The Covid-19 crisis is shaking up the banking sector and leading consumers to discover the digital channel. To meet their growing needs in terms of customer experience development, traditional banks have every interest in strengthening their collaboration with fintechs.
Investing in middle- and back-end operations
The World Fintech Report 2020 stresses the need for traditional banks to invest in middle- and back-end operations through partnerships with fintechs. Indeed, the study reveals that while overall investment in the development of new IT tools jumped from 24% to 33% from 2016 to 2019, these operations are still based on complex and often manual business processes. This has an impact on the product design and marketing phase, which is not always up to scratch: half of customers don't feel they have a personalized relationship with their bank, 60% don't have the option of making immediate debit payments on several merchant sites, and 48% of new-generation customers say they are disappointed by the limited range of products and services offered by their traditional bank. Logically, they are turning to the new players in the sector, who offer faster, more accessible services.
According to the report, banks need to improve their entire value chain to "ride the Open X wave" and reduce costs. The best way to do this is to collaborate effectively with fintechs.
Committing to Open X by working with fintechs
Capgemini and Efma believe that, despite the growing gap between traditional banking establishments and Bigtechs and neobanks, the former have a chance to catch up by adopting Open X, which consists in relying on the fluid exchange of data and resources.
The World Fintech Report 2020 is based on the "Open X Readiness Index", a global benchmarking tool that measures banks' level of maturity by taking into account four main pillars: people, finance, business approach and technology. The results show that of the 60 banks analyzed, only 3 are capable of creating the right conditions for collaboration. The most capable players are those with a team dedicated to partnerships with startups and investing in emerging technologies.
So, while Bigtechs and neobanks have shown their ability to win over customers by offering innovative experiences, traditional banks must "commit to Open X or risk tipping towards obsolescence", says John Berry, Efma's Secretary General, in a statement. The health crisis should accelerate and strengthen collaborations between banks and fintechs.