The gap between what customers expect and what traditional banks currently deliver has never been wider. Still, it now is the right time for banks to catch up from front to back-end to offer the best customer experience," this is one of the key messages delivered in the World Fintech Report 2020 by Capgemini. The report urges a rethink of the execution of collaborations between incumbent finance players and the new up-and-coming players, both of which stand to benefit from collaboration. Capgemini's Open X Readiness Index Report says that banks already leading in a revitalised approach to collaboration are those who have designated a dedicated and autonomous start-partnership team and who "demonstrate a fail-fast innovation approach" to determine the value and cut losses quickly.
Frontrunners will also invest in emerging technologies and have little dependency on legacy systems, making FinTech integration easier. And 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. To remain attractive and competitive, banks must shift to becoming customer-centric and inventive.
Need to change the business model
Many traditional banks have realised that rather than compete, it's better to collaborate and leverage the potential through collaborative strategy.
Banks are now finding ways to engage with these innovative organisations to achieve value-creating collaboration.
Many in the industry feel that unless banks and FinTech firms get better at working together, neither will reap the full benefits of innovation. They must partner, or they may perish.
Collaborative banking empowers us to build an omnipresent ecosystem by partnering with multiple partners each having their strengths, presence and customer base and integrating our offerings on their platforms. In doing so, the focus would be to achieve a win-win equation whereby the platforms can boast of best-in-class banking services integration. At the same time, the bank builds its visibility and customers without competing with the platforms.
The big growth of tech-savvy fin-tech companies in banking and financial service is making traditional bankers to change their traditional approach to customers. The industry is facing enormous challenges due to ever-changing customer expectations and digitalisation. Traditional banks need to start looking at partnering with Fintech players for delivering essential banking solutions. This partnership, emerging from the collaborative strategy, will help to build an open banking network that allows traditional banking players to offer an on-demand experience for the new-age customers.
Banks progressing towards positioning banking as a plug and play system where customised solutions can be extended to diverse platforms seamlessly
Since the 2008 financial crisis, the FinTech industry is proliferating, driven by a powerful blend of innovative start-ups and major technology players, bringing a significant disruption globally. And banks were feeling the heat of these tech-savvy players who offered more personalised service through their digital platform. The recent crisis in the non-banking finance sector has also created a vast opportunity in collaborative banking with NBFCs, especially with digital aggregator platforms, fintech and small finance banks. We need to build positive and strategic collaborations in this ecosystem.
Synergy is the key.
Yes, synergy is the key to such partnerships. While banks take care of banking needs and funds management, the partners provide the service.
Of recently, Fintech firms have unbundled the services offered by banks and even fused them to be their verticals. And this has to simplify the banking experience for customers making Fintech appealing.
Globally many such partnerships between Fintech and traditional banks turning out to be a profitable proposition. These team-ups are paying off as they have yielded cost savings, better revenue, and a fresh take on their brands. Future of banking Analysts feel that there is plenty of opportunities for traditional banks and Fintech to co-exist.
Experts suggest that banks should take on more specialist roles within this new ecosystem, such as a supplier or aggregator, rather than attempt to fill a universal one.