Research: APAC Banks Can’t Get Enough of Fintech Innovation
Banks used to shun fintechs. Many saw them as potential competitors, while others felt that their startup mentality was incompatible with their cultures. Besides, many had built a strong in-house IT team, so why look outward?
In Asia Pacific, such attitudes are changing fast. After a pandemic, rampant digitalization, post-pandemic uncertainty, and cut-throat competition from digital alternatives, APAC banks are adopting fintech innovation in droves — and more than any other region globally.
Fintech partnerships are a critical part of APAC banks’ strategies, with 87% – a higher proportion than any other region – planning to connect with an average of four fintechs in the next 12-18 months and just 12% planning to build their solutions in-house.
These figures come from a Finastra survey produced in collaboration with East & Partners. It showed that banks worldwide are investing heavily in fintech partnerships and digitalization to help them adapt to customer and regulatory demands. But in Asia, the rate of adoption has been spectacular.
So, why the sudden change of heart? The primary issue is realizing that no one bank can do it all. In addition, fintech innovation allows today’s banks to look for operational efficiency and access talent they don’t have.
“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” said Isabel Fernandez, executive vice president for lending at Finastra.
“Our survey demonstrates the recognition from banks that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs.”
According to the study, the top three motivations for APAC banks are: integrating fintech solutions to reduce operational costs (43%), easier deployment of new technology (47%), and leveraging technology expertise not available in-house (52%).
Another reason why APAC banks are deploying fintech solutions is customer experience. The study noted that APAC banks prioritize solutions for online portals/banking channels (52%), transparency across processes, such as providing the customer with real-time updates on onboarding progress (50%), and improving end-to-end connectivity and value-add services (45%).
"Major inflection points in recent years have had, and are still having, a dramatic impact on how financial services [industry] is evolving,” commented East & Partner global head of markets analysis, Martin Smith.
“We believe that despite the challenges facing global banks, the industry’s focus on collaboration and driving ESG initiatives forward, highlighted by the research, will ultimately have great benefits for financial institutions and their customers, today and in the future.”
Image credit: iStockphoto/AnnaElizabethPhotography
