The financial services industry has been dealing with the impact of Open Banking since the inaugural World FinTech Report in 2017. Fast forward to the World FinTech Report 2020 and the imminent Open X, a multi-sectoral open platform era maximising the eXperience, and the harsh reality is that FinTechs have moved “from disruption to reality,” and banks that haven’t embraced effective collaboration with startups are struggling to retain and acquire new customers.
Shaped by hyper-personalised service and mobile-only experience offered by unstoppable and ever-powerful BigTechs and agile challenger banks, consumer expectations are changing in real time. To keep pace, incumbents must embrace Open X and become Inventive Banks, prepared to adopt specialised open ecosystem roles and complementary support from qualified FinTech partners – according to the World FinTech Report 2020.
No longer simply disruptors, FinTechs have matured to become respected, global players with robust acquisition rates and profitability potential. It is up to incumbents to decide whether to consider FinTechs formidable competitors or enabling allies.
Most banks understand that a positive last-mile experience and an engaging front end are critical to keeping customers happy and loyal. However, less visible middle- and back-office operations – also essential for customer satisfaction – are often neglected. That’s why, despite substantial front-end investment, many banks continue to fall short of delivering seamless and personalized customer experience.
Bringing back-end operations up to speed can be an extended journey. The Capgemini and Efma World FinTech Report 2020 offers proven methods for banks to join forces with mature FinTechs to map, prioritise, and innovatively enhance their most-critical open platform processes.
The way forward: effective structured collaboration is essential for bank and FinTech partnerships to be successful
Both Banks and FinTechs are currently frustrated by the lackluster results of their collaborations to date. The World FinTech Report 2020 reveals several pain-points:
- Only 21% of banks say their systems are agile enough for collaboration
- Only 6% of banks have achieved the desired ROI from collaboration
- 70% of FinTechs don’t culturally or organisationally see eye-to-eye with their bank partner
- More than 70% of FinTechs say they are frustrated with the incumbent’s process barriers
- Half of FinTech executives say they have not found the right collaborative partner
Despite synergies and the win-win potential of bank/FinTech collaboration, the frustrating reality is that most partnerships have not paid off. Why? Relationship stumbling blocks and differing corporate cultures prevent collaboration at scale, and innovative solutions are rarely solidified – let alone brought to market.
Effective collaboration requires people, business, and process maturity from both incumbents and FinTechs. Late-stage FinTechs (scaleups) can drive productivity and value based on their last-mile expertise, data management know-how, and mobile-only mentality. Inventive banks can leverage their reach, trust,
and business expertise to optimise their assets and remain relevant to an increasingly diverse customer base. This is especially important given the highly uncertain economic outlook caused by never- seen-before risks.
Players with readiness to collaborate at scale and industrialise innovation are the most likely to prosper within the shared Open X ecosystem.
“The world has changed dramatically over the last couple of months. Businesses will evolve and emerge from the COVID-19 crisis in different and profound ways. For traditional banks, this will translate into an even greater need for digital experience through further collaboration with FinTechs,” says Anirban Bose, CEO of Capgemini’s Financial Services and Member of the Group Executive Board.
“Since we began this report three years ago, FinTechs have moved from disruptors to mature players, and it is now essential for incumbent banks to consider them not only as formidable competitors, but as necessary partners of choice to meet changing consumer expectations,” comments “Effective collaboration requires people, business, and process maturity. While, for traditional banks, failure is not an option, FinTechs are fast to market yet ready to fail. Inventive banks with the willingness and capabilities to collaborate at scale and industrialize innovation are most likely to prosper within the shared Open X ecosystem.”