Fintech firms are toning down the fighting talk that marked the beginning of the movement as the realisation dawns that they will be hard-pushed to succeed without the support of incumbent banks. That's the conclusion of Capgemini's World Fintech report which charts the 'fizzling out' of the much-hyped fintech revolution.
With complementary strengths, fintech startups are increasingly looking to symbiotic collaboration with the traditional financial services firms they once sought to overthrow, according to the Capgemini study.
The challenge is to scale-up and create financially-viable business models. Although fintech firms have raised nearly US$110 billion since 2009, the report found that most are likely to fail if they do not build an effective partnership ecosystem.
At the same time, traditional financial institutions are adopting many agile fintech customer service enhancements, while retaining strengths including risk management, infrastructure, regulatory expertise, customer trust, access to capital, and more.
“With more than 75% 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,” says Anirban Bose, head of Capgemini’s financial services global strategic business Unit. “Without an agile and committed collaboration partner, both traditional and fintech firms risk failure.”
Echoing the views of a similar report released by Accenture yesterday, Capgemini found that more than 70% of fintech executives polled said their top challenges to engaging with traditional financial firms was the latter's lack of agility, while incumbents in turn perceive negative impacts on customer trust, brand, and changing the internal culture as their top challenges.
Both Accenture and Capgemini recommend the establishment of a formal process for banks to chart their relationships with startups. To this end, Capgemini has launched a 'ScaleUp Certification' tool that creates a model for collaboration and mutual verification between partner organisations.