Fintech has been repeatedly hyped as a revolution in finance and banking that could create far-reaching change in the industry.
2 Mar, 2018DIGITALJOURNAL.COM
Fintech startups are having to reassess the way they provide their services as the industry becomes dominated by partnerships with banks. According to a new report, collaboration with existing firms is now the top priority at over 75% of new providers.
Fintech has been repeatedly hyped as a revolution in finance and banking that could create far-reaching change in the industry. The World FinTech Report 2018, from Capgemini and LinkedIn, reveals this vision is now shifting as startups move to work with the firms they were expected to replace.
75 percent of fintech executives said their primary business objective is to collaborate with traditional firms, such as banks and insurance companies. Although 76 percent said their ability to innovate more quickly is vital to success, it’s also clear that fintech firms are no longer aiming to usurp the banks. Instead, they're looking at the broader finance industry to find ways to improve it.
The report comes amid a lull in optimism around fintech technology. While fintech firms have raised almost $110 billion since 2009, it's now becoming apparent that tech alone won't overhaul the industry.
Collaborating to increase efficiency, improve the customer experience and encourage long-term relationships will be critical to the success of both banks and fintech firms. Successful providers will be defined by their ability to integrate with traditional companies and expand on existing services.
"With more than 75 percent of FinTech firms identifying their primary business objective as collaborating with traditional firms, it is essential that both FinTechs and traditional firms transform their business models by collaborating to drive innovation while retaining customer trust," said Anirban Bose, Head of Capgemini's Financial Services Global Strategic Business Unit and Member of the Group Executive Board. "Without an agile and committed collaboration partner, both traditional and FinTech firms risk failure."
Although fintech firms are coming to recognise the need for collaboration, further challenges lie ahead. The executives polled said their top challenge when working with banks is the restricted agility of traditional firms. Banks can't offer the same level of flexibility as their startup counterparts, which can make it hard for fintech providers to start engaging.
The banks themselves list a different set of challenges, which include possible impacts on their brand and customer trust. Fintech providers are still approached cautiously by industry members, which adds further barriers to successful integration.
The report advised both parties to remain "open-minded" and focused on collaboration, while remaining mindful of the other's strengths and weaknesses. In the case of banks, this might mean acknowledging the increased innovation rate of startups by welcoming them as a new source of expertise.
Meanwhile, fintech execs should be respectful of the trust and reputation associated with existing businesses. By accepting each other, banks and startups will have the greatest chance of moving the fintech industry forward.
This article was first published by James Walker on Digital Journal