A lack of in-house capabilities is driving banks to partner with fintechs, with our research finding that more than three-quarters of banks are considering new fintech partnerships. 36% of those surveyed are looking to partner in a bid to improve customer experience (36%) while others need help to achieve real-time visibility (36%). Banks are also partnering with fintechs in order to offer customers better cash and card management, to speed up digital transformation and reduce costs.
This suggests that banks are beginning to realize that by partnering with fintechs, they will be able to overcome shortcomings in their internal skills base and benefit from innovative technology systems without having to invest time, money and resources in their development. Additionally, research by Accenture has found that almost half (49%) of banking customers say that high-quality customer service drives loyalty. As such, banks stand to reap substantial benefits for offering an elevated customer experience.
Looking more closely at the priorities of those banks considering fintech partnerships, strengthening online security is top for almost two-thirds (60%), while other priorities include ensuring the right skills are in place to be successful, upgrading operational systems and increasing profits.
Perception vs reality
While these numbers indicate a growing appetite for partnerships, it is clear that some banks continue to perceive barriers to partnering with fintechs, the most prevalent of which are security concerns (40%) and a focus on in-house development (38%). Additionally, a number of banks consider the challenge of integrating with legacy technology and budget to be among the barriers of partnering up.
However, rather than being based on facts, many of these barriers are a matter of perception. In reality, fintech partnerships can help banks to efficiently overcome the majority of these challenges.
Fintechs have the knowledge and technology systems already in place to help banks mitigate a lack of capabilities in-house and low budgets, as solutions can increasingly be implemented out of the box, without the need for internal development. Additionally, these solutions cater not just for the bank’s current requirements but also for their future roadmap.
With fintechs providing the right technology, banks will be better able to meet the needs of their customers and deliver the experience and services they desire. For example, the FIS Performance Against Customer Expectations 2019 (PACE) report, has found that more than a third (35%) of consumers want banks to invest in apps in order to replace plastic payment cards in the coming decade. In addition to this, almost half (47%) want banks to invest in digital security technologies like facial recognition, instead of passwords. As many banks lack the capabilities to develop these technologies in-house, fintech partnerships will provide banks with the technology, skills and knowledge to ensure they are best placed to cater to these changing customer demands.
Ultimately, not only will these partnerships allow banks to deliver better customer experiences, but they will also allow them to futureproof their business and benefit from the latest technology without having to foot the costs of in-house development.