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Global banks turn to fintech partnerships

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A Finastra survey, produced in collaboration with East & Partners, indicates that banks are investing heavily in fintech partnerships and digitalization to help them adapt to customer and regulatory demands.

The research reveals that fintech partnerships are a critical part of a bank’s strategy, with 3 in 4 global banks planning to connect with an average of 3 fintechs in the next 12-18 months.

The largest proportion of respondents want to plug into a platform of integrated fintech solutions (56%), with only 6% preferring to build capabilities in-house. This is particularly prevalent in Europe, where this is 73% and 5% respectively.

The research, conducted by East & Partners, finds that the core motivations of global respondents to integrate fintech solutions is reducing operational costs (46%), deploying new technology with greater ease (43%), and aligning more closely with evolving compliance needs (37%).

Digital transformation remains a priority, with global institutions investing an average of $367.6 million in transformation in 2023. European banks are investing substantially more, at an average of $886 million.

However, while global respondents say they have digitized 47% of their digital processes on average, only 1 in 5 feel they are ahead on their digital journey (20%), and 1 in 2 (54%) believe they are behind. This is substantially lower in the Middle East, where only 12% feel they are ahead and 62% say they are behind.

“In an environment characterised by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” explains Isabel Fernandez, EVP Lending at Finastra.

“Our survey demonstrates the recognition from banks that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs.”

Report Highlights:

  • Banks are using fintechs to enhance the customer experience – when searching for a new fintech partner to improve their customer offering, global banks are prioritising online portals / banking channels (55%), transparency across processes, such as providing the customer with real-time updates on onboarding progress (45%) and improving end-to-end connectivity and value-add services (44%).
  • Organisational ESG priorities vary globally – reducing their own carbon emissions is the primary ESG goal for 49% of global banks, followed by board and management alignment on sustainability initiatives (46%). These stats are similar for banks in the Middle East. In Europe, a larger proportion (74%) are prioritising reduction in carbon emissions, followed by settling on definitions and terms (67%). In APAC, the main priorities are securing longer-term funding internally (63%) and board and management alignment on sustainability initiatives (61%).
  • Appetite for green lending continues to soar – 3 out of 4 global banks plan to increase their exposure by more than 16% in the next 12-18 months or more. The main barriers banks face in relation to ESG are:
    • The lack of ESG products being delivered by fintechs that banks can offer to corporates (40%).
    • Keeping pace with rapidly evolving regulatory compliance requirements (20%).

“Major inflection points in recent years have had, and are still having, a dramatic impact on how financial services is evolving,” says East & Partner Global Head of Markets Analysis, Martin Smith.

“This is forcing institutions to reconsider how they manage risk, increase their agility, and fast-track innovation to evolve with new demands.

We believe that despite the challenges facing global banks, the industry’s focus on collaboration and driving ESG initiatives forward, highlighted by the research, will ultimately have great benefits for financial institutions and their customers, today and in the future.”

The research was conducted amongst 783 interviewees at 260 banks in the UK, Europe, the Middle EastAsia Pacific, and the Americas, as well as 393 interviews with North American community markets banks and financial institutions.

The findings explore the current appetite in the marketplace for fintech investment and integration, and Environmental, Social and Governance (ESG).

Access the full reports and findings here:

Global report – Build a formula to win: Orchestrating digital transformation in corporate and commercial banking

How financial institutions can win in North American Community Markets: Digital transformation

ESG: The new playbook for financial institutions

 

Source: Payments Cards and Mobile

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