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Global banks turning to fintechs to boost customer experience - research

Global banks turning to fintechs to boost customer experience - research

Three-in-four global banks are planning to connect with an average of three fintech startups over the next eighteen months to boost their digitsation efforts, according to research conducted by East & Partners on behalf of Finastra.

The study, which entailed 783 interviews conducted at 260 banks and 393 community banks in North America, found that the largest proportion of respondents want to plug into a platform of integrated fintech solutions (56%), with only 6% preferring to build capabilities in-house. This is particularly prevalent in Europe, where this is 73% and 5% respectively.

Core motivations include the reduction of operational costs (46%), deployment of new technology with greater ease (43%), and closer alignment with evolving ESG and compliance needs (37%).

Digital transformation for improved customer experience remains a priority, with global institutions investing an average of $367.6 million in transformation in 2023. European banks are investing substantially more, at an average of $886 million. However, only 1 in 5 feel they are ahead on their digital journey (20%), and 1 in 2 (54%) believe they are behind.

“In an environment characterised by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” says Isabel Fernandez, EVP lending at Finastra. “Our survey demonstrates the recognition from banks that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs."

The ongoing efforts of global banks to overhaul their legacy architecture is already translating into improved profits and producivity across the sector, according to the latest Retail Banking Radar report from consultancy Kearney.

Covering 89 banks across 21 European markets, the report finds that income per customer was at its highest level since 2015, standing at €650 . Productivity over the last 15 years has also dramatically increased, with productivity per employee in 2022 almost double (197%) what it was in 2008, and productivity per branch almost triple (284%).

Kearney puts the jump in productivity down to technology investment and digitasation.

Roberto Freddi, Partner at Kearney, says: “It is clear that in recent years, new technology and digitisation have been key factors in improving the performance of the retail banking sector. These banks now have a real opportunity to further capitalise on the benefits of technology by increasing strategic investments in digital transformation. Improving business resilience will also be important as banks prepare to navigate the challenges ahead.”

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