Fintech providers are making it increasingly difficult for banks to keep up, says World Banking Report.
The release of the 2016 World Retail Banking Report (WRBR) shows that fintech providers are making significant inroads with customers, forcing a majority of banks to admit they are unprepared for the threat of digital disruption.
The WRBR surveys more than 16,000 customers across 32 countries and includes qualitative data from banking executives’ interviews.
Of banking executives surveyed, 96 per cent agreed that that the industry is evolving into a digital banking ecosystem, with only 13 per cent admitting to having systems in place to effectively support it.
The report found that 63 per cent of customers use fintech or non-traditional financial services and are 17 per cent more likely to refer friends and family to fintech providers, rather than banks. Fintech services are gaining popularity with customers due to their ease of use (82 per cent), fast service (81 per cent) and overall positive user experience (80 per cent).
Conversely, the report shows that banks still enjoy a greater level of customer loyalty and trust than their digital counterpoints. Fintech firms are catching up, however, with more than 88 per cent of customers across all regions completely or somewhat trusting their fintech provider.
Close to two-thirds of executives surveyed believe that they need to consider fintech firms as partners, with the majority of bank development strategies taking the form of collaboration (46 per cent) and investment (44 per cent).
The banking report found that while fintech firms take the lead over their traditional counterparts in agility, exploration of new technology and innovation, banks are ahead in expertise with regulators, capital and deep customer bases.
Banking industry practice leader, Sharon Rode, from Capgemini Australia said that banks need to do a better job of harmonising with their nemesis.
“The inability of banks to innovate leaves the door wide open for Fintech providers to attract new customers,” she said.
“There is opportunity for banks to begin working collaboratively with these companies, but they must formulate a rapid response plan to do so before the swiftly evolving bank environment outpaces their window for change.”