Research: APAC Banks Can’t Get Enough of Fintech Innovation

Banks used to avoid fintechs. Many saw them as potential competitors, while others felt their startup mentality was incompatible with their cultures. Also, many had built a strong internal IT team, so why look outside?

In the Asia-Pacific region, such attitudes are changing rapidly. Following a pandemic, widespread digitalisation, post-pandemic uncertainty and fierce competition from digital alternatives, APAC banks are adopting fintech innovation in droves – and more than any other region globally.

Fintech partnerships are a critical part of APAC banks’ strategies, with 87% – a higher share than any other region – planning to connect with an average of four fintechs in the next 12-18 months and only 12% planning to build their solutions in -house.

These figures come from a Finastra survey created in collaboration with East & Partners. It showed that banks worldwide are investing heavily in fintech partnerships and digitization to help them adapt to customer and regulatory demands. But in Asia, the rate of adoption has been spectacular.

So why the sudden change of heart? The main problem is realizing that no bank can do everything. In addition, fintech innovation allows today’s banks to look for operational efficiencies and access talent they don’t have.

“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recession risks, banks are under increasing pressure to reduce operating costs while continuing to improve the way they serve