Published on the 13/06/2017 | Written by Newsdesk
Working together the route to riches, according to new report…
Consulting outfit Capgemini has shaken the covers off a report which has found that while fintech firms are seeking to disrupt larger players, the opportunity in financial services is based on collaboration rather than competition.
The report is published by The Australian Digital Transformation Lab, a joint venture between the University of Sydney Business School and Capgemini.
In a statement, the organisations said the emerging fintech industry and Australia’s traditional banking are being urged to work together and innovate to survive looming threats posed by so called ‘Big Tech’ companies like Apple and Amazon.
It is therefore critical for banks and fintechs to consider collaboration as part of an integrated strategy.
“We commonly think of fintech as small, digitally-native companies that fundamentally change the financial services market, disrupting and displacing incumbents. But what’s becoming clear is that it’s difficult for fintech firms to prove themselves as a viable option for everyday consumers despite the innovation in services,” said University of Sydney Business School professor Kai Riemer.
“That’s not to say incumbents are able to sit back and enjoy their current status – customers are increasingly exposed to new fintech options that offer convenient, engaging services. The future will lie in exploring collaboration,” he added.
According to the report, the increased pace of innovation tied with venture capital funding has led to a perfect storm in the financial services market:
- The impression of stability and lingering customer trust has helped banks and other traditional institutions maintain their dominant position, but younger tech-savvy Gen Y customers are increasingly willing to go elsewhere for their financial services. Combined with the growing support from government, fintech companies are well placed to make the most of their increasingly favorable regulatory environment.
- The fintech sector has been successful in harnessing digital technology, using it to offer customers better prices, convenience, access, choice, and the benefits of community.
- The Australian fintech industry is thriving and incumbents and start-ups, initially competitors, now see the value in collaborating. Adjusting large-scale systems and embedded processes to become more responsive is however no simple task for incumbents, which face a major challenge in matching the agility of their nimbler counterparts.
- While fintech companies have successfully managed to introduce customer centric services and products, traditional firms still hold an advantage in the area of trust, specifically the perception of stability, security, and safety. This is particularly true when it comes to long term investments like mortgages – customers place their trust in traditional firms for their stability. If fintechs want to overcome this hurdle and unlock a larger segment of the market and scale-up, they should consider partnering with incumbents.
The overall pace and source of disruption is accelerating, driven by the increased adoption and pervasiveness of smarter technologies: “Banks and fintechs should adopt a strategic approach and collaborate throughout the innovation process, leveraging each other’s’ strengths to deliver maximum benefits from digital initiatives,” said Nicolas Boussand, Capgemini ANZ director of digital customer experience.
The report concludes that fintechs and the banks face challenges when it comes to digital transformation and that each can learn from the other. Fintechs need help with scaling-up, while incumbents can benefit from learning how to harness digital technology. This shift requires an open mindset from the banks and fintechs to enable agility and collaboration.