Research has discovered that nearly two thirds (64%) of US commercial banks cannot develop fintech applications because of working with legacy systems.
However, while these systems are hindering some commercial banks, they must find a way of negotiating this issue to avoid missing out on opportunities and falling behind their competitors.
The in-depth study also revealed that fintech firms are preparing for a healthy future in the US, with 82% of 100 commercial banks planning to increase fintech investment over the next few years. While these findings help to paint a promising picture of the current trends in the fintech marketplace, it is also important that banks take steps to ensure that their fintech partnerships are built to last, rather than just providing a short-term solution.
Firstly, it is important to understand exactly what factors are driving this growing fintech influence. As nimble and dynamic fintech firms continue to remain at the forefront of technological development in areas such as commercial card payments, banks appear to be slightly behind. While respondents listed legacy systems as the most common barrier preventing their banks from developing in house applications, not having access to technical expertise (56%) and resources (53%) were also noted as limiting factors.
While these elements could be restricting progress, fintech firms are able to provide banks with an effective solution to navigate these barriers through outsourcing selected services.
Outsourcing services to established fintech firms can, in some instances, help products to be brought to market faster and aid banks to understand the challenges of local markets, providing effective solutions for its customers. They can enable commercial banks to sidestep agility issues often associated with legacy systems while also reducing their internal development costs.
It is also crucial for a bank to make the correct choice when opting to outsource. Banks should not feel threatened by technology, working with a fintech partner can help provide the customer with a better service, which can ultimately help build a lasting relationship. Again, when these partnerships are successfully built, it enables the bank to provide a better range of relevant services to its customers while providing a new business opportunity for the fintech.
The industry has seen these types of partnerships proving successful in the US, with only 22% of US banks revealing that they do not currently outsource any payment services, in comparison to 30% of their UK counterparts.
Demonstrating results in banking technology is often reliant on selecting an appropriate path into the future. When partnering with a trusted and knowledgeable fintech provide to outsource its services, it will enable them to follow a clear path.