Tug of love turns to group hug for banks and fintechs
“A shift towards collaboration”
With the EU’s Second Payment Services Directive (PSD2) and open architecture framework set to come into force next year, regulation may well tip the scales between banks and fintechs for customer loyalty, according to a new report conducted for Temenos by the Economist Intelligence Unit.
In the 36-page study, “Symbiosis: Your bank has your trust. Can fintech make you love it?”, the Economist Intelligence Unit surveyed 200 senior retail banking executives about regulatory, customer, security and technology influences on the industry up to the year 2020.
In addition, “in-depth” interviews were conducted with 36 senior executives from banks of all sizes, start-ups, venture capitalists and mutual fund managers.
The report “offers a new twist in the ‘tug of love’ story of banks and fintechs under changing regulatory and compliance rules”.
David Arnott, CEO at Temenos, adds: “The struggle between banks and fintechs for customer loyalty is not new, however new regulation and technology change is now driving a shift towards collaboration.”
The key findings show:
- The regulators will decide. Capital and compliance will shape incumbents and newcomers alike. Banks cite regulation as the most impactful trend in the coming years: bank capital requirement regulation (54%), bank product suitability regulation (53%), product design and transparency regulation (47%); regulatory fines and recompense orders (30%);
- Into the unknown: American banks worry about regulation the most, despite a promised rollback. European policy direction is more certain yet onerous.;
- Resistance is futile. PSD2 and open architecture are “game changers”. Banks may lose their customers’ loyalty, fintech could hit compliance barriers;
- Complacency is not a virtue. Fear of peer-to-peer lenders and robo-advice may have peaked. Non-banks could still steal deposit and lending business – and profit unless banks improve the customer experience;
- No cash, no cheques. If banks are smart, they may still win the war to build truly universal digital networks;
- Banks main concerns on cybersecurity are lack of system preparedness in the event of a cyber-attack (65%) and the ability to maintain data security (60%);
- The possibilities of blockchain are “still not fully understood”; 34% think of it only as a tool to reduce financial crime while 34% see its greatest value in increasing the speed and reducing the cost of back office functions;
- The majority of bankers surveyed (55%) think anti-globalisation movements will negatively affect retail banking by 2020.
