Several weeks ago, I was out with the rest of the Bedel Security staff on a strategic and team building exercise. During our meal we discovered a “vodka pairing” menu that the restaurant was working on.
Now, everyone knows about wine pairing. I've seen some really good craft beer pairings. And even bourbon with chocolate or parmesan cheese can really bring out some new flavors.
But vodka? I mean, some are smoother than others, but there's just not a lot of flavor profile there to work with. I like a Martini as much as the next guy, but it brought up the question:
“Does vodka pairing really make sense. Or is it just an attempt to be trendy based on novelty alone?”
Call me old, but after a very short discussion, we unanimously agreed that it was likely the latter.
What's this got to do with FinTech?
As a community bank or credit union, I think we need to ask ourselves the same question when it comes to FinTech. Does it make sense for our financial institution or is it just a buzzword?
The short answer is: it depends.
FinTech Defined
FinTech by definition is very broad – “technology used to support or enable banking and financial services.”
That covers a lot of ground. When you look at it that way, my own company Bedel Security is technically a FinTech, and just about all community financial institutions are currently partnered with a FinTech in some way.
By that definition - I think we can all agree that we can interchangeably use the word FinTech with “innovation”. It's kind of like when the term “service bureau” moved to “hosted” and then it was “the cloud”. “Cybersecurity” used to just be called “information security”. The idea hasn't changed, it’s just a new term that sounds trendy – a buzzword, not quite a vodka pairing, but close.
Don’t be confused, innovation is not only a good idea for community banks and credit unions, it is absolutely imperative for their survival – as we talked about last year: https://www.bedelsecurity.com/lp-surviving-the-post-pandemic-landscape
As Peter Drucker, management guru, says: “Innovate or die.”
A Deeper Look
But the term FinTech is not that simple. In its more specific use, we have to start talking about non-banking entities that are using technology to deliver financial services – typically a startup.
This is where we really need to be careful. I’ve seen numerous articles, from trusted sources, calling for community banks and credit unions to partner with these outside FinTech firms. Some even going as far as recommending purchasing an equity share to bring that emerging technology into the fold.
Not only is there financial risk in making this kind of move, there are a number of cybersecurity risks including:
- Managing a hosting environment
- Development lifecycle management
- Application security testing
- And integrating development staff that likely doesn’t even know what GLBA is (I’ve seen it with my own eyes in a previous consulting engagement)
On top of all of that, the search, selection, and acquisition process requires skills and involvement that can be far outside the capabilities of a typical community financial institution – definitely some of the trappings of vodka pairings here…
When you read an article that says there's risk in not getting in the FinTech space, understand that there is risk on the other side of the coin as well.
Closing
You need to ask yourself if your financial institution needs to be in the code development business – or if it’s just something that sounds cool.
If there's truly value for you, your customers, and your shareholders in making this kind of move, be prepared to take on new risks that you've never had to deal with before. Make sure you find good outside advisory partners to help along the way.
If that feels like too much, don’t let that be an excuse to not adopt new technologies – there are many ways for banks and credit unions to innovate without buying a tech firm. Our industry is going to change drastically over the next 5 years and those that choose to avoid innovation won’t be around much longer.
No matter what you call it, FinTech is just like any other innovation or partnership in banking: you need to make sure the move is focused on business objectives and you need to appropriately manage the risks.
If you’re looking for help in managing the risk of new technology, drop us a note at support@bedelsecurity.com.
Additional Resources:
The Virtual CISO Whitepaper
https://www.bedelsecurity.com/the-virtual-ciso-whitepaper
Surviving the Post Pandemic Landscape
https://www.bedelsecurity.com/lp-surviving-the-post-pandemic-landscape
Your Information Security Program Needs Focus
https://www.bedelsecurity.com/blog/your-information-security-program-needs-focus
Two Essential Ingredients to Improve Your Information Security Program
https://www.bedelsecurity.com/blog/two-essential-ingredients-to-improve-your-information-security-program
The Gist of Governance
https://www.bedelsecurity.com/blog/the-gist-of-governance
Does Your Change Management Process Need a Conversion
https://www.bedelsecurity.com/blog/does-your-change-management-process-need-a-conversion