Published on the 04/11/2016 | Written by Anthony Caruana
Half of banking customers across the globe are using products or services of at least one fintech firm…
That’s according to the first World FinTech Report (WFTR) from Capgemini and LinkedIn, in collaboration with Efma.
While the WFTR found that fintechs are gaining momentum and mindshare amongst younger, tech-savvy, and affluent customers, overall customer trust levels in these providers remains low. Fewer than a quarter said they trust their FinTech provider compared to 36.6 percent for traditional firms.
In a statement, Penry Price, LinkedIn marketing solutions VP said, “Fintechs are largely gaining momentum by meeting needs traditional players have yet to address, but many lack the transparency required to earn the trust of their consumer audiences to capitalise on these opportunities.”
This is where traditional finance service providers have an advantage. Customers noted traditional financial institutions still hold some advantage over fintech providers when it comes to fraud protection, quality of service, and transparency.
While large financial institutions can struggle with adopting new technologies – blockchain is a good example – smaller fintech companies can focus their full attention on specific problems and solutions. The risk-averse nature of traditional firms also makes it difficult for them to create cultures that prioritise innovation; two in five executives surveyed said their culture is not conducive to innovation. And fewer than half are confident in their fintech strategy.
The good news is that while traditional organisations such as banks are finding it hard to be innovative, they do have an appetite for investing in startups.
Capgemini Australia practice leader Philip Gomm said, “We also see strong institutional appetite from Banks looking to take equity in startup fintech businesses with promising solutions.”
For example, when it comes to payments, banks have invested to reduce cost, increase efficiency and deliver the seamless customer experience, added Gomm.
Despite traditional firms increasingly pursuing a wide range of strategies in response to fintechs, many are taking a two-tiered approach by engaging partners and developing their own in-house capabilities.
And the shift towards fintech is not being done in a haphazard way. The primary focus on providing better day-to-day customer experiences has resulted in nearly 90 percent of executives focussing on implementing big data and analytics, with Internet of Things (IoT), blockchain, process automation, and open API technologies garnering attention.
The WFTR has defined a four-step framework to help traditional firms overcome their innate resistance to innovation and address current and potential future disruption. Those steps are discovering new technologies, devising ideas and insights into business models, deploying aligned executives to support innovation, and sustaining innovation by improving efficiency and implementing best practices.
