The Fintech Advantage 2017, a report by Capgemini

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    In the current Australian financial landscape, emerging fintech companies are effectively harnessing digital technologies to cater to the unmet needs of the customer. In this process, they are altering customer expectation to anticipate more from financial services institutions and together with large “BigTech” companies explore the potential for disrupting traditional players. Traditional banks, however, are not sitting ideally by – they are investing and partnering with fintechs in the hope of capitalising on their innovative ideas and sought-after digital and people capabilities.

    Collaborating to achieve advantage makes lots of sense as Australia has one of the healthiest fintech eco-systems in the world, and there is a perfect storm for market disruption. From changes in regulatory frameworks that make it easier for fintech to innovate to the high penetration of smartphones in the Australian market

    The Fintech Advantage, a report by Capgemini, identifies three different types of collaboration, each requiring a different level of capital investment and each with different objectives:

    • Divergent Thinking is aimed to feed the ideation process and generate new concepts. For example, BOQ hosted a hackathon in association with River Labs to create new ideas and validate business concepts.
    • Problem Solving, requires more investment but is aimed at accelerating specific solutions for development. The fintech hub Stone and Chalk is a great example of an accelerator program designed to solve specific problems.
    • Symbiosis (The most intensive option) where both sides team-up to develop brand new products and services.

    These partnerships aim to leverage existing and proven technology to improve customer experience and can range from simple cross-referral to a more elaborate joint venture. A good example is the trend of large banks to partner with blockchain solutions for intra-bank transfers and back office processing.

    Establishing meaningful partnership, no matter what mode of collaboration, need to focus on solving customer problems, yet companies should not underestimate the complexity of these collaborations. Working with start-ups can be reinvigorating but require a cultural shift and the realisation that they seek to use incumbents systems to overcome to challenges of scalability. Despite this challenge, we see banks as continuing to partner with Fintechs to reattain market positioning. Indeed Fintechs are ahead in five of the six key areas of providing value for customers; they are price, convenience, access, choice, and community with traditional banks still retaining an advantage on trust, although this is in decline. This loss of trust points to the need for banks to maintain the benefit of confidence while investing in the fintech collaboration to reaffirm their market position.

    Ultimately, Fintechs and the banks face significant challenges when it comes to digital transformation and that each can learn from the other. Fintechs need help with scaling-up, while incumbents can benefit from learning how to harness digital technology. This shift requires an open mindset from the banks and fintechs to enable agility and collaboration, as a result unleashing the fintech advantage driven by customer centricity.

    Download your copy of the report 'The Fintech Advange: Harnessing digital technology, keeping the customer' in focus here.

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