Both traditional financial organisations and Fintechs must seek out collaboration or face the risk of failing.
Fintech firms and traditional financial services organisations are increasingly creating a symbiotic relationship, seeking out beneficial collaborations.
Rather than overthrowing those that they sought to replace, Fintechs have apparently realised that they will struggle to succeed alone, leading to an “Win-win collaboration,” between the two, according to Capgemini’s World FinTech Report 2018.
Whilst 90% of Fintech firms state that agility and providing an enhanced customer experience are key to competitive advantages, they have struggled to scale up their legacy free approach. Creating those financially-viable business models has been a struggle, despite Fintech firms raising nearly $110bn since 2009.
A lack of an effective partnership ecosystem often results in failure and traditional financial institutions are increasingly adopting the Fintech customer service enhancements.
“With more than 75 percent 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.”
However, simply finding just any partner won’t suffice, the right partner is essential. The Capgemini report found that “collaboration will be essential to foster long-term success for both FinTechs and traditional financial firms.”
The report found that more than 70% of Fintech execs said their top challenges to collaborating with traditional financial firms was their lack of agility, with traditional firms worried about a negative impact on customer trust should they align with a relatively unknown entity.
“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.
Although the financial services revolution may not have been quite as explosive as some predicted, they are driving a revitalisation of the financial services customer journey, according to Capgemini.
The ability to leverage customer data to drive personalised offerings is something that traditional firms have struggled with, however, customer trust in the newcomers isn’t as high as it is with the traditional firms.
“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.