The increased willingness of fintech startups to work with banks and other traditional financial services firms may be hampered by attitudes about their agility and ability to execute on innovative ideas, according to a global survey from CapGemini and LinkedIn released Wednesday.
World Fintech Report 2018 was originally released late last month, but executives from both CapGemini and LinkedIn invited banks and other enterprise companies to hear the findings in more detail at an event in Toronto. The research, which was also done in partnership with industry group Efma, gathered responses from “both sides” — in other words, incumbent banks and insurance firms, as well as startups that provide similar or adjacent kinds of services.
The results provide a revealing look at how fintechs compare the big banks and their own strengths and weaknesses. For example, 90 per cent of fintech startups believe they are more agile and able to make changes because they are not tied down by the large legacy IT systems of the major banks. However early as many they have enhanced customer service compared with incumbent financial services firms.
“The banks have said, ‘fintechs don’t make sense,’ and fintechs say ‘I’m smarter than the banks.’ From our perspective, that kind of thinking is over,” said Sankar Krishnan, CapGemini vice-president of financial services, adding that both sides need to develop a more symbiotic relationship if they don’t to miss out on growth opportunities. “There are a lot of smart ideas that are not finding homes.”
Of course, banks are not exactly standing still in the face of fintechs and many have launched their own innovation arms. One of their key advantages, Krishnan said, is the trust traditional financial services giants tend to have with their customer base. Many customers may, in fact, be more likely to try a fintech service if it is offered through their current financial institution, he said. This may be why 66.4 per cent of fintechs are interested in “white labelling” their offerings, where as 65 per cent are open to integrating with a financial enterprise’s in-house solutions.
Diana Luu, head of marketing solutions at LinkedIn, suggested traditional financial services firms might be able to change perceptions among their customers and even fintechs about their focus on innovation by being more open in the way they encourage employees to talk about what’s happening behind closed doors. She pointed out that many banks and insurance firms, for example, prohibit their teams from sharing content across any social media platform, let alone LinkedIn.
“We really think you should reconsider that,” she said. “One of the biggest ways for you to build trust with your customers is through your employee base.”
It’s not just a matter of better content marketing or social media usage, however. Krishnan said traditional financial services firms lose credibility with fintechs and their customers when they get distracted by other organizational priorities. CapGemini has seen this first-hand, he said.
“Forever we get called into these innovation and strategy meetings, but they don’t move beyond a certain point because of budget,” he said. “Fintechs stay the course.”
Not all fintech activity involves startups, Krishnan added. He pointed to a recent partnership between Amazon and J.P. Morgan Chase to bring one-click capabilities to certain products and services as an example of how “big tech” firms are slowly invading the finance sector.