Australia’s banks are putting tens of millions of dollars behind fintechs but have long-term ambitions to disrupt the current breed of disruptors, a banking expert has said.
Capgemini Australia’s industry practice leader for banking and capital markets Philip Gomm told Information Age he believed the Big 4 harboured ambitions to create internal innovation capabilities to rival that which they currently bought in from fintech start-ups.
Banks in Australia have put considerable funds behind start-ups in order to understand their business models, such as Westpac through Reinventure and the many institutions that back Stone & Chalk.
Capgemini estimates that around $2 billion flowed into Australian fintechs between 2009 and 2015.
“The incumbents know that the fintechs are changing the industry landscape,” Gomm said.
“They’re looking at investment in fintech, they’re looking to partner, they’re looking to collaborate, they’re looking to understand the culture and mindset of the fintech disruptor.
“But in a way, they’re wanting to get access to the same technology so they can disrupt the disruptor.”
However, if banks harbour an ambition to replicate the innovation that they currently source from start-ups, it appears the process of building that internal capability will take some time.
“[The banks are] struggling to successfully develop innovation capabilities themselves and achieve the desired results, and that’s still holding them back,” Gomm said.
“They’re prepared to partner and collaborate [for now] but their ultimate game is to transform.
“They know that the status quo is not going to remain the same, and the status quo is not adequate.
“They need to go through their own transformation program, and they’re not naïve to the scope and scale of the transformation that needs to take place as they move towards digital.”
Fintech is one of the key battlegrounds for how much control the banking sector is willing to relinquish in the race to modernise.
While the offerings of many fintech companies need the backend infrastructure of traditional financial services firms, it’s their innovation at the customer-facing frontend that Gomm believes has the banks concerned.
A case in point is the current stoush between several Big4 banks and Apple over the future of mobile payments and – effectively – who can offer the frontend, and on which platforms.
This could play out in other arenas as more fintech start-ups innovate around the way customers make and receive payments.
“I would suggest that there’s going to be some very challenging scenarios forming as the new fintech payment services providers come to market with new solutions that are simply easy to use,” Gomm said.
At the end of the day, which side of the innovation equation is successful could come down to the one that manages to fine-tune the customer experience the best.
According to Gomm – and a Capgemini’s world fintech report 2017, released this week - both the banks and fintechs have room to improve in this regard.
“The rise of the fintech movement is still lagging in terms of its ability to raise the bar around customer experience,” Gomm said.
“Neither traditional firms nor the fintechs have completely met customer experience needs, especially at what we describe as the ‘moments of truth’ touchpoints.
“There are inroads being made; we still haven’t got that seamless experience that we need that drives mass take-up of fintech solutions. But we’re getting closer.”