Traditional banks must collaborate with fintech firms if they are to offer the best customer experience and stay relevant in the modern market, according to a report published today.
While lenders have invested heavily in front-end IT infrastructure, their efforts are lagging behind the norm in other sectors, according to the World Fintech Report 2020.
The research, published by Capgemini and Efma, urged banks to embrace so-called Open X — the era of seamless data exchange across sectors — and take on more specialised roles, such as supplier or aggregator.
Anirban Bose, chief executive of Capgemini Financial Services, said the coronavirus crisis would spark even greater need for traditional banks to improve their digital experience through collaborations with fintech firms.
“Since we began this report three years ago, fintechs have moved from disruptors to mature players, and it is now essential for incumbent banks to consider them not only as formidable competitors, but as necessary partners of choice to meet changing consumer expectations,” he said.
Banks should prioritise investment in middle and back-end transformation through data-driven partnerships with fintechs, according to the report.
It added that while overall investment in IT development has increased over the last four years, bank-end operations continue to be based on complex business processes, leading to a fragmented customer experience.
Front-end experiences such as packaging and delivering products were the biggest source of customer dissatisfaction, according to the report, with half of those surveyed saying they did not receive a personalised experience from their bank and 60 per cent complaining they were unable to make direct-debit payments on several retail sites.
Moreover, almost half of young and tech-savvy customers were frustrated with the narrow range of products and services and said they were likely to switch to a more digitally-focused rival within the next year.
As a result, the report said banks and fintechs that prioritise collaboration are most likely to thrive in the modern sharing economy.
“Traditional banks are at a critical juncture. They must embrace Open X or risk becoming irrelevant,” said John Berry, chief executive of Efma.
“In order to keep up with ever-changing customer expectations in today’s marketplace, incumbent banks must transform into inventive banks with collaborative support from qualified fintech partners.”