This is an exciting time in the world of finance. Technological innovation has brought countless new entrants to the market and seriously disrupted the traditional banking sector.
New digital financial solutions are giving consumers more choice and control over their money than ever before. With frequent news coverage and social media buzz around the most popular new players, you could even say fintech has become cool.
The media is just as quick, however, to cover the many issues faced by some challenger banks and fintech providers. Forced account freezes, ditched rewards programmes and unwanted mass PIN resets can plague these high-growth firms as they struggle to scale their data infrastructure. Such issues can have a significant impact on a brand’s reputation.
Research commissioned by Contis shows that 68 percent of consumers want access to new digital services, yet challenger banks enjoy just half the trust of the established high-street banks. Demand is there, but trust remains low.
Contis’ research exposes how, in many ways, new digital banks and legacy banks face the exact opposite challenges.
Legacy providers are trusted. They have large amounts of data and know how to deal with issues at scale. However, they struggle to be agile and innovate quickly due to huge bureaucracies, established processes and legacy technology.
By contrast, challengers are great at innovating and bringing out new product updates. However, they struggle with the infrastructure required to scale quickly and lack the brand trust that big banks have built up over decades.
So what’s the solution?
There is undoubtedly space in the market for all types of providers. But they must take advantage of a crucial piece of the puzzle: collaboration. Businesses can tackle their shortcomings and boost their offering through carefully chosen strategic partnerships.
This is all the more relevant following recent open banking legislation designed to ease cooperation and information sharing. Niche, nimble providers are already populating the gap between established institutions and fintech startups, and bringing real value by addressing the challenges big players face.
A great example of this in action is Lloyds partnering with komgo to enable quicker international commodity trade finance using distributed ledger technology.
Lloyds said at the time: “We’re entering a new era of simpler and more inclusive access to blockchain technology that has the potential to support strong, collaborative business relationships.
“Partnerships like this, and the technology that underpins them, will help mitigate the pain points our clients face and support British businesses to prosper internationally.”
Digitisation is possibly the most exciting challenge the finance industry has ever faced – and our data clearly shows that businesses that don’t adapt will die. This is why we believe the most forward-thinking leaders in the industry are those embracing collaboration to help bridge the gap between the old world and the new.