The financial technology, or fintech, industry has exploded, and big banks are sitting up and paying attention.
Often, fintech companies like robo-advisors and financial planning startups are seen as “out to crush” their more traditional counterparts.
But there’s one important goal that companies in both industries share, and it’s motivating them to work together: helping Americans save more money.
“Everybody benefits if a broad base of Americans saves more and has access to more capital so they can build businesses,” Maria Gotsch, the president and CEO at the Partnership Fund for New York City, told Business Insider.
Her organisation partnered with the Department of Commerce and the financial planning startup LearnVest to host a conference that brought some 40 fintech startups together with a handful of large financial institutions last week.
Participants included Secretary of Commerce Penny Pritzker, JPMorgan Asset Management CEO Mary Erdoes, Northwestern Mutual CEO John Schlifske, and folks from Goldman Sachs and MasterCard, among others.
“The economic benefits which will emerge from fintech are not restricted to the growth of the sector,” Secretary Pritzker told participants. “Your success translates directly into the growth of businesses across all sectors, and the strength of our consumer base.”
Traditional financial institutions, hampered by post-financial crisis regulation and legacy technology, are struggling to do it alone. That’s why it’s in everybody’s interests — even the Department of Commerce’s — to help them partner with startups.
Partnership can take many forms. For large institutions, it might be mentorship relationships with startups, strategic investment opportunities, or utilising technology as a customer of the firms.
In the case of life insurance giant Northwestern Mutual, it meant acquiring LearnVest to enhance their digital platform for clients.
“We see LearnVest really serving as an innovation hub for Northwestern Mutual, so we’re going to drive lots of experimentation and new thinking through LearnVest and see what takes,” Northwestern Mutual executive vice president Tim Schaefer told Business Insider.
It’s makes sense from the perspective of fintech companies too.
“Everyone wants to help consumers save more, save smarter, invest better,” Jon Stein, CEO and founder of the robo-adviser Betterment, told Business Insider. “I think some of the big companies feel they just can’t get there for technology reasons, for investment restrictions, for regulatory restrictions.”
His company shares common problems with traditional investment firms — things like data portability and compliance constraints. Identifying and agreeing on specific issues, or pain points, to bring to regulators in Washington was a big topic of discussion at the conference.
A sea change
One potential case study they discussed is the intense regulation surrounding 401K clients, which are more expensive to serve than retail customers due to regulation. It’s an issue that affects both large and small institutions — but together, they hope to make a little more headway.
“You’ve seen a sea change, where the big financial institutions are looking to us to help solve some of these big pain points,” LearnVest CEO and founder Alexa von Tobel told Business Insider.
Other shared goals included getting fintech entrepreneurs better access to capital and getting all financial companies better access to data.
But the main objective all the participants agreed on was the need to help their customers save money.
“America’s wallet needs more help,” von Tobel said. “We need to help people save, help people understand the confusion, help people understand their financial plans, save more for retirement, avoid [making] big financial decisions without good guidance … We need more innovation.”