Collaboration rather than competition between fintechs and established banks will help mount the best challenge against a looming ‘BigTech’ threat, according to a recent study by The Australian Digital Transformation Lab, a research partnership between the University of Sydney Business School and Capgemini.
The incursion of ‘BigTech’ disruptors, such as Apple, Amazon and Google, into the financial services space could pose a serious challenge to incumbent institutions, the study said.
“These well-respected companies have built extensive relationships and trust with customers across the world. Their market penetration and embeddedness in customers’ daily lives, through mobile technology use in particular, makes them powerful competitors in what has traditionally been the arena of large banks.”
A number of emerging BigTechs have already adopted various financial services functions to both “enhance their current offerings and to increase loyalty to their core products,” the study said.
The study cited Uber’s “seamless” payment’s system and WeChat’s in-built payments function as potential disruptors that successfully dispense with the ‘middleman’ – i.e. bank – during the transaction.
The ability to create holistic and seamless digital ecosystems that are familiar to customers is a major boon for BigTechs, the study said.
“These companies typically develop their solutions around customer needs and emerging technologies, to deliver a comprehensive and seamless customer experience by combining different services into one platform,” the study said.
To hold these global challengers at bay, local fintechs and incumbents were urged to seek common ground, establishing collaborative environments that produce mutually beneficial outcomes.
“Incumbents can capitalise on innovative ideas and coveted digital and human capabilities, whilst fintech firms will gain access to much-needed capital, as well as “access to existing customer bases, scalable processes, and importantly the perception of stability, safety and security that large financial institutions in Australia still benefit from.”
However, the success of such alliances will depend on the effective utilisation of people power and the ability to leverage cultural capital, the study said.
“Both banks and fintechs need to dedicate thought and resources towards addressing operational and cultural aspects of their partnership. If approached with a willingness to learn from one another, such partnerships can provide a catalyst for meaningful organisational evolution.”
The study urged incumbents and fintechs to utilise each other’s strengths and to take advantage of digital innovations in customer service.
“Strategic partnerships, built with appropriate structures and timelines in mind, can help both incumbents and fintechs to continue to evolve and respond to a rapidly changing financial services landscape in Australia and beyond.”
“Staying ahead in the key areas of price, convenience, access, choice, community, and trust requires harnessing digital technology and capabilities by keeping the customer at the centre.”