Fintech challengers have been gaining ground by offering easier, cheaper or more intuitive ways to compare and acquire the financial services that customers need. Today, the question is not whether these new players will topple the established banking hierarchy, but rather if banks are willing to lose a significant portion of their customers to these new firms.
Banking and financial services leaders are well aware that their businesses are under threat and many are increasing spending to counter the menace, according to a new survey by recruitment firm Robert Half.
The survey, which involved 400 financial services leaders in Singapore, Hong Kong, Japan and the UK, found that banks feel the most threaten by online investment firms, a threat nominated by 40% of respondents, followed by challenger banks (18%) and peer-to-peer lenders (12%).
Respondents said they were willing to increase spending by 11.11% to counter new technology entrants. The average increase in spending to counter new technologies is greater among Singapore banks compared to the other countries surveyed with 13.57%.
“Singapore banks and financial institutions are actively countering this threat by upgrading their own user interfaces and moving more of their interactions to mobile and digital. That’s why financial services professionals with experience in these new technologies are in high demand,” Stella Tang, Managing Director of Robert Half Singapore, said in a statement.
“The challenge to banks and financial institutions is to ensure they do not lose their customers to new firms offering easier, cheaper or more intuitive ways to compare and acquire the financial services they need.”
The proportion of banks with an innovation strategy has increased from 37% in 2009 to 73% in 2015, according to a report from Efma and Infosys Finacle.
The 7th Annual Innovation in Retail Banking Report, which surveyed 100 retail banks around the world, found that 72% regarded the threat from technology companies as high or very high.
According to Michael Reh, executive vice president and CEO of EdgeVerve, digitalization will continue to “massively shake the business foundations of ‘brick and mortar’ banking institutions.”
“Banks need to proactively disrupt themselves and explore working with innovative startups to accelerate change and develop a leading edge in a competitive market,” he said.
To achieve this, Reh believes that a “dual strategy” is critical:
“Banks need new capabilities to help their businesses grow in new ways. They also need to renew their existing systems, opening them up to benefits of mobility, analytics, cloud computing, and connected systems.”
Others as well recommend taking a ‘coopetition’ approach. Calling for ‘fintegration,’ the Economist Intelligence Unit believes that banks and fintech startups have more business interests in common than issues that divide.
In a report published in December last year, it argued that banks should embrace disruption and team up with fintech startups to create new product innovations and better experience for customers.
Featured image: Bank via Shutterstock.
