Powering Innovation: The Synergy of FinServ and FinTech Collaboration
- Himanshu Patni
- June 29, 2023
- BLOG, TELECOM & IT
- FinServ and FinTech Collaboration, FinServ and FinTech Collaboration Analysis, FinServ and FinTech Collaboration Growth, FinServ and FinTech Collaboration Outlook, FinServ and FinTech Collaboration Share, FinServ and FinTech Collaboration Size, FinServ and FinTech Collaboration Trends
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Financial Services Sector (FinServ) is the largest sector of the global economy in terms of earnings and equity market capitalization. FinServ institutions help people and businesses save, borrow, invest, move, and manage money. Their services range from handling consumer credit card transactions to financing business acquisitions to helping taxpayers with tax preparation and helping multinational corporations manage their financial risk.
FinTech (financial technology) use innovative technologies to enhance and automate the supply of financial services, including automation and artificial intelligence (AI). FinTech help their customers earn more money, save more money, and make better financial decisions by providing consumers and businesses with better ways to manage their financial operations—from personal bank accounts to split-second financial transactions and automated process risk calculations.
According to a recent PwC global report, the majority of global financial services companies intend to expand their FinTech collaborations because 88% of them are worried about losing business to innovators. Over the next three to five years, the vast majority of international banks, insurance companies, and investment managers plan to expand their collaborations with FinTech firms and anticipate an average return on investment of 20% on their innovation projects.
FinTech has developed from startups that aimed to compete with and defeat market leaders to a more variety of ecosystems of companies, many of which were seeking collaborations. Startups in the fintech industry require customers in addition to capital. In order to promote change and deliver innovation, organisations need new strategies.
The survey mentioned above shows how a variety of sources, such as tech firms, e-retailers, and social media platforms, are driving innovation that originates outside of the financial services industry. In some Asian markets, this strategy has undoubtedly been common. The new collaborative strategy offers alternative strategies for both startups and new competitors, but it also involves a new set of risks.
FinTechs have increasingly shifted into businesses that are focused towards consumers after initially concentrating on the backend systems of respectable FinServs. FinTechs prioritise quick technological innovation, market agility, and experiences and branding that are focused on the customer. They operate in a variety of industries, including education, retail banking, nonprofit, investment management, and cryptocurrency.
Current trends and changing tides:
Legacy financial institutions are setting up for innovation to explore and use emerging technologies. They are actively collaborating with fintechs that offer agility and knowledge in technologies outside of their strategic initiatives, and they are building labs to encourage innovation. The time to market for innovations like AI-driven insights, which can result in new revenue opportunities and competitive differentiation, can be sped up for FinServs through these alliances. Collaboration between FinServ and FinTech can help address the problem of cybercrime. FinTech can assist banks and credit card issuers in using data insights to power automated fraud detection, flag suspicious attempted transactions, and notify customers before they are approved.
According to Deloitte, investment banks will likely need to “modify certain business models and operational platforms” and “optimise the use of financial technology, data, and analytics to generate differentiated insight and added value,” as they face challenges from other trends such as changing financial regulation, a rise in remote work, and advanced analytical clients.
Conclusion:
Financial institutions should collaborate with fintech rather than view them as competitors because there is a significant amount of opportunity for collaboration. FinTech is all about disruption, innovation, and transformation, and it will undoubtedly have an impact on and shape how financial institutions operate globally.
Author: Sakshi Gupta
