Capgemini has released the findings of a new report published by The Australian Digital Transformation Lab, a joint venture between the University of Sydney Business School and Capgemini.
The report finds that while Financial Technology (FinTech) firms are seeking to disrupt the larger players, the opportunities in financial services are based on collaboration rather than competition.
The report finds that technology giants such as Apple and Amazon threaten the emerging FinTech industry and Australia’s traditional banking sector. To survive this threat, the FinTech industry and the banking sector should work together, the report says.
“We commonly think of FinTech as small, digitally-native companies that fundamentally change the financial services market, disrupting and displacing incumbents,” says professor Kai Riemer, University of Sydney Business School.
“But what’s becoming clear is that it’s difficult for FinTech firms to prove themselves as a viable option for everyday consumers despite the innovation in services.”
Riemer continues, “that’s not to say incumbents are able to sit back and enjoy their current status – customers are increasingly exposed to new FinTech options that offer convenient, engaging services. The future will lie in exploring collaboration.”
Key findings from the report include:
- The impression of stability and lingering customer trust has helped banks and other traditional institutions maintain their dominant position, but younger tech-savvy Gen Y customers are increasingly willing to go elsewhere for their financial services needs. Combined with the growing support from government, it would seem that FinTech companies are well placed to make the most of their increasingly favorable regulatory environment.
- The FinTech sector has been successful in harnessing digital technology, using it to offer customers better prices, convenience, access, choice, and the benefits of community.
- The Australian FinTech industry is thriving and incumbents and start-ups, who initially considered each other as competitors, now see the value in collaborating. Adjusting large-scale systems and embedded processes to become more responsive is however no simple task for incumbents, who face a major challenge in matching the agility of their nimbler counterparts.
- While FinTech companies have successfully managed to bring to the market customer centric services and products, traditional firms still hold an advantage in the area of trust, specifically the perception of stability, security, and safety. This is particularly true when it comes to long term investments like mortgages – customers place their trust in traditional firms for their stability. If FinTechs want to overcome this hurdle and unlock a larger segment of the market and scale-up, they should consider partnering with incumbents.
“Banks and FinTechs should adopt a strategic approach and collaborate throughout the innovation process, leveraging each other’s’ strengths to deliver maximum benefits from digital initiatives,” comments Nicolas Boussand, director of Digital Customer Experience, Capgemini in Australia and New Zealand.
The report concludes that FinTechs and the banking sector can learn from each other to overcome the challenges in digital transformation they are confronted with.
Fintechs need help with scaling-up, while incumbents can benefit from learning how to harness digital technology.