Expanding customer expectations are reshaping the financial services industry, driven by the bar set by big technology firms, and the customer journey is being redefined by creative, agile fintech solutions, according to a new report.
However, many fintech startups have realized they will struggle to succeed alone, and are increasingly looking to collaborate with the traditional financial services firms they once sought to overthrow.
Their ability to expand their base, gain full customer trust, scale operations and navigate the regulatory environment depends on the engagement, support and insight of the financial services sector.
Capgemini and LinkedIn, in collaboration with Efma, a Paris-based nonprofit group that facilitates networking among banks and insurers worldwide, developed the report based on a global survey encompassing responses from traditional financial services firms and fintech firms, including banking and lending, payments and transfers, investment management and insurance.
According to the report, emerging technologies have transformed the customer experience by eliminating multiple pain points across the customer lifecycle.
More than 90% of fintech firms said agility and providing an enhanced customer experience were key to competitive advantages, and some 76% said being able to develop new products and improve existing products and services was critical to success.
Their challenge is to scale up and create robust business models. Since 2009, fintechs have raised nearly $110 billion, but most are likely to fail if they do not build an effective partnership ecosystem, the report said.
At the same time, financial services customers trust traditional firms more than fintechs, according to the report. “Fintech firms are finding success with a customer-centric focus that fills in gaps left by traditional firms,” LinkedIn’s vice president for global market solutions, Penry Price, said in a statement.
“These gaps opened the doors to fintechs, but trust in traditional firms remains important to customers.”
The survey found that traditional financial institutions are adopting many fintech customer service enhancements, while retaining their strengths: risk management, infrastructure, regulatory expertise, customer trust and access to capital, among others.
All this suggests traditional and fintech firms can benefit from a symbiotic, collaborative relationship.
“With more than 75% of fintech firms identifying their primary business objective as collaborating with traditional firms, it is essential that both fintechs and traditional firms transform their business models by collaborating to drive innovation while retaining customer trust,” Anirban Bose, head of Capgemini’s financial services global strategic business unit, said in the statement.
“Without an agile and committed collaboration partner, both traditional and fintech firms risk failure.”
Some 70% of fintech executives in the survey said their main challenge in collaborating with traditional financial firms was their lack of agility. For their part, traditional firms’ top challenges are negative effects of collaboration on customer trust and brand, and changing the internal culture.
“For a successful collaboration, both sets of firms will need to remain open-minded and keep a dedicated focus on collaboration,” Efma’s CEO, Vincent Bastid, said in the statement. “Financial institutions need to respect the fintechs’ culture to avoid losing their agility, which is one of the major assets that they bring to projects.
“The next challenge will be to select the best fit fintech with whom to collaborate.”
Capgemini said in the statement that it has rolled out a ScaleUp Certification tool to help financial services firms accelerate collaboration and foster symbiotic relationships.