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ScienceDirect Available online at Procedia Computer Science 158 (2019) 971978 1877-0509 2019 The Authors. Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 3rd World Conference on nullchnolonullnullnullnovnullion nulld nullntrepreneurship 10null01nullnullprocsnull019null9null38 10null01nullnullprocsnull019null9null38 1877-0509 2019 The Authors. Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship Available online at ScienceDirect Procedia Computer Science 00 (2019) 000000 1877-0509 2019 The Author(s). Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship 3rd World Conference on Technology, Innovation and Entrepreneurship (WOCTINE) Fintech Integration Process Suggestion for Banks Okan Acar a, *, Yusuf Ensar tak b a İstanbul University, Turkey b INCEIF, Malaysia Summary Although fintech subject has been highly discussed by the financial institutions in all around the world, there are only a few studies on how banks should draw a framework for fintech integration. In this research, we are aiming to draw a framework by using business experience in Kuveyt Trk Participation Bank in Turkey to give guidance to other financial institutions in Fintech Integration Process. This study contains entire fintech Integration Process from revealing the needs of the internal departments to the completion of fintech integration. We divided Fintech Integration Process into seven phases. First phase, collecting needs of internal departments. Second phase consist of scouting relevant fintechs around the world by using databases and online platforms. Third phase, fintech makes presentation for introduction and explains its business model. At the end of this meeting, relevant bank employees evaluate the presentation and decide whether to invite fintech again for Business Committee or not. Fourth phase, fintech enters Business Committee to make presentation for Vice Presidents of the relevant departments. Fifth phase, fintech meets with IT, compliance and legal departments to discuss and solve problems. In sixth phase, senior management makes decision to start POC (Proof of Concept) process. Lastly, in seventh phase, fintech integration comes alive for the customer use. All these phases are constructed to mitigate risks and increase awareness of fintechs in the departments. In this way, most of the departments get in touch with fintechs and understand the importance of external collaboration. 2019 The Author(s). Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship Keywords: Fintech, Fintech integration, Banks 1. Introduction Financial institutions have great importance on todays world. Its importance is not only for people in daily life but also for economy all over the world. Even small changes create huge effects over the world economy. *Corresponding author. E-mail address: .tr Available online at ScienceDirect Procedia Computer Science 00 (2019) 000000 1877-0509 2019 The Author(s). Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship 3rd World Conference on Technology, Innovation and Entrepreneurship (WOCTINE) Fintech Integration Process Suggestion for Banks Okan Acar a, *, Yusuf Ensar tak b a İstanbul University, Turkey b INCEIF, Malaysia Summary Although fintech subject has been highly discussed by the financial institutions in all around the world, there are only a few studies on how banks should draw a framework for fintech integration. In this research, we are aiming to draw a framework by using business experience in Kuveyt Trk Parti ipation Bank in Turkey to give guidance to other financial institutions in Fintech Integration Process. This study contains ntire fintech Integration Process from revealing the ne ds of the internal departments to the completion of fintech integration. We divide Fintech Integration Process into seven phases. Fi st phase, collecting needs f internal departments. Second phase consi t of scouting relevant fintechs around the world by using databases and online platforms. Third phase, fintech makes presentation for introduction and explains its business model. At the end of thi meeting, relevant bank employe s evaluate the presentation and decide whether to invite fintech again for Business Committee or not. Fourth phase, fintech ent rs Business Committee to make presentation for Vice Presidents of the relevant departments. Fifth phase, fintech meets with IT, compliance and legal departments to discus and solve problems. In sixth phase, se ior management makes decision to start POC (Proof of Concept) process. Lastly, in seventh phase, fintech integration comes alive for the customer use. All these phases are constructed to mitigate risks and increase awa eness of fintechs in the departments. In this way, most of the departments get in touch with fintechs and understand the importance of external collaboration. 2019 The Author(s). Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship Keywords: Fintech, Fintech integration, Banks 1. Introduction Financial institutions have great importance on todays world. Its importance is not only for people in daily life but also for economy all over the world. Even small changes create huge effects over the world economy. *Corresponding author. E-mail address: .tr 972 Okan Acar et al. / Procedia Computer Science 158 (2019) 971978 2 Acar either integrate with fintechs or internally innovate your company. At the beginning, most companies preferred to innovate internally. But it turn outs that, integration with fintechs are easier and more effective. Fintechs focus on directly to solution of one problem and spend their entire energy to solve it. However, banks can not focus on a specific problem by nature. Addressing variety of customers from different segments and providing multipurpose solutions made it almost impossible for banks to focus on one specific point. As Kuveyt Trk Participation Bank, we choose to make collaborations with fintechs. Because we believe, they can offer better value propositions and cheaper solutions at some points. Furthermore, there are many studies on cooperation with fintechs but no research paper offered to draw a systematic framework guide for integration with fintechs. Looking to address this gap, this article aims to create systematic fintech integration framework for banks. This article structured as follows; introduction followed by brief history of Kuveyt Trk Participation Bank, than evaluation of fintechs, fintech integration process and lastly conclusion. 