Finastra: Global banks partnering with fintechs to reduce operational costs
Global banks partnering with fintechs prefer to plug into a platform of integrated fintech solutions to help reduce operational costs, according to new research.
A survey by Finastra, conducted in collaboration with East and Partners, found that three in four global banks intend to connect with an average of three fintechs in the next 12 to 18 months.
The largest proportion of respondents, at 56%, prefer to plug into a platform of integrated fintech solutions, while only 6% want to build capabilities in-house, rising to 73% and falling to 5%, respectively, among European banks.
Of the banks surveyed, 46% are motivated to integrate fintech solutions to reduce operational costs, while 43% cited deploying new technology with greater ease, and aligning more closely with evolving compliance needs is the main motivation for 37%.
Finastra revealed that, when searching for a new fintech partner to improve their customer offering, 55% of global banks are prioritizing online portals/banking channels. This is followed by transparency across processes, such as providing the customer with real-time updates on onboarding progress, at 45%, while 44% want to improve end-to-end connectivity and value-add services.
“In an environment characterized 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,” said 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.”
When it comes to digital transformation at banks, global institutions are investing an average of $367.6 million in transformation in 2023, although European banks are investing an average of $886 million.
Global respondents have digitized 47% of their digital processes, on average, yet only one in five feel they are “ahead on their digital journey”, and 54% believe they are behind.
In the Middle East, only 12% reported feeling they are ahead and 62% believe they are behind.
Finastra’s research was conducted among 783 interviewees at 260 banks in the UK, Europe, the Middle East, Asia Pacific, and the Americas, as well as 393 interviews with North American community markets banks and financial institutions.