What is more threatening to banks – fintech or old tech?

We love quotes like this: “Dave McKay, chief executive of Royal Bank of Canada, thinks banks should focus more on fixing their legacy systems than trying to pull fintech...

Snehal Fulzele 9th December 2015

We love quotes like this:

“Dave McKay, chief executive of Royal Bank of Canada, thinks banks should focus more on fixing their legacy systems than trying to pull fintech startups under regulators’ purview.”

This quote came from a recent roundtable meeting where banks were grappling with how to transform systems built on human interaction and fit it to customers who now work digitally on their phones. Mr. McKay’s comment reflects his long-term view of banks’ struggle with alternative finance. He believes that banks should focus on the fundamental issues of how to transform themselves rather than accepting the short-term conventional wisdom that regulation of altfi is the only thing needed to put banks on a level playing field.

“The biggest barrier to adapting is the incredible legacy systems,” McKay added, noting that many banks have systems that are essentially 50 years old. The full article is here.

You might say today’s banks are driving 1961 Thunderbird convertibles, while the altfi guys are driving 2016 Teslas. A friend of mine has one of those vintage T-Birds. It’s a great car, but it’s definitely not her daily driver. For day to day transportation she prefers a Tesla. It’s fast, agile and based on technology that is light years ahead of the 50-year-old Ford.

Her parade car
Her parade car


Her daily driver. Source: US News
Her daily driver. Source: US News
Who do you think is going to win in today’s digital world?

In the past year, we have seen our cloud technology power some of the fastest growing and best known companies in the altfi world. Equally exciting, we have been in discussions with senior decision makers at banks around the world who find themselves in a quandary. These business leaders are struggling to wield a huge wrench: one side of the wrench must be applied to their internal digital transformation, and the other used to out-innovate the fintech players.

We believe there are three ways banks can achieve a competitive edge as they learn to both compete with and collaborate with the altfi firms:

  • Focus on the borrower experience – whether consumer or commercial
  • Cooperate and compete with marketplaces
  • Innovate in new marketplace ecosystems


How do they do this in practice? They make the shift from legacy technology to industry-leading cloud technology.

In the first example, we have seen many altfi lenders adopt CL Originate to improve the consumer experience with 6 Click Lending and the commercial experience with the CL Deal Room. Both approaches allow lenders to provide a WOW customer experience that lowers costs, increases revenue, and brings those customers back for more. [Webinar Recording: A WOW Borrower Experience with 6-Click Lending]

In the second example, banks have the option of either cooperating with marketplaces or competing with them. Remember “coopetition,” a business term popularized in the 1990s? It is increasingly being associated with mere survival in fast-moving markets. You can collaborate with marketplaces by using them as distribution channels for your bank, perhaps sharing non-conforming loan applications with multiple marketplaces. In addition, you can economically diversify into segments where you don’t traditionally lend, such as Citi and Union have done by becoming institutional investors in Lending Club. [Webinar Recording: How To Compete In Today’s Disruptive Lending World?]

You can also build your own marketplace and compete head to head, as suggested by several speakers at the recent American Banker conference in New York. Some of these speakers went on to acknowledge the challenges of such an endeavor: building your own marketplace can be as difficult as re-building your auto transmission from scratch. Fortunately, Cloud Lending’s platform provides a very fast onramp to a fully functioning marketplace. We have launched marketplace lenders in as little as 90 days. Nostalgia over classic T-Birds will be slow to fade, just as it’s easy to be enamored with the tremendous staying power of yesterday’s legacy systems. But if you want to really feel your heart race, step into a Tesla and move into the modern age. Like a Tesla, cloud technology delivers the latest innovations in security, automation and performance, leaving yesterday’s information systems in the dust.

All at Tesla’s “ludicrous speed”.

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