2. History of Kuveyt Trk Participation Bank Kuveyt Trk Participation Bank established in 31 March 1989 as Private Finance House by the permission of Central Bank of Turkey. Main shareholder is Kuwait Finance House which is one of the foremost Islamic Financial institutions in the world. Main purpose of the Kuveyt Trk Participation Bank is to provide Sharia compliant banking services to its customers in Turkey. Kuveyt Trk adopts and practices Islamic principles in business services. Currently, Kuveyt Trk Participation Bank is the biggest Participation Bank in Turkey and its market share reaches approximately 40% of Turkeys participation banking sector. Also, Kuveyt Trk is the eleventh biggest bank in Turkey in terms of asset size. It provides various banking products from account opening to financing of household customers Kuveyt Trk Participation Bank serves variety of customers from retail to commercial. In order to spread Islamic financial services in Europe, KT Bank AG was established in Germany which is 100% owned by Kuveyt Trk. Kuveyt Trk follows technological developments very closely and leads participation banking sector by pioneering some banking innovations. XTM digital banking solution started to operate in different locations where it is not feasible for normal branches. XTM is a new generation VTM (Video Teller Machine) with interactive digital panel allows customers to reach customer representatives. Customers can easily do variety of banking services by connecting to customer representatives through video calls. Range of services provided by XTM is as rich as normal branches. Another innovative business solution is, Senin Bankan, which is the first digital online banking platform for participation banking sector in Turkey. Senin Bankan offers branchless banking services to its customers and provides new customer experience. Through all these developments, in order to move on next stage, Digital Transformation Group was established in the second quarter of 2018. The associated group has created Digital Transformation roadmap which aims to prepare the bank for the future by increasing customer experience level throughout the company, efficiency in banking processes and digitalization levels. One of the main jobs of Digital Transformation Group is to make collaboration with fintechs. In order to do that, first of all, fintechs and their probable value propositions to bank are evaluated. After evaluation, successful fintechs are integrated to banking services and start to create new experiences for internal or external customers. Okan Acar et al. / Procedia Computer Science 158 (2019) 971978 973 Author name / Procedia Computer Science 00 (2019) 000000 3 3. Evolution of fintech In the widest sense, the word fintech is formed from the abbreviations of two words, namely financial and technology. Officially, World Economic Forum defines fintechs as “companies that provide or facilitate financial services by using technology. In its current form, fintech is marked by technology companies that disintermediate formal financial institutions and provide direct products and services to end users, often through online and mobile channels”2. Another definition for fintech by PwC (2016a) is “a dynamic segment at the intersection of the financial services and technology sectors where technology-focused start-ups and new market entrants innovate the products and services currently provided by the traditional financial services industry. As such, fintech is gaining significant momentum and causing disruption to the traditional value chain” 3. Further Gartner defines as “fintechs are startup technology providers that deliver emerging digital technologies that approach financial services in innovative ways or can fundamentally change the way bank products and services are created and distributed, and generate revenue. The term may also refer to the technologies these providers offer” 4.Other definitions such as fintech integrates finance and technology together, traditional financial structures combined with todays technology-based processes 5 and simple one fintech refers to the application of technology in financial service 6. Even though, all these definitions are not converge on one meaning, mostly they are saying same things. Fintechs are using technology in financial services in unusual ways. Fintech spelled differently in various studies; FinTech, Fin-Tech or fin-tech but in this study, it is used as fintech. Although some authors connect fintech roots back to the beginning of 90s by diffusion of internet 7, others claimed fintechs were around already in the 1950s 8. When we look at the representation of fintech we can pursue our research even back to mid-eighteen century. Fintech term entered our lives recently, but relationship between fintechs and financial institutions, in the sense we understand, started in 1866, by laying down transatlantic cable between Europe and America. Main purpose of laying cable was to building a communication channel between continents. However in time, it was started to use for transferring mutual economical information 9 10. First time in history financial services started to use digital channels to communicate but still most of the financial services stayed analog. This is why this era from 1866 to 1967, defined as financial services move from analog to digital and period characterized as fintech 1.0 11. Developments in communication technology and processing technologies for financial services changed perceptions of traditional institutions. First usage of ATM (Auto Teller Machine) in Great Britain started the period of fintech 2.0. In the 1980s, banks started using sophisticated computers to calculate sophisticated methods, analyze data and keep records of the transactions. Some of these computers were huge and they covered up to one whole office area. By 2005, the first internet only bank started doing business in the UK12. From the beginning of the 21st century to until now, banks domestic operations and interactions with external and internal customers have started to become fully digitalized. Up until now, fintech was mostly related with bank business processes on the backplane, but with the help of the developing technology, in the 1980s, customers started to involve in bank processes directly. This is the reason why the period from the 1980s to early 2000s has called modern era of fintech. The destructive effects of the 2008 global economic crisis brought serious questions about the ethical legitimacy of financial services on to the table. It was not the beginning of these questions but it is difficult to identify how these questions started and where it started. Huge financial institutions all over the world took the biggest hit from both economic and public trust perspectives. Crisis environment and low public trust of big companies opened the door for a new kind of financial institutions. An alternative to current financial institutions came into the picture with small, controllable, and transparent features. Therefore, it is reasonable to say that the 2008 global financial crisis represented the milestone to trigger fintech 3.0 era. 3.1 Effects on Financial Sector After the Financial Crisis, fintechs started to expand rapidly in the financial market and it brings question of whether fintechs going to replace traditional financial institutions or not. Some people believe that fintechs are posing huge threat to banking and financial sector and their days are numbered. Others believe, banks are going to win this battle by adopting fintech developments into their core businesses. Debate was crucial and wind was blowing in favor of fintechs 13. After all, fintechs were providing services more efficiently than banks. Moreover, fintechs provide some 974 Okan Acar et al. / Procedia Computer Science 158 (2019) 971978 4 Acar we, as Digital Transformation and
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