The era of competition between banks and fintechs is over, with connectivity now seen as the key to a new financial services ecosystem where the 'banking-as-a-platform' model dominates, according to a report from Barclays.
Barclays quizzed nearly 2000 FS industry leaders at Money 20/20 events in Europe, Asia and the US about the current and future state of a fast evolving sector.
More than two thirds of respondents identify collaborating and partnering with fintechs for mutual benefit as the preferred approach for traditional banks in the future.
In this collaborative environment, fintechs will partner with traditional banks, startups will work with 'fincumbents', and even smaller firms will cooperate to integrate their micro-specialisms with more commercially robust players, predicts Barclays.
The underlying driver for this cooperation is the expectations of customers who have become accustomed to a seamless personalised experience in other aspects of their digital lives.
A single organisation - giant bank or upstart fintech - may struggle to provide this and so brand may become less important, paving the way for a model of packaging up multiple services in a banking-as-a-platform.
A prime example is provided by Standard Chartered, which just yesterday rolled out a new business platform to help e-commerce firms shape loans, credit cards and savings products for their customers under their own brand name.
Elsewhere, China is expected to see the biggest rise in payment innovation in the next five years. Nearly half of Asian firms ranking it as the most likely source of future innovation, along with 40% of European firms. Even the US, which picks itself as the most obvious hotspot for future innovation, ranked China as the second most probable source.
While still in the shadow of China, India ranks in the top three as a future source of payment innovation across all three regions, with 21% voting for it in Asia, 12% in Europe and a further 10% in the US.
Respondents offer mixed views on cybersecurity: over half say their companies do not have a robust approach to the issue, yet less than a quarter feel further investment in the area should be a priority.
Phil Bowkley, global head, financial institutions group, Barclays Corporate Banking, says: "As traditional banks look set to collaborate with fintechs for mutual benefit, and innovation continues to be driven from locations dispersed all over the world, what is clear is that in this fast moving environment successful business models will need to adapt rapidly and reflect regional sentiment and opportunities."
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