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JHA’s Lee Wetherington Delivers Insight About Fintechs and Big Techs at AFT Spring Summit

Lee WetheringtonBack by popular demand, Lee Wetherington, Director of Strategic Insight for Jack Henry & Associates, delivered a perceptive take on big tech and fintech trends and what it means to financial services at the 2018 AFT Spring Summit at California’s Ojai Valley Inn.

“It's important that you understand we have undergone just in the last two-three years a complete shift in the threat to the banking industry and that entire ecosystem,” Wetherington warned. Those threats come from various fintechs and entities such as Monzo Bank, a mobile-only bank based in the United Kingdom with global payment capabilities, which is talking to regulators about establishing its charter in the U.S.

Wetherington also dove into what he described as the real material threat to financial services and the industry, which he declared “Will require a change in strategy for most everybody in this room.”

First, Wetherington tackled the hype surrounding the notion that fintechs are already disrupting banks. The JHA strategist held fintechs are not disrupting banks, yet. Fintechs are partnering and licensing with banks.

He described how fintech venture funding basically topped out in 2015 in the U.S. with the number of deals declining. However, fintechs are now rampant in Europe in response to the new EU’s General Data Protection Regulation.

Wetherington explained fintechs have not been able to disrupt the U.S. financial ecosystem because many thought people would leave their banks and become attached to fintechs offerings. “OK, that didn't happen.” The second thing was that the biggest U.S. banks, every time they saw something interesting or something that might be a little bit threatening, they either bought it or emulated it enough to cut the knees out from underneath fintechs.

“Even though the fintechs did not disrupt our industry, fintechs did lay the foundation for disruption in the future,” Wethington said by setting a new standard for user experience and by accelerating the pace of change.

Then there is the threat from big techs like Amazon in financial services. Wetherington suggested, “Amazon's been doing financial services or things that look and smell and feel like financial services for quite some time.” Now they are partnering with banks to offer lending and checking accounts.

But what the big techs really want is financial institution data. Wetherington noted banks and credit unions already have the best data. “It's all labeled, it’s beautiful.” That data shows where people buy, what they buy, how much and how often. “That's the holy grail of data.” He added it is the kind of data Google and Amazon fantasize about.”

Wetherington added, if the traditional financial services industry wants to hold steadfast and protect the status quo and community financial institutions, they should leverage fintechs to fend off the big techs.

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