A vast majority of banking executives believe financial services will soon become an inter-connected digital ecosystem, but only 13 per cent of them are prepared for the new world, according to a new report.
The Capgemini World Retail Banking Report 2016 found 96 per cent of banking executives agree that the banking industry is evolving towards a digital ecosystem.
However, only 13 per cent of banking executives said their core systems are up to the task of sustaining such an ecosystem.
"To keep up with the rapid changes caused by fintech firms, banks are exploring new approaches to innovation, including collaboration, incubation and acquisition," said the report.
"Nearly two-thirds of banks (65.3 per cent) say they view fintech firms as partners, a striking level of acceptance, given the historical perception of fintech as a destructive element.
"The shift reflects the reality that each side offers something to the other. Fintech firms excel in their ability to move quickly, innovate, and exploit new technology, while the banks have capital, deep customer bases, and expertise in dealing with regulators," said the report.
While 27.7 per cent of banking executives continue to view fintech firms as competitors, only 6.9 per cent view them as irrelevant.
The growing level of partnership between banks and fintech firms is expected to take "many forms", Capgemini said.
"Collaboration and investment are high on the list of bank strategies, with 45.5 per cent citing collaboration and 43.6 per cent looking to invest in fintech firms," said the report.
"By taking advantage of fintech capabilities, banks can grow existing businesses or enter into new ones, such as low-value payments and loans," it said.
Acquisition is lower on the bankers' list, with less than one fifth (17.8 per cent) of respondents saying they plan to purchase firms or their technology.
"Virtually all the bankers surveyed agreed that the advance of fintech requires action. Only 4 per cent cited doing nothing as a valid option," Capgemini concluded.
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