Banks and fintechs still don’t work together as closely as they might. A new study shows why it is so important to get the cooperation up and running.
Banks are getting ever more digital, or at least that is their claim. A reaction by Jan Langlo, the director of the Association of Swiss Private Banks published by finews.com on Monday illustrates this very neatly:
«Private banks have not waited for buzzwords like blockchain or crypto-assets to develop digital solutions for their clients. All have access to some form of e-banking.»
Private bankers are not alone in this. Capgemini and NGO Efma recently published the «World Fintech Report 2020» and concluded: «Most banks understand that a positive last-mile experience and an engaging front end are critical to keeping customers happy and loyal.»
Tech Companies Raised the Stakes
But that won’t be enough, say the experts. « However, less visible middle- and back-office operations – also essential for customer satisfaction – are often neglected. That’s why, despite substantial front-end investment, many banks continue to fall short of delivering seamless and personalized customer experience.»
The consultants claim that the core of the problem isn’t solely to be found with the traditional banks. Digital neo-banks and big-tech firms such as Facebook, Google and Amazon have raised the stakes and wet the appetite of their customers. The younger generation in particular expects to receive a similarly seamless and hyper-personalized offering from their bank.
Innovation Doesn’t Come Cheap
The banks that can’t deliver will suffer the consequences. «And they won’t hesitate to switch to one that offers hassle-free, relevant products and services,» the report authors said. The whole development will come to a head once the giants such as Google and Amazon start offering banking services, once neo-banks such as Revolut attempt to get a Swiss banking license or if the Chinese providers (Ant Financial) try to establish a foothold in Europe.
It will cost a very big amount of money to make the bank back-offices conform with what has become a digital standard – and that’s why banking has sought to link up with specialized fintechs to advance their digitization moves in specific areas of their business. According to this concept, the fintech delivers the innovation and the bank the financial and human resource firepower. In Switzerland, the Bankers Association and a fintech group had signed a deal as early as 2018 with the intention to improve the cooperation between the industries.
«Unimpressive Results»
In Switzerland, the cooperative model may work ok, but globally, this is far from a foregone conclusion, according to the report: «Now, more than ever, incumbent banks and fintechs are convinced that collaborative partnerships offer win-win synergies. But success looks different for each participant, and a lack of focus leads to unimpressive results and dissatisfaction all around.»
Keyword Open X
The big traditional banks have to succeed and build successful partnerships. They are key to their efforts to keep satisfying the demands of their clients.
The keyword in this context is «Open X», the next phase of innovation after open banking. It will lead to an even deeper form of cooperation and specialization, engendered by a standardized API and the cooperative analysis of client data.
