Facing disruption from fintech providers, traditional banks must embrace APIs and the open-source model to avoid losing their place at the center of consumers’ financial lives, a new report warns. Capgemini’s 2017 World Retail Banking Report polled thousands of retail banking customers around the world to gauge how the rise of fintech-based financial services has changed the game when it comes to banking.
Among the study’s key findings was that the new breed of players already are making their presence felt, with nearly one-third of banking customers polled reporting they use at least one nontraditional provider for some services. What’s more, 52 percent of customers reported having relationships with more than three such providers. Emerging players have been able to carve out this market share quickly by identifying specific areas in which to “wow” consumers by providing relevant, attractive and easy to use services, the report noted. And, because they’re not bogged down by the legacy systems of established firms, fintech providers can quickly build and deploy such solutions, said Capgemini.
With such services often coming through the mobile channel, it’s little surprise that fintechs have been embraced with particular enthusiasm by younger and more tech-savvy consumers, with 42 percent of that demographic reporting having a relationship with nontraditional providers, the study found. In emerging economies like China and India, more than half of such consumers used at least one nontraditional provider.
To deal with the threat, banks need to rely on a few key built-in advantages, including large customer bases, access to resources and high levels of consumer trust, the report advised. But those assets must be combined with a willingness to embrace the agile, open-source nature of the fintech model for banks to avoid falling behind. That may mean partnering with fintech providers to combine the respective strengths of each party to create the best possible customer experience. Banks and fintechs seem to have heard that message loud and clear, with 91 percent of banks and 75 percent of fintechs saying they expect to partner with each other, the survey found. That collaboration will rely heavily on APIs, which help bypass issued of technical and systems compatibility, Capgemini noted.
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