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The growing number of partnerships between fintechs and legacy players suggests that incumbents believe there are benefits to working with new market entrants.
Meanwhile, some of these collaborations are now established enough for those benefits to be measured, with a new survey from global law firm Mayer Brown showing where incumbents think their partnerships are paying off. The firm surveyed 70 UK financial services providers including banks, insurers, and asset managers.
Cost savings. Eighty-seven percent of respondents said they were able to cut costs to some extent by working with fintech providers. These savings likely come from incumbents spending less on the development of new customer-facing services, as well as the efficiencies fintechs can bring to legacy processes thanks to their agile structures and use of the newest technology.
Brand refreshes. Eighty-three percent of respondents said collaborations with fintechs offered opportunities for incumbents to refresh their branding. That's likely because partnerships with fintechs enable legacy players to improve customer engagement and launch innovative products and services faster than they could build them in-house. This allows incumbents to reposition themselves as better serving a particular market, or simply as cutting-edge.
Increased revenue. Fifty-four percent of respondents said partnerships had resulted in boosted revenue. It's worth noting that this is the benefit seen by fewest incumbents, which suggests it may take longest to emerge as the parties involved work out a business model that suits everyone.
The full benefits of fintech partnerships will only be realized by incumbents with well thought out fintech strategies. To make the most of partnerships, firms need to decide in advance which specific areas they want to improve or change — cost savings or their brand, for example — and which fintechs are best suited to help them achieve such goals.
Incumbents also need to carefully consider the practicalities of integrating fintechs' technology with legacy systems, as well as ensure that fintech and legacy working cultures can work side by side. Incumbents that jump into partnerships without considering these factors in advance will likely be slower to reap any benefits from working with fintechs.
The increase in fintech partnerships shows that we’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs. No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
After months of researching and reporting this important trend, Evan Bakker, senior research analyst for BI Intelligence, Business Insider's premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:
Retail banking
Lending and Financing
Payments and Transfers
Wealth and Asset Management
Markets and Exchanges
Insurance
Blockchain Transactions
If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.
Among the big picture insights you'll get from The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry:
Why financial technology is so disruptive to financial services—it will soon change the nature of almost every financial activity, from banking to payments to wealth management.
The basic conflict will be between old firms and new—startups are re-imagining financial services processes from top to bottom, while incumbent financial services firms are trying to keep up with new products of their own.
Both sides face serious obstacles—traditional banks and financial services firms are investing heavily in innovation, but leveraging their investments is difficult with so much invested in legacy systems and profit centers.
Meanwhile, startups are struggling to navigate a rapidly-changing regulatory landscape and must scale up quickly with limited resources.
The blockchain is a wild card that could completely overhaul financial services. Both major banks and startups around the world are exploring the technology behind the blockchain, which stores and records Bitcoin transactions. This technology could lower the cost of many financial activities to near-zero and could wipe away many traditional banking activities completely.
This exclusive report also:
Explains the main growth drivers of the exploding fintech ecosystem.
Frames the challenges and opportunities faced by incumbents and startups.
Breaks down global and regional fintech investments, including which regions are the most significant and which are poised for the highest growth.
Reveals which two financial services are garnering the most investment, and are therefore likely to be transformed first and fastest by fintech
Explains why blockchain technology is critically important to banks and startups, and assesses which players stand to gain the most from it.
Explores the financial sectors facing disruption and breaks them down in terms of investments, vulnerabilities and growth opportunities.
And much more.
The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry is how you get the full story on the fintech revolution.
To get your copy of this invaluable guide to the fintech revolution, choose one of these options:
Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
Purchase the report and download it immediately from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of financial technology.
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