Fintech startups are in the forefront of progress. Being vibrant and innovative they are nimble and quick to adopt the latest in technological advancement. With fintech transforming banks, they are already at the forefront of adopting Blockchain, AI, Biometrics and Identity management.
FinTech excels in improving efficiencies and reducing costs, enhancing security and making processes much simpler, resulting in better customer experience. Financial Services on the other hand have still to overcome the challenges of instilling innovation into their organisation. Due to fintech transforming banks, they are bogged down with complex regulations and governance issues. These processes not only distract management from their main business but can be very expensive costing the world’s largest banks up to SGD 5.2 billion per annum.
Fintech and Banks
Mainstream Financial Service strongly believe their business will be negatively affected by Fintech. 80% believe their businesses are at risk and 88% are increasingly concerned of losing business to standalone Fintech. It is forecasted that more and more consumers will adopt non-traditional service providers for their needs. This is especially so in the payments, funds transfer and personal finance sector.
Financial service incumbents have long adopted a strategy of closely monitoring Fintech and how they are changing the way business is done. But most fail to respond appropriately. With fintech transforming banks, some institutions are even rethinking whether their fundamental role as a provider of capital should evolve to being an enabler of financial services.
Partnership between Fintech and Banks
Financial Service have finally come to terms with the emerging Fintech. Now with fintech transforming banks, instead of looking at each other with suspicion they are forging partnerships and teaming up. Financial Service is bringing into their fold the ecosystem of Fintech they being disruptive but innovative into their mist and thereby kickstarting the crucial innovation culture within their organisation. These new relationship results in powerful synergies, creating not only innovative culture but assimilating new technology and driving changes quickly for the big incumbents thereby acquiring products and services that is satisfying to its customer.
In such a partnership Fintech companies gain the much-needed large pool of customers as well as ready capital and resources. In addition, the Fintech acquires a reputable brand that will make it easier to attract people of calibre to join the company. Such partnership between Financial services and Fintech has grown at a rate of 32% in 2016 to 45% in 2017.
Fintech is Transforming Banks
In conclusion, the way Financial Services providers does its business will totally change within 5 years. Now with fintech transforming banks, the key to survival is the prioritising of the innovation process. Financial Services providers that do not innovate will find themselves left far behind. And the key instruments that will propel the organisation in the journey of innovation, setting up of dedicated teams to evaluate emerging new technologies, building partnerships with Fintech and eventually integrate, instil an IT culture that is agile and seamless, listening to the customers and fostering a company culture that encourages innovation.
PWC, Global FinTech Report 2017, link