer global perspectives and tailored solutions that can help treasurers better understand audience perspectives.

Where are the opportunities for monetising open banking APIs?

With the rise of open banking, embedded banking, marketplac- ► es and as a service model, there has been a greater emphasis on competitors forming partnerships, whether that is through data sharing or collaboration. Therefore, these are the monetising trends we’re likely to see:

• Open data will be the new normal as these capabilities will be deeply embedded into day-to-day customer journeys;

• Data will no longer be just about APIs. APIs and data management will be synonymous and integration with machine learning, artificial intelligence and linkages to the Internet of Things will create differentiation and adoption; and

• Marketplaces will take centre stage and will be built around trust. Businesses will look to leverage marketplace solutions that onboard merchants quickly, offer buyers multiple ways to pay, and offer real-time fraud and transaction monitoring.

What is J.P. Morgan’s stance?

J.P. Morgan’s open banking strategy [powered by APIs] is to promote innovation and competition in the payments ecosystem by identifying new solutions and delivering value-added services to our customers, with a relentless drive towards improved, seamless user experiences.

Our key focus is on connectivity, cybersecurity and endto-end support and we welcome the continued regulatory and industry momentum to evolve the open banking framework to one that fosters open finance opportunities.