More than three-quarters (78%) of US commercial banks are considering new fintech partnerships in 2019 in a bid to improve customer experience (42%) and achieve real-time visibility (40%) according to a new industry report, released today. The research, commissioned by fintech provider and Visa subsidiary Fraedom, also found that other factors inspiring banks to partner with fintechs are speeding up digital transformation, better cash and card management and cost savings.
“A lack of in-house capabilities is driving commercial banks to partner with fintechs to answer the growing demands of their customers. They are beginning to realize that these partnerships allow them to overcome shortcomings in their internal skills base and benefit from innovative technology systems without having to invest time, money and resources in their development,” said Kyle Ferguson, the CEO of Fraedom (above photo).
The report also revealed that strengthening online security is a top business priority for over three-quarters (77%) of commercial banks considering fintech partnerships. This is followed by upgrading operational systems, increasing profits and using data to better understand customers.
- For over three-quarters (77%) of commercial banks considering fintech partnerships, strengthening online security is a top business priority
- However, concerns about fintech partnerships include security issues (44%) and the challenge of integrating with legacy technology (34%)
- Speeding up digital transformation, better cash and card management and cost savings are among other factors inspiring banks to partner with fintechs
While these numbers indicate a growing appetite for partnership, they also reveal several perceived barriers remain. Concerns about security issues (44%) and the challenge of integrating with legacy technology (34%) remain fairly widespread. Banks also considered budget, a focus on in-house development and a lack of support from management to be among the barriers of partnering with fintechs.
“Many of the barriers preventing commercial banks from partnering with fintechs are about perception, and in fact partnerships can help banks to efficiently overcome many of these challenges,” added Ferguson. “Specifically, fintechs have the knowledge and technology systems in place to help banks mitigate a lack of capabilities in-house and low budgets, as solutions can increasingly be implemented out of box, without the need for internal development. Additionally, these solutions cater not just for the bank’s current requirements but also for their future roadmap.”