# Why Fintech Alone Doesn’t Herald the Next Banking Revolution Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-07-28 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: Technology Shakeups in Banking: Palantir and Credit Suisse Meta Description: Discover how collaboration between Credit Suisse and Palantir is reshaping banking with sophisticated analytics systems and explore the potential of emerging URL: https://financedigest.com/why-fintech-alone-doesnt-herald-the-next-banking-revolutionhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/dsc1944-2210-1736843642550-compressed.jpg) _By **Nathan Snyder**, Partner at Brickendon Consulting_ One of the largest technology shakeups in banking in recent years has been the use of advanced data analytics techniques to catch rogue trading activities within banks. The stand-out story has been the collaboration between Credit Suisse and Palantir, which led to the creation of a sophisticated analytics system for identifying the early warning signs of rogue trading. While many might assume this is a fintechstartup success story, they would be wrong. Palantir already had a distinguished history of working with government agencies – most notably the CIA. Fintech, defined by IOSCO’s 2017 [research report](https://www.financedigest.com/bacillus-coagulans-market-research-report-2022-global-forecast-till-2028.html "Bacillus Coagulans Market Research Report 2022 – Global Forecast till 2028") into the sector as typically offering one or more specific financial products or services in an automated fashion, has attracted considerable interest for a while now. A number of [innovation hubs have been created in financial centres around the world with the aim of encouraging the development](https://www.financedigest.com/luggage-market-development-innovation-opportunities-and-growth.html "Luggage Market Development, Innovation, Opportunities And Growth") of, and providing funding for, fintechstartup companies. But the question is: will the [next banking](https://www.financedigest.com/explainer-why-is-bank-of-england-acting-again-what-next-in-the-uk-crisis-2.html "Explainer-Why is Bank of England acting again? What next in the UK crisis?") revolution actually come from the fintech sector? Recent newspaper articles have typically focussed on the difficulties fintechstartups have had in creating a banking revolution through the [innovative application of technology](https://www.financedigest.com/research-and-technological-innovations-to-bolster-developments-in-polycarbonate-resins-market.html "Research and Technological Innovations to Bolster Developments in Polycarbonate Resins Market"). The fintechstartupMoven recently admitted to the New York Times that they had toned down their rhetoric of replacing the banks, focussing instead on [selling their technology to banks](https://www.financedigest.com/russia-bans-western-investors-from-selling-banking-key-energy-stakes.html "Russia bans Western investors from selling banking, key energy stakes"). [Banks’ business](https://www.financedigest.com/two-speed-economy-in-sweden-central-bank-business-survey-shows.html "Two-speed economy in Sweden, central bank business survey shows") models are protected by years of history, established practice and regulation. However, this isn’t the same in all industries – and so-called [technology disruption is occurring in other sectors](https://www.financedigest.com/why-trust-and-technology-are-the-perfect-partnership-to-rebuild-the-financial-sector.html "Why trust and technology are the perfect partnership to rebuild the financial sector"). The best-known modern example is the breaking of [taxi cab monopolies by the likes of Uber](https://www.financedigest.com/uber-executive-says-european-taxis-joining-platform.html "Uber executive says European taxis joining platform"), Gett and Lyft. Through a combination of aggressive policies and highly-usable technology, these companies have replaced the existing intermediaries, who offered little economic value to the [businesses they were managing](https://www.financedigest.com/intelligent-receivables-management-why-its-a-businesss-greatest-ally.html "Intelligent Receivables Management: Why it’s a business’s greatest ally"). Banks, however, are not classic intermediaries. The promise of [fintech “peer-to-peer lending” has failed in all but name](https://www.financedigest.com/automation-is-the-name-of-the-game-in-fintech-in-2022-and-beyond.html "Automation is the name of the game in fintech in 2022 and beyond"). The idea that some people want to lend and others to borrow is a classic one that seems simple to solve via technology. However, the real value that [banks provide is that they take deposits and issue loans](https://www.financedigest.com/metro-bank-posts-flat-third-quarter-loan-growth.html "Metro Bank posts flat third-quarter loan growth"), creating economic value in the process. The security provided by the banks’ [balance sheets](https://www.financedigest.com/ecb-policymakers-back-jumbo-rate-hike-differ-on-balance-sheet-cut.html "ECB policymakers back jumbo rate hike, differ on balance sheet cut") is hard to replicate with a website and in many cases peer-to-peer lending is now provided by banks, such as the example of Citi teaming up with Lending Club in 2015. On the other hand, IOSCO’s paper also talks of another area of finance technology – [namely emerging technologies](https://www.financedigest.com/inmobi-names-inderbir-singh-pall-as-chief-technology-officer-of-inmobi-advertising-platform.html "InMobi Names Inderbir Singh Pall as Chief Technology Officer of InMobi Advertising Platform") that can be used to “supplement both fintech new entrants and traditional incumbents”. This provides a much more promising avenue for exploration. The general [trend in talking about emerging technologies](https://www.financedigest.com/technology-trends-heat-up-for-financial-firms.html "Technology trends heat up for financial firms") seems to split opinion between passionate advocates and wary cynics. Sales pieces tend to overstate the case with a sense of pride and awe, giving the impression that robotics and [artificial intelligence](https://www.financedigest.com/artificial-intelligence-in-banking-magazine.html "Artificial Intelligence in Banking Magazine") (AI) are already combined into an integrated set of products, which is not currently the case. This then inspires a backlash of cynical commentary discussing how far sales pitches have deviated from technological reality. Another [source of disillusionment has been the banks’](https://www.financedigest.com/nomuras-india-head-of-investment-banking-steps-down-sources.html "Nomura’s India head of investment banking steps down -sources") interest in blockchain technology. For many, the magic of bitcoin was that it provided a distributed ledger for all, with the only barrier to entry being technical know-how. By contrast, some banks are proposing allowing only trusted institutions to hold the ledgers, thus dampening some of the enthusiasm. Both the supporters and the doubters, however, miss the point. Whilst Libratus (the poker playing AI system built by two [computer science researchers](https://www.financedigest.com/we-researched-dfinitys-internet-computer-and-this-is-what-we-learned.html "We Researched Dfinity’s Internet Computer and This Is What We Learned") at Carnegie Mellon) may win Texas Hold ’Em tournaments and grab headlines, of equal interest is JP Morgan’s COIN software. This learning machine has been taught to parse contracts for legal clauses that were previously only readable to humans. The implications for solving business problems from netting to client account segregation are huge. And here is where the real [revolution in banking](https://www.financedigest.com/prime-bank-and-agam-spark-lending-revolution-for-individuals-and-business.html "Prime Bank and AGAM spark lending revolution for individuals and business") is likely to come. Not from fintech alone or banks alone, but from banks and fintech [companies collaborating on emerging](https://www.financedigest.com/veterinary-teleradiology-market-insights-by-leading-companies-and-emerging-growth-till-2031.html "Veterinary Teleradiology Market Insights by Leading Companies and Emerging Growth Till 2031") technologies.  Financial institutions are investing heavily in big data, artificial intelligence, [blockchain and distributed ledger](https://www.financedigest.com/blockchain-a-case-for-the-general-ledger.html "BLOCKCHAIN: A CASE FOR THE GENERAL LEDGER") technology, in some cases with only an outline of a business use case. Instead of determining how technology can service their business model, they are looking to [see what new business models](https://www.financedigest.com/the-next-decade-to-see-the-humanized-liver-mice-model-market-detonate-innovation.html "The Next Decade To See The Humanized Liver Mice Model Market Detonate Innovation") the new technology might suggest. This is the future. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---