Convergence between the strategies of financial technology companies (fintechs) and traditional financial institutions across Europe, the Middle East and Africa (EMEA) is rapidly gathering pace, the latest survey of financial institutions, fintech start-ups and ecosystem participants finds.
The survey, conducted by MagnaCarta Communications on behalf of electronic payments specialist ACI Worldwide, finds that 78% of the traditional financial institutions (FIs) surveyed are now actively seeking partnerships with fintechs to create digitally-based services and applications for customers. They believe that collaborating with fintechs will help them to achieve their goals faster and more cost effectively.
The ACI 2017 Fintech Disruptors Report finds these partnerships take a wide range of forms, from selective collaborations and in-house acceleration programmes to acquisitions, joint ventures and, for a growing number of banks, a blended approach that includes a combination of some or all of these elements.
Collaborating provides a range of benefits for all of these organisations, the research shows: fintechs look to banks for help with financing or to get access to a broad customer base, while traditional FIs increasingly look to work with fintechs to develop new applications and generate new revenue streams.
Among the report’s key findings:
- Top areas of fintech investment in 2017:Fifty-six per cent of respondents said payments was the biggest area of investment for next year with the global push for real-time payments quoted as a major theme, followed by electronic commerce (e-commerce (36%), consumer banking (35%) and security and fraud management (28%).
- Biggest opportunities:Banks feel the biggest opportunities for collaboration with fintechs are in the areas of developing application programming interfaces (APIs) (46%), mobile applications (43%) and data analytics (38%).
- Global fintech hubs:Seventy-nine per cent of all respondents believe North America will remain the global centre of fintech innovation over the next five years, followed by the UK (67%), Europe (43%) and China (43%).
- Brexit impact: More than half the respondents believe the UK’s vote for Brexit will have little or no impact on European fintech development and financing.
- Africa – biggest opportunity for growth:The continent, with a large unbanked population, estimated to be as high as 90% in some countries such as Nigeria, is widely viewed as the region with the greatest potential for fintech applications.
“Our research shows that the transition from an analogue to a digital banking model and from complete to shared ownership is well underway,” said Paul Thomalla, senior vice president (SVP) for global business development at ACI.
“Traditional players and fintechs have realised that neither can win in isolation and that collaboration is the way forward for those that want to succeed. Businesses on both sides of the bridge that are ready to adapt to the new terms of the alliance will share the rich rewards to be won from combining institutional scale with entrepreneurial agility.”
Simon Hardie, partner at MagnaCarta, who conducted the research, added: “Our survey demonstrates that fintechs and traditional financial institutions are now closely aligned in both their aims and approaches.
“The fact that both industry groups are now keen to forge partnerships suggests that, if anything, we are likely to see acceleration of the current rapid pace of development of new financial technologies in 2017 and beyond.
“Challenges remain, notably in aligning the cultures of large organisations and start-ups; however, we believe an increase in the current phase of mass development will lead to the adoption of a revolutionary digital delivery platform for financial services within the next 10 years.”
The report is based on polling of more than 100 senior executives from leading banks, FIs and fintechs during September.
An upgrade for the US, Europe and Japan is offset by downgrades for Mexico and other major emerging economies.
Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit signed a memorandum of understanding in Brussels for developing digital trade chain (DTC).
The Swedish corporate bank’s fixed income macro strategist believes rising infltaion will see the Riksbank lift rates.
ClearBank is likely to concentrate on services for fintechs, according to founder Nick Ogden who originally launched WorldPay.