Competition and customer demands for convenience and personalisation are transforming financial services — and creating new opportunities for FinTechs to collaborate with traditional financial firms.
The rise of FinTechs continues to revitalise the financial services customer journey. However, many startups have realised they will struggle to succeed alone. With complementary strengths, FinTechs are increasingly looking to symbiotic collaboration with the traditional financial services firms they once sought to overthrow, according to the World FinTech Report 2018 from Capgemini and LinkedIn, in collaboration with Efma.
The report examines how FinTechs are transforming the financial services customer journey through better customer centricity and use of emerging technologies; the potential for symbiotic relationships between FinTechs and traditional financial institutions; and the impending role of BigTechs [BigTech is a general term to cover data-driven technology firms not traditionally present in financial services, such as Google, Amazon, Alibaba, Apple, and Facebook] in financial services.
FinTechs drive revitalisation of the financial services customer journey
FinTechs, innovating with emerging technologies, are revitalising the customer journey through financial services. Competition and rising customer expectations are driving demands for more convenience and personalisation. FinTech firms are leveraging both customer data to drive personalised offerings, and providing fast, 24/7 online services that can be accessed from any device.
However, financial services customers have greater trust in the brands of traditional firms versus those of FinTechs, according to the report. For future success, financial services firms must look to continue aligning with customer goals, maintaining trust, and delivering digital, agile and efficient processes.
“FinTech firms are finding success with a customer-centric focus that fills in gaps left by traditional firms. These gaps opened the doors to FinTechs, but trust in traditional firms remains important to customers,” said Penry Price, vice president, Global Marketing Solutions, LinkedIn.
Win-win collaboration opportunity
Unburdened by legacy systems and old-school culture, FinTechs have leveraged new technologies to rapidly respond to customer demands. In fact, the report found that more than 90% of FinTech firms said agility and providing an enhanced customer experience are key to competitive advantages, and more than 76% cited their ability to develop new products and improve existing products and services as critical to success.
The challenge is to scale-up and create financially-viable business models. Although FinTechs 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 FinTech customer service enhancements, while retaining strengths including risk management, infrastructure, regulatory expertise, customer trust, access to capital and more. Both traditional and FinTech firms stand to gain from a symbiotic, collaborative relationship.
“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,” said Anirban Bose, head of Capgemini’s Financial Services Global Strategic Business Unit and Member of the Group Executive Board. “Without an agile and committed collaboration partner, both traditional and FinTech firms risk failure.”
Finding the right partner is essential to successful collaboration
This year’s report found that collaboration will be essential to foster long-term success for both FinTechs and traditional financial firms. A successful collaboration is contingent on finding the best partner and engagement model. To develop strong partnerships, firms will have to overcome barriers to collaboration.
According to the report, more than 70% of FinTech executives said their top challenges to collaborating with traditional financial firms was their lack of agility, while traditional firms perceive negative impacts on customer trust, brand, and changing the internal culture as their top challenges.
“For a successful collaboration, both sets of firms will need to remain open-minded and keep a dedicated focus on collaboration. Financial institutions need to respect the FinTechs’ culture to avoid losing their agility, which is one of the major assets that they bring to projects. The next challenge will be to select the best fit FinTech with whom to collaborate,” said Vincent Bastid, secretary general at Efma.
Looking ahead: Accelerating collaboration and preparing for the future
The future of financial services is in the hands of both the FinTech and traditional firms that can complement each other’s strengths to meet customer needs and redefine the journey.
The disruption coming from FinTechs is leading the financial services industry into the great unknown. However, what is clear is that now is the time for FinTechs and traditional firms to find the right collaboration partner and redefine the path to success.