Half of global banking customers use at least one fintech firm for their financial needs, according to a report released Wednesday by Capgemini and LinkedIn. Younger, affluent customers in emerging markets – more than three-quarters of customers in China and India use fintech services – are driving adoption.
Fintech could be especially disruptive for investment management. The report found over 17% of customers use only fintech services for investment management needs, while over 27% use fintech in addition to traditional investment management services.
However, traditional firms have an advantage in that overall customer trust is still low for fintech firms. The report found less than 24% of respondents said they trust their fintech provider, compared to almost 37% who trust their traditional provider on things like fraud protection, quality of service and transparency. While respondents recognize traditional firms provide better quality service, they said they were getting better value for their money from fintechs.
Penry Price, vice president of marketing solutions for LinkedIn, said customers increasingly expect “more personalized and advanced digital experiences.” Those expectations, combined with “advancements in technology, greater access to venture capital, and lower barriers to entry have created fertile ground for growing fintechs,” Price said in a statement. “Fintechs are largely gaining momentum by meeting needs traditional players have yet to address, but many fintechs lack the transparency required to earn the trust of their consumer audiences to capitalize on these opportunities.”
The report found 60% of traditional firms see fintech providers as a potential partner, but they’re almost equally likely — 59.2% — to be developing their own in-house offering. However, “with the exception of a handful of industry leaders, most firms are struggling to achieve positive results from their innovation initiatives with only 10% of executives stating they have been very effective at achieving desired innovation results,” according to Thierry Delaporte, head of Capgemini’s global financial services business unit and member of the group executive board.
Just 44% of executives at traditional firms said they were confident in their fintech strategy, and less than 35% said they have a well-structured or proactive strategy in place. Over 40% said their firm culture, particularly their risk-averse nature, makes it difficult to prioritize innovation.
There may also be a philosophical resistance to accepting digital advancement, the report noted. It quoted an unnamed executive at a London firm as saying, “Digital transformation over decades has been focused on making processes cheaper rather than making them better.” That has led to traditional firms adopting “generic one-size-fits-everybody banking experiences, even though customers now favor having an element of control over their financial relationships,” according to the report.
The report found 38% of traditional firms are investing in fintech, primarily in improvements to customers’ experience through more streamlined operations. Almost 90% are looking at ways to use big data, with majorities looking at the Internet of Things, blockchain and automated processes. Half are working on open APIs.
“Both fintech and traditional firms still have work to do on delivering a better customer experience,” according to Vincent Bastid, secretary general of Efma, a network of financial institutions that collaborated on the report. “The arrival of fintechs has accelerated the improvement of overall customer experience in the industry, but it is still not at the level that customers perceive that it should be.”