Collaboration between banks and fintechs is key to survival

With the EU’s Second Payment Services Directive (PSD2) and open architecture framework set to come into force next year, regulation may well tip the scales between banks and fintechs for customer loyalty.

Concessions must be made on both sides along the way, but in the end the collaborators will be the ones to survive – that’s according to an in-depth study released today by Temenos, the software specialist for banking and finance.

The report explores one central theme: ‘Symbiosis: Your bank has your trust. Can fintech make you love it?’ The report, the fourth in a series conducted for Temenos by the Economist Intelligence Unit (EIU), offers a new twist in the ‘tug of love’ story of banks and fintechs under changing regulatory and compliance rules.

>See also: How do banks morph to become digital through and through?

David Arnott, chief executive officer at Temenos commenting on the report, said: “The struggle between banks and fintechs for customer loyalty is not new, however new regulation and technology change is now driving a shift towards collaboration. Banks with a modern core and an open and flexible architecture will be best placed to seize the advantage and thrive.”

Renee Friedman, the editor of the report from the Economist Intelligence Unit, added: “Banks will increasingly have to adapt their culture and digital strategies to their customers’ needs if they are to compete, not expect their customers to bend to theirs.”

The Economist Intelligence Unit, on behalf of Temenos, surveyed 200 senior retail banking executives about regulatory, customer, security and technology influences on the industry up to the year 2020.

In addition, in-depth interviews were conducted with 36 senior executives from banks of all sizes, start-ups, venture capitalists and mutual fund managers to gain further insights.

The key findings were varied, but found that ultimately, regulators will have the power. They will decide – capital and compliance will shape incumbents and newcomers alike.

In other results, the survey found that banks cite regulation as the most impactful trend in the coming years: bank capital requirement regulation (54%), bank product suitability regulation (53%), product design and transparency regulation (47%); regulatory fines & recompense orders (30%).

Into the unknown

American banks worry about regulation the most, despite a promised rollback, while European policy direction is more certain yet onerous.

>See also: Rise of the collaborative open bank

Resistance is futile

The EU’s Second Payment Directive (PSD2) and open architecture are game changers. Banks may lose their customers’ loyalty, while fintechs could hit compliance barriers.

Complacency is not a virtue

Fear of peer-to-peer lenders and robo-advice may have peaked. Non-banks could still steal deposit and lending business – and profit unless banks improve the customer experience.

No cash, no cheques

If banks are smart, they may still win the war to build truly universal digital networks.


Banks main concerns on cyber security are lack of system preparedness in the event of a cyber-attack (65%) and the ability to maintain data security (60%).

>See also: Is FinTech really a game changer?


The possibilities of blockchain are still not fully understood; 34% think of it only as a tool to reduce financial crime while 34% see its greatest value in increasing the speed and reducing the cost of back office functions.

Finally, the majority of bankers surveyed (55%) thought that anti-globalisation movements will negatively affect retail banking by 2020.

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...