Innovations in the fintech sector will accelerate the transformation of traditional financial services as ever more banks are looking to collaborate.

Fintech partnerships are becoming increasingly important for global banks as they work more and more closely with fintechs offering a platform of integrated solutions to reduce operating costs.

A survey by UK-based financial services firm Finastra, in partnership with banking consultancy East & Partners, shows that three out of four banks plan to work with an average of three fintechs in the next 12 to 18 months.

Reducing Operating Costs

More than half of the respondents prefer to join a platform with integrated fintech solutions, while only six percent want to build their capabilities in-house.

Key motivations include lowering operating costs, easier adoption of new technologies, and better adaptation to changing ESG and compliance requirements.

Europeans Investing Heavily

Digital transformation to improve customer experience remains a priority for banks. Globally, financial institutions will invest an average of nearly $370 million in transformation in 2023. European banks are investing significantly more on average with $886 million, most likely because European banks need to play catch up in digitization, compared to their North American counterparts.

In seeking new fintech partners to enhance the customer experience, financial institutions are looking to improve services such as online portals/banking channels, process transparency with real-time updates to customers during onboarding, and end-to-end connectivity and value-added services.

Lack of ESG Products

In addition to reducing their carbon emissions, sustainable lending is also an important goal for banks. Three out of four institutions plan to increase their exposure by more than 16 percent over the next 12 to 18 months.

However, the lack of ESG products from fintechs that banks can offer to businesses is seen as one of the biggest obstacles, even more so than the challenge of keeping up with rapidly changing regulatory requirements.