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Fintechs partner banking, says report
According to the Economist Impact’s ‘Threat Assessment 2022: Digital Competition in Global Finance’ report commissioned by digital transformation leader WSO2 (www.wso2.com) of the 300 C-suite banking industry executives surveyed overs half (54%) say their financial institutions have faced greater competition over the past three years from digital alternatives while 47% of UK respondents found this to be the case.
Despite this, many respondents believe their organization is now in a better position to compete, with 85% of respondents saying that they have, to some extent or more, the necessary technological tools to create new digital products and services. This rises to 90% for UK respondents.
In rising to the digital competition challenge many of the banking firms have responded to the competition by investing in their digital presence. Among survey respondents, 47% say they are serving customers via digital channels, including online or mobile applications, to a large or great extent (43% for UK respondents), and 77% of these executives predict their organisation will serve customers via digital channels to a large or great extent over the next two years (80% for UK respondents).
“All signs in the Economist Impact report point to established financial institutions successfully rising to the digital challenge,” says Eric Newcomer, CTO, WSO2. “A majority of survey respondents say they have the necessary tools, are culturally ready, and have the talent needed to create new digital products and services, which to me represents significant change in the industry dynamic.”
At the same time, the growth of new digital entrants in the banking sector is shifting views on who is a competitor versus a potential partner. Among executives surveyed, 26% identified increasing competition from banking as a service (BaaS) or embedded finance, such as from non-financial firms including technology companies, and telecoms providers, among others. Whereas 43% of those UK respondents who had identified increasing competition stated that this was down to cybersecurity concerns or challenges including customer trust.
Meanwhile, only 12% of survey respondents listed increasing competition from financial technology (fintech) companies, dropping to 7% for UK respondents – in stark contrast to the widespread fear of competition from fintechs just a few years ago.
“The intense competition facing banks is leading to unprecedented digital collaboration,” adds Seshika Fernando, Vice President of Banking and Financial Services, WSO2. “Banks once jealously guarded their data on proprietary systems to grow their customers and revenue share. Today, they are accelerating their growth by partnering with fintechs to add new services, embedding banking-as-a-service solutions in online retail offerings, and tapping the insights of agencies with big data expertise.”
The full report can be found at http://impact-competitioninglobalfinance.econ-asia.com/projects/digital-competition-in-global-finance