Fintech has become a disruptive force for banks and the broader financial services sector.
12th March 2018
The importance of patents as banking and technology converge
From peer-to-peer lending apps to robo-investment services and challenger banks such as Monzo, Fintech has become a disruptive force for banks and the broader financial services sector. These waves of innovation have introduced new B2C products and services yet back office financial operations remain ripe for disruption.
Whilst banks have long been some of the largest investors in Fintech, fragmented legacy infrastructure has meant that they have traditionally worked in isolation and developed their own technology. Banks continue to have a competitive advantage in terms of scale and market share, however, banks are becoming increasingly aware of the need to innovate through collaboration.
Emerging players and initiatives such as the UK’s Open Banking Directive, which came into force on 13 January 2018 and allows third parties access to customer information, make collaboration more likely.
Whilst banks have been building their patent portfolios over time to protect their investments in R&D, chart 1 shows the discrepancy between the patent strategies of technology companies and banks. Whilst technology companies have long understood the importance of IP in protecting the market, banks are still playing catch up.
Chart 1 – Patent trend overview: banks, technology and patent companies
The protection of Fintech using patents is relatively new for the financial services sector. As can be seen in chart 2, the patent portfolios of banks differs widely. This chart also can enable an analysis of patent distribution across specific technologies.
Chart 2: Banks – Who protects what? (2017 granted and pending)
The disruption caused by technology is not unique to the financial services sector, and it is becoming more important than ever for organisations to learn how to best adapt their IP strategy to ensure that it is aligned to core business strategy.
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- IBM owns 5x more Fintech related patents than all the banks put together
- Banks do protect their investment in technology
- Ten years ago 80% of all Fintech patenting came from technology companies, whereas today it’s less than half