Finastra’s commissioned study reveals that 75% of global banks plan to collaborate with an average of three fintechs in the next 12-18 months, highlighting the importance of partnerships in the fintech sector.
It is impossible to overstate the importance of partnerships and collaboration in the growth of the fintech sector. Three out of four global banks intend to collaborate with an average of three fintechs in the upcoming 12 to 18 months, according to study Finastra commissioned. Although this is encouraging for the sector, the study explores the reasons for banks’ growing reliance on fintechs.
In addition to conducting 393 interviews with North American community markets banks and financial institutions, Finastra received replies from 783 interviewers at 260 banks in the UK, Europe, the Middle East, Asia Pacific, and the Americas.
The largest percentage of respondents (56%) wish to connect to a platform of integrated fintech solutions, according to the financial software vendor. Only 6% of the respondents said they would prefer to develop these competencies internally. Where the percentages were 73% and 5%, respectively, this trend was particularly strong in Europe.
Some of the most common reasons why more banks were looking to include fintech technologies included:
- Lowering operating expenses (46%)
- Making new technology deployment easier (43%).
- Increasing adherence to changing compliance requirements (37%)
Additionally, digital transformation has continued to be a top priority, with global institutions planning to invest an average of $367.6 million on it by 2023. Additionally, European banks are investing significantly more than this, on average $886 million.
However, even while global respondents claim to have, on average, digitalized 47% of their operations, just 20% feel they are ahead of the digital curve, and 54% believe they are behind. Additionally, it was discovered that in the Middle East, only 12% of respondents felt they were ahead of the game, with 62% saying they felt they were falling behind.
According to Finastra study, banks are utilizing fintechs to improve the customer experience. Global banks are prioritizing online portals and banking channels (55%), process transparency, such as giving customers real-time updates on onboarding progress (45%), and enhancing end-to-end connectivity and value-add services (44%), when looking for a new fintech partner to improve customer offerings.
For 49% of global banks, lowering carbon emissions ranks first on their ESG priority list, followed by 46% for board and management alignment on sustainability activities. Similar statistics apply to banks in the Middle East.
In Europe, fewer people (74%) prioritize lowering carbon emissions, whereas less people (67%) prioritize deciding on definitions and words. Internally securing longer-term finance and board and management alignment on sustainability efforts rank as the top priority in APAC, respectively, at 63% and 61%.
Banks looking for fintech
Isabel Fernandez, EVP of lending at Finastra, highlights the increased pressure on banks to reduce operational costs and improve customer service in uncertain economic times and emphasizes the importance of partnering with fintechs, especially through integrated solutions, to adapt quickly and reduce costs. The research also shows the expanding importance of ESG throughout banks’ operations and external offerings, and Finastra advocates for open finance to help banks future-proof their offerings and promote a better future for communities.
Martin Smith, the global head of markets analysis at East & Partner, shared his insights on the impact of major inflexion points on the financial services industry and how banks are adapting to this environment through collaboration and driving ESG initiatives forward, as revealed by the research conducted in partnership with Finastra, ultimately benefiting financial institutions and their customers.