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Banks and fintech companies are still struggling to find the middle ground

At the moment, few banks and fintech companies seem to be satisfied with their collaboration. The COVID-19 crisis will probably speed up collaboration between the two parts. Only 6% of banks have achieved a desired return on investment through collaboration. On the fintech side, 70% do not share the cultural or organizational values of their partner bank. Finding the right partner is not easy.

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Traditional banks and fintech companies are still struggling to create good conditions for collaboration, according to Capgemini and Efma in the “World Fintech Report 2020” published on April 21st.

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Few banks and fintech companies are satisfied with their collaboration

With the COVID-19 crisis, “consumers have discovered the digital channel. On the one hand, the bank sector needs to improve its customer experience but does not have the means to do so. And on the other hand, the fintech sector has no financing. A collaboration between the two players is, therefore, necessary,” explained Elias Ghanem, head of market intelligence for the financial services sector at Capgemini.

At the moment, few banks and fintech companies seem to be satisfied with their collaboration. For example, according to the report, 21% of banks said their systems are agile enough to collaborate. Furthermore, only 6% of banks have achieved a desired return on investment through collaboration with fintech companies.

On the fintech side, 70% do not share the cultural or organizational values of their partner bank. In addition, half of the fintech companies’ bosses said they have not found the right partner.

Banks lack innovation in their processes

Capgemini assessed the level of maturity of the banks on the four pillars of collaboration: people, technology, business, and finance. The company also evaluated the bankers according to four moments of collaboration: meeting, evaluation, acculturation, and industrialization. The results showed that out of the 60 banks analyzed, only three are able to create good conditions for collaboration.

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In the all-digital age, Big Tech and neobanks have demonstrated their ability to lure customers by offering innovative experiences. Yet, despite traditional banks’ investment in IT infrastructure to improve the customer experience, they are still struggling to innovate.

Banks should, for example, improve the middle and back office, the expert believes. “In banks, there are still manual processes: for example, currently very few banks offer a digital contract, unlike neobanks. As far as the back-office is concerned, banks do not use customer data to better support them,” explained Elias Ghanem. On a global level, investment in IT increased by 4% between 2016 and 2019. On the other hand, the share of new investment in IT rose from 24% to 33%, mainly in the front office.

Faced with this observation, “the banks must act now with the start-ups: it has been three years since they are only on the experimental part: however, the final consumer does not benefit from it,” observed the expert.

According to the report, 50% of users consider that they do not have a personalized relationship with their bank and 60% cannot make payments by direct debit on several merchant sites. Similarly, 48% of Generation Y customers consider that traditional banking does not offer enough services, pushing them to sign up for neobanks.

The COVID-19 crisis will probably speed up collaboration between traditional banks and fintech companies, enabling traditional banks to become “inventive” banks.

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(Featured image by Clay Banks via Unsplash)

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First published in L’AGEFI, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Valerie Harrison is a mom of two who likes reporting about the world of finance. She learned about the value of investing at a young age upon taking over her family's textile business when she was just a teenager. Valerie's passion for writing can be traced back to working with an editorial team at her corporate job, where she spent significant time working on market analysis and stock market predictions. Her portfolio includes real estate funds, government bonds, and equities in emerging markets such as cannabis, artificial intelligence, and cryptocurrencies.