• Technology

A Symbiotic Approach to Fintech Innovation

At Morgan Stanley, collaborating with the right Fintech companies is central to success.

Just a few years ago, Fintech companies were seen as introducing a new era of disruption to traditional banks and financial services firms. Instead of becoming adversaries, however, both sides have developed symbiotic relationships.

We have a long tradition of working with Fintech companies to drive innovation through a proactive approach to collaboration. We believe that these companies benefit from our experience, scale of operations and breadth of client and market access; we benefit from cutting edge innovation and new solutions that help us become more efficient, improve our services and introduce new services to our clients.

That’s why, for the third year in a row, we are hosting our Fintech Summit. This two-day event at our New York headquarters features a handpicked group of best-of-breed Fintech companies that will showcase their innovative approaches. This year’s event–our largest to date—includes close to 100 presenting companies. And if history is any guide, we will build long-term, mutually beneficial relationships with a number of them.

After the Summit, the hard work begins: Working collaboratively with a few selected companies, we will map out plans to tailor their offerings to our businesses and clients, ideally in ways that will also help the Fintech companies grow and flourish. Although we work with companies of all sizes, some of them are relatively young, and we take pride in helping them realize their potential.

An Innovative Approach

How did we come to this collaborative approach? Over the years, we have developed a strong conviction that in order to remain at the forefront of innovation, we need to challenge the status quo by bringing in external perspectives that enable us to offer the best available technologies and solutions to our clients.

Traditionally, innovation within many financial institutions like ourselves was driven internally. However, the pace of change around the world began to accelerate dramatically, and, increasingly, innovation occurred outside of large, established financial services firms. Startups in many fields, not just financial services, gained the ability to work more nimbly and to address customer needs from a blank-slate perspective.  We’ve seen some amazing stories of companies that changed complete industries and burst on the scene very rapidly—not quite overnight, but perhaps over five to ten years.

Initially, we spotted this trend many years ago, first with enterprise software and infrastructure. We then started annually to gather our technology experts for a week on the West Coast with the aim of monitoring external technology innovation and establishing relationships with emerging software and infrastructure startups.

Building on the success of that approach, we developed a new guiding principle: Whenever a technology product on the market proves better than what we can build or have built, we should strive to work with that company. Our priority is to provide clients with the best services—not to pride ourselves on the ownership of the technology involved.

Today, it’s clear to us that to stay in the vanguard, we can’t innovate in isolation. It’s imperative that we work with an ecosystem of Fintech companies. 

The Selection Process

Through a wide outreach—across our front office, clients, technology organization, venture capital firms and incubators— we mapped the landscape for potential candidates for the FinTech Summit across five key areas of interest: capital markets and securities, banking and payments, investing and wealth management, regulatory and risk, and cross-business and financial infrastructure.

From a list of about 400 companies, about 90 are invited to the Summit based on their relevance to current business and technology needs. Over two days in November, we welcome these companies to our offices to present and discuss their solutions. We provide transparency into how our business is evolving and what we’re focused on. Speakers from inside and outside the firm offer broader insights into global macro trends and opportunities.

Companies meet individually with the most relevant team of cross-divisional business and technology experts and decision makers. We give the companies fast and direct feedback. If we think their products are relevant, we will pursue the companies quickly and enthusiastically. If not, we let them know immediately, as it spares both sides highly precious time. And if we think we might want to wait and take another look later, we will stay in touch and follow up. We know that the best relationships can sometimes take a while to develop.

One example of such a journey is Brighterion, which won our FinTech Award last year. The company, now owned by Mastercard, applies novel machine learning models to fraud detection. It presented in our first FinTech Summit, in 2016, and now the company’s solution has become a core risk-management tool for our fraud-detection department.

On a more personal note, before joining Morgan Stanley, I myself was a serial FinTech entrepreneur—and, before that, a young programmer. My own experiences have given me helpful business and tech perspectives. Having started two companies, I know what it’s like to be on the other side of the table selling, and I appreciate what both sides have to bring to the table. During the summit, I especially enjoy hearing the passion when the entrepreneurs explain why their creations will change the world. And I relish the intellectual discussions led by our own experts of how we can shape the future by merging our views and theirs.

© 2018 Morgan Stanley & Co. LLC and Morgan Stanley Smith Barney LLC.  Members SIPC.