Regional banks turn to fintechs to boost digital transformation progress: Survey
Published: 02:04 PM,Apr 26,2023 | EDITED : 06:04 PM,Apr 26,2023
Banks in the Middle East and Africa (MEA) region regard fintech partnerships as important for growth and innovation, with respondents looking to connect with an average of two fintech providers in the next 12-18 months. The largest proportion of respondents want to plug into a platform of integrated fintech solutions (63%), with only 7% preferring to build capabilities in-house, according to new research by Finastra, a global provider of financial software applications.
The research, conducted by East & Partners, finds that the core motivations of respondents to integrate fintech solutions is reducing operational costs (53%), benefiting from broader technology experience than they have in-house (51%), and aligning more closely with evolving compliance needs (46%).
When it comes to digital transformation progress, banks in MEA are behind. On average, 29% of respondents say they have digitized their processes, compared to the global average of 47%.
Similarly, only 12% of respondents in MEA feel they are ahead in their digital journey, and the largest proportion (62%) say they are behind. Four out of five banks state that regional differences in legal and compliance requirements is the biggest barrier for implementing new technology, and nearly three in four say this slows down the entire adoption process.
This suggests that banks will prioritize connecting with fintechs that have deep expertise in local banking and regulatory practices.
The global research was conducted amongst 783 interviewees at 260 banks in the UK, Europe, the Middle East, Asia Pacific, and the Americas, as well as 393 interviews with North American community markets banks and financial institutions. The findings explore the current appetite in the marketplace for fintech investment and integration, and Environmental, Social and Governance (ESG).
“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” said Isabel Fernandez, EVP Lending at Finastra. “Our survey demonstrates the recognition from banks in MEA that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs.'
The research, conducted by East & Partners, finds that the core motivations of respondents to integrate fintech solutions is reducing operational costs (53%), benefiting from broader technology experience than they have in-house (51%), and aligning more closely with evolving compliance needs (46%).
When it comes to digital transformation progress, banks in MEA are behind. On average, 29% of respondents say they have digitized their processes, compared to the global average of 47%.
Similarly, only 12% of respondents in MEA feel they are ahead in their digital journey, and the largest proportion (62%) say they are behind. Four out of five banks state that regional differences in legal and compliance requirements is the biggest barrier for implementing new technology, and nearly three in four say this slows down the entire adoption process.
This suggests that banks will prioritize connecting with fintechs that have deep expertise in local banking and regulatory practices.
The global research was conducted amongst 783 interviewees at 260 banks in the UK, Europe, the Middle East, Asia Pacific, and the Americas, as well as 393 interviews with North American community markets banks and financial institutions. The findings explore the current appetite in the marketplace for fintech investment and integration, and Environmental, Social and Governance (ESG).
“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” said Isabel Fernandez, EVP Lending at Finastra. “Our survey demonstrates the recognition from banks in MEA that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs.'