Hardly a day goes by without headlines about banks breaking new ground and banking undergoing fundamental change. The partnership between Deutsche Bank and Google, the introduction of Apple Pay in conjunction with the Sparkassen girocard, and more intensive cooperation between Mastercard and crypto companies are just a few recent examples. These make it clear: In the Covid crisis, “cooperation between established banks and emerging financial start-ups” has gained in importance, as Sandra Ficht, digitalization expert at the consultancy Capgemini Invent, explains in Handelsblatt, and what several studies confirm.
Crisis intensifies structural change
One such study is the World Fintech Report 2020 by Capgemini Efma. According to it, there is now an even greater need for digital service offerings due to the changes brought about by the pandemic. In order to meet the rising expectations of customers, established banks must view fintechs as necessary partners. According to its recent survey in this regard, the auditing and consulting firm PwC considers “partnerships with external service providers or fintechs [to be] indispensable, especially during the crisis.” With this support, banks must optimize processes, digitize business activities, strengthen business operations and expand business models. This is because for 58 percent of the survey participants, increasing earnings is particularly important, while for 37 percent, cost reductions are the top priority. For three quarters of the banks surveyed, external service providers were a decisive lever for increasing their revenue and reducing costs. In addition, all respondents want to use the Covid crisis as an impetus to drive forward digitization in order to ensure customer proximity and competitiveness in the long term. The participants named the digitization of their sales channels, new business processes and existing processes as the most important areas.
The extent to which cooperation between banks and fintechs is widespread in this context becomes clear when taking into account the situation before the crisis. For example, a study of the world’s 150 largest banks with a commercial focus by Ádám Kerényi, Júlia Molnár and János Müller, published in 2018, shows that almost 52 percent of banks were already cooperating with fintechs in some form at that time. Moreover, not only banks, but also many non-banks and regulators have partnered with fintech companies, according to the paper „Bank and Fintechs: Healthy Cooperation or dangerous Liaisons?“, which also reveals the main benefits of cooperation.
Benefits for banks, fintechs – and customers
Banks effectively gain fresh technological know-how and new capabilities to offer their customers additional products and services or the opportunity to enter new markets or sectors. Fintechs benefit from a larger customer base, lower customer acquisition costs, and accelerated product development and testing. In addition, consumers win. They can access banking services more easily, quickly and at lower cost.
One example is the revolution of the once laborious lending process. Solutions like KYCnow enable banks to easily automate the KYC process, minimize risk and serve customers faster. Other examples include our account switching service, account switching assistance and securities account switching service – solutions that enable banks to make it much easier for their customers to switch to them. In addition, we offer white label solutions. This enables banks to delight their customers and create new business models. Incidentally, we see the development of efficient, future-proof solutions for the broadest possible customer base as a common basis for cooperation. This is the point that, according to BearingPoint’s models for cooperation between banks and fintechs, represents the lever for overcoming the cultural differences between banks as well as fintechs and must be taken into account when planning a cooperation.
Seize growth opportunities now
All of this makes it clear: Cooperation between banks and fintechs that is successful for all parties involved has arrived in everyday life and can be implemented very well. It opens up growth opportunities in today’s market for traditional banks that embrace an expanded open banking approach, as Capgemini Efma’s World Fintech Report 2020 confirms. Specifically, the index presented in the report illustrates that “the banks that succeed are those with a collaborative approach, a dedicated and autonomous startup partnership team, and a fail-safe innovation approach to rapid value discovery and loss reduction. Also well prepared are those that invest in new technologies early and have little reliance on legacy systems, which makes fintech integration easier.” So as a responsible party, don’t wait any longer, ask us how we can support you!
Yours, Florian Christ
CEO
