According to research carried out by East & Partners on behalf of Finastra, three out of four global banks intend to collaborate with an average of three fintech startups over the next 18 months to advance their efforts to go digital.
The majority of respondents want to plug into a platform of integrated fintech solutions (56%), according to the study, which involved 783 interviews conducted at 260 banks and 393 community banks in North America. Only 6% of respondents preferred to build capabilities themselves. The prevalence of this is particularly high in Europe (73% and 5%, respectively).
Reduced operational costs (46%), easier adoption of new technology (43%), and a closer fit with changing ESG and compliance requirements (37%) are among the primary drivers.
Global institutions will invest an average of $367.6 million in digital transformation in 2023 as improving customer experience is still a top priority. With an average investment of $886 million, European banks are investing significantly more. However, only 20% of those who believe they are ahead in their digital journey and 54% of those who believe they are behind do so.
According to Isabel Fernandez, EVP lending at Finastra, “banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers in an environment characterised by uncertainty, high inflation, fluctuating interest rates, and recessionary risks.” Our survey shows that banks are aware they need help to navigate these waters. In order to assist them in quickly adapting while minimising costs, they are choosing to partner with fintechs and prefer to plug into a platform of integrated fintech solutions.
According to the most recent Retail Banking Radar report from consultancy Kearney, the ongoing efforts of global banks to update their legacy architecture are already translating into increased profits and productivity across the sector.
The report, which covers 89 banks in 21 European markets, finds that income per customer reached €650, which is the highest level since 2015. Additionally, productivity has significantly increased over the past 15 years, with productivity per employee nearly doubling (197%) from 2008 to 2022 and productivity per branch nearly tripling (284%).
Kearney attributes the increase in productivity to digitization and technology investment.
“It is obvious that new technology and digitisation have been key factors in improving the performance of the retail banking sector in recent years,” says Roberto Freddi, Partner at Kearney. By increasing their strategic investments in digital transformation, these banks now have a real chance to further benefit from technology. Enhancing business resilience is crucial as banks get ready to face the challenges ahead.