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Covid-19 aftermath will bring banks and fintechs together

Covid-19 aftermath will bring banks and fintechs together

Despite underwhelming past experience of bank/fintech collaborations, the current pandemic is likely to drive deeper relationships between incumbent banks and startups as legacy applications prove unfit for purpose in a digitally-empowered future.

Both banks and fintechs are currently frustrated by the lackluster results of their collaborations to date, according to CapGemini's annual World Fintech Report.

The study 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 organizationally 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

“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," says Anirban Bose, CEO of Capgemini’s financial services practice. "For traditional banks, this will translate into an even greater need for digital experience through further collaboration with fintechs. Effective collaboration requires people, business, and process maturity.”

Bose says that incumbents must invest in middle- and back-end operations to deliver a better customer experience, working with innovative startups to improve data retrieval and provide a more agile and reliable front-end.

Capgemini’s 'Open X Readiness Index' is a global benchmarking tool that measures the readiness of banks to effectively collaborate at scale with startups by measuring their maturity across people, finance, business, and technology pillars.

Featured in the World FinTech Report 2020, the index shows that leading collaborative banks are those with a dedicated and autonomous startup-partnership team and who demonstrate a fail-fast innovation approach to determine value and cut losses quickly. Readiness frontrunners are also early movers that invest in emerging technologies and have little dependency on legacy systems, making fintech integration easier.

A recent report from VC FInch Capital suggested that the current crisis could ultimately end up benefiting the fintech industry by accelerating the rush to digitisation. A more downbeat assessment from Rosenblatt Securities forecasts that, as funding sources dry up, struggling fintech firms may be forced to seek collaboration, investment, or acquisition by traditional financial institutions, PE funds, or even non-financial strategic buyers.

Comments: (2)

David Gyori
David Gyori - BANKING REPORTS, LONDON - London 21 April, 2020, 12:301 like 1 like

I agree. Increased cooperation, strategic partnerships as well as M&A activitiy is coming to the Bank / FinTech arena. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 22 April, 2020, 11:31Be the first to give this comment the thumbs up 0 likes

For years, I've appealed to banks to make digital banking more frictionless so that customers don't flock to branches. The need to avoid branch visits has acquired new meaning now. Hope banks take the opportunity to improve CX, either by themselves or via fintech partnership.

I see a white space for a fintech app to sit between the customer and the bank app and provide overlay features that reduce / eliminate friction involved in a lot of digital banking activities today e.g. KYC, Confirmation of Payee, etc. This will hopefully drive greater adoption of digital banking channels and automatically reduce branch visits, which is what all of us want post the pandemic crisis. 

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