Over the last decade, fintechs have taken advantage of the boom in digital technology and their lack of regulatory oversight to build single-purpose offerings in areas where they can beat traditional financial services players.

Dubbed 'Fintech 1.0' in the Santander lexicon, this has proved relatively successful without posing a significant threat to incumbents or shaking up the banking landscape in the way that markets such as travel and entertainment have been disrupted by the digital revolution.

However, the authors claim, we are now preparing to enter 'Fintech 2.0', as open data and APIs, cloud computing and intense cost pressures combine to push fintech firms deeper into the heart of banking, fundamentally changing the infrastructure and processes at the core of the industry.

The paper argues that the best way to face this oncoming change is for fintechs and established firms to work together. "This is the central premise of this report: that, to realise the opportunity of Fintech 2.0, banks and fintechs will need to collaborate, each providing the other with what it now lacks, be that data, brand, distribution or technical and regulatory expertise. Only by collaborating will the opportunity of Fintech 2.0 be realised."

Among the areas investigated are the applications for the Internet of Things, how to be smarter with data, and creating frictionless processes and products. Examples highlighted include the streamlining of processes surrounding the creation of $25 trillion of new mortgages issued annually across the globe, and addressing the estimated $4 billion lost through inefficiency in global collateral management within the asset leasing sector.

Mariano Belinky, managing principal, Santander InnoVentures, says: "Funds alone are not enough. To move to the next phase of evolution in financial services, banks need to invite fintechs to work within our industry, even inside our own businesses."

Read the full treatise here: