truth about consortia

Over the past couple years we’ve witnessed the births of many consortia. These multifaceted alliances have become the faces of the fintech industry and their prevalence doesn’t appear to be slowing down. According to a document produced by law firm Simmons & Simmons, approximately 64 percent of financial institutions in Hong Kong and Singapore are expected to bridge the gap and proceed with collaborations with fintech firms over the next 18 months. The document, titled “Hyperfinance: Accelerating Digital Innovation In Financial Services,” gives details of a thorough survey administered to Asia Pacific (APAC) financial institutions and asset managers, and surprisingly, the results reveal a lot of cynicism about the current state of fintech.

First, the document shows that large APAC firms struggle with innovation by acknowledging that not many financial institutions are making significant “big firsts” within the industry. According to the paper, the survey revealed that only seven percent of respondents can assert that the banks and/or asset managers they represent are “setting the pace of digital innovation.”

The document explains that collaboration within the fintech industry is crucial to the development of innovation, but points out that most large institutions are ill-equipped for this. Most firms aren’t fit for these types of collaborations due to complex decision-making procedures and concerns about intellectual property. As a result, over three-quarters of respondents admit to a much-needed polishing of partnerships with outside firms. An additional 19 percent of respondents “consider their procurement processes to be ‘highly effective’ in enabling collaboration with FinTech firms.”

The survey also revealed that about one-third of the respondents are expecting to procure a fintech firm within the next 18 months. However, many are concerned about regulatory risk. Of the remaining two-thirds, a total of 45 percent sees regulatory risk as a crucial obstacle to surmount before developing successful partnerships with other firms. The paper attributes sector growth as a possible reason why leading banks are instituting “strategic investment units to beat the competition to the best start-ups.”

Unsurprisingly, cybersecurity was brought up as one of the biggest risks among respondents. Despite the rigorous data protection and compliance requirements for the industry, roughly 71 percent of respondents agree that cybersecurity threats pose the greatest risk to the establishment of partnerships within the fintech industry.

Lastly, the firm reveals that the establishment of industry consortia is key to implementing innovation for technologies like distributed ledgers, but the current model needs a makeover. This was revealed after a stunning 60 percent of survey respondents expressed that they see existing consortia as ineffective due to large sizes. Another 68 percent stated they would need a large degree of control over the consortium’s agenda in order to participate.

Dan is a Los Angeles-based musician, writer, and veteran passionate about science and technology, current events, human rights, economic impacts, and strategic calculus.
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