Tighter Regulations Inspire FIs to Become More Open to Innovation

SAN FRANCISCO – Consider it another real-life example that necessity is indeed the mother of invention.

With the financial crisis over and new regulations flooding banking — cutting into bank revenue — the industry is ripe for a little more innovation. Why? Because banks across the nation are on soul-searching quests, seeking new identities in order to find new sources of revenue.

“Banks are desperately trying to find ways to make up money,” said PayPal’s CTO Scott Guilfoyle, during a morning discussion at Future of Money & Technology Summit today.

“What it means to be a bank is up in the air,” said Schwark Satyavolu of BillShrink. “There’s an opportunity to fill huge gaps in what has been a static industry for hundreds of years.”

In addition to banks seeking new solutions, there’s equally good news for fintech companies. The morning panelists today also conveyed how fintech funding is much richer too, then, say, 10 years ago. Not only is that due to a consumer mentality shift toward banking because of the crisis, but also because APIs are more open, and social media allows younger companies to make a mark. Naturally, the ultimate problem for those seeking to drive innovation is that they are in good company. Many want in on that action, and it will be hard to come up on top. For consumers, though, this competitive drive should be advantageous in the long term, even when it comes to their banking partners. Guifoyle said it best: though banks won’t vanish, they will never remain the same.

“This transformation going on in the banking systems globally isn’t over for a long time,” Guilfoyle said. “It’s almost the beginning. …Consumers need something they don’t have.”