According to a study, banks must rise to the fintech challenge because nearly two-thirds of business clients are looking for new financial services providers.
In the ongoing struggle between traditional financial institutions and fintechs, a recent study found that 62% of business clients now work with a fintech provider and that two-thirds of business clients lack confidence in their existing bank’s payment operations.
According to the research The Forces Disrupting Payments, emerging fintech payment providers are squeezing out traditional financial institutions that serve business clients. The study, conducted by BNY Mellon in association with Aite-Novarica Group, reveals banks are reversing this trend by teaming up with more prominent financial organizations that have already developed new relationships with fintechs.
According to the report’s authors, the survey revealed that when businesses work directly with fintechs, banks, community banks, and credit unions continue to run the danger of being shut out. Only one-third of the firms polled think their current bank completely comprehends their payment needs, and 62% of business respondents claimed they are currently collaborating with a fintech company.
They assert that this so-called “disintermediation” increases the perception of competition between established financial institutions and fintechs, but it also creates the potential for innovation and collaboration, with benefits for both parties.
According to the report’s authors, businesses prefer working with another bank than looking for independent fintech companies. Fintech payment methods have proven beneficial to smaller banks when partnered with larger financial institutions that have already examined and approved them.
According to Isabel Schmidt, Co-Head of Global Payments at BNY Mellon, “Banks need to address sources of friction as their commercial customers show a larger expectation for powerful, real-time capabilities.” According to our experience, clients who collaborate with financial institutions aware of fintechs and their possibilities are more likely to succeed.
BNY Mellon and Aite-Novarica Group say that banks need to work together more.
The report’s conclusions are based on responses from a survey of 790 employees of large and medium-sized businesses in seven North American and European nations.
According to Erika Baumann, the report’s author at Aite-Novarica Group, “the threat of disintermediation provides the fuel for a lot of innovation among banks as they engage with fintechs on new methods to generate growth.” This creates a market opportunity for fintech companies and financial institutions (FIs) that have developed strong services in response to market demand to close the significant gaps in existing payment strategies.
The study also finds that 87% of companies have invested significantly or relatively significantly in enhancing their payment technology or procedures.
According to the research, 88% of respondents still intend to invest, which presents many market prospects for fintech companies and financial institutions working together.
