The report from Capgemini and Efma, entitled the “World FinTech Report 2020,” claims banks embracing “Open X” and transitioning to becoming “Inventive Banks” will have the best chance to succeed. “The gap between what customers expect and what traditional banks currently deliver has never been wider, but now is the right time for banks to catch up from front to back-end to offer the best customer experience,” according to the organizations.
Open X, per the report, “leapfrogs the compliance-based approach” normally associated with open banking and emphasizes a seamless “eXchange” of resources and data “empowered by an eXpedited product innovation cycle” meant to continuously improve the customer “eXperience.” Inventive banks, they state, are prepared to take on specialized roles in a new, open ecosystem. To that end, they would seek out collaborative support from fintechs.
“The world has changed dramatically over the last couple of months. Businesses will evolve and emerge from the COVID-19 crisis in different and profound ways. For traditional banks, this will translate into an even greater need for digital experience through further collaboration with FinTechs," said Anirban Bose, CEO of Capgemini’s Financial Services and member of the Group Executive Board. "Since we began this report three years ago, FinTechs have moved from disruptors to mature players, and it is now essential for incumbent banks to consider them not only as formidable competitors, but as necessary partners of choice to meet changing consumer expectations.”
The groups note tech-centric and challenger banks have succeeded in winning customers over, while traditional banks are more heavily invested in front-end IT infrastructure. Traditional banks’ efforts to woo customers have fallen short compared to other sectors. According to the report, in order for those banks to remain competitive, and to win over customers, they should tend to their “middle- and back-end transformation through data-driven and customer-centric partnerships with FinTechs” in order to, ultimately, bolster their front-end.
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Survey results reported in the publication, though, show players are unsatisfied with the results of existing collaborations. Both fintechs and banks have reported myriad issues, which are illustrated in the findings. For example:
- Merely 21% of banks say existing systems are “agile enough for collaboration”
- Only 6% of banks say they have achieved “desired ROI from collaboration”
- 70% of FinTechs don’t “culturally or organizationally see eye-to-eye” with bank partners
- More than 70% of FinTechs claim they are “frustrated with the incumbent’s process barriers”
- 50% of FinTech executives report they haven’t found the “right collaborative partner”
“Traditional banks are at a critical juncture. They must embrace Open X or risk becoming irrelevant,” said John Berry, CEO of Efma. “In order to keep up with ever-changing customer expectations in today’s marketplace, incumbent banks must transform into Inventive Banks with collaborative support from qualified FinTech partners.”
Capgemini developed an “Open X Readiness Index” as a benchmarking tool to help banks scale collaboration with startups by measuring financial, business, human and technological maturity.
“Effective collaboration requires people, business, and process maturity. While, for traditional banks, failure is not an option, FinTechs are fast to market yet ready to fail. Inventive banks with the willingness and capabilities to collaborate at scale and industrialize innovation are most likely to prosper within the shared Open X ecosystem,” said Bose.
