Financial institutions (FIs) and fintech companies are caught in a procedural bottleneck, causing the creation and onboarding of a proof-of-concept (POC) to take significant time and resources, often with no guarantee of achieving production, a study reveals.

Fintechs often encounter issues translating a POC into a production order in both emerging and mature markets. They are often pushed into offering free POCs, as investors look for proof of success before moving into the production stage which may only last two to four weeks, says the study released by ASEAN Financial Innovation Network (AFIN).

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Fintechs are caught in an unsparing cycle while they face limited cash and resources. It takes six to fourteen months for just an end-to-end POC. Only less than 25 per cent POCs will move to production. Fintechs secure POCs faster in emerging markets, the research finds.

On the other hand, FIs do fewer than four POCs per year. Regulatory compliance clearances, internal risk reviews, and IT infra provisioning cause 80 per cent bottlenecks to more frequent experimentation. They also lack tools to discover credible fintechs.

As per the AFIN findings, procurement processes, legal clearance, and IT clearance all take significantly longer to achieve in a mature market over that of the emerging markets.

“The research points to how the scales are tipped against fintech companies. The journey of creating a POC is unnecessarily lumbered with regulatory roadblocks, compliance and other bottlenecks, so much so that there’s a higher than 70 per cent chance of the POC not turning into a production order,” Manish Diwaan, MD of AFIN said.

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The study was conducted with more than 300 bank and fintech respondents across several mature and emerging markets between July and October 2019, to assess the state of collaboration between financial institutions and fintechs across three markets.

 

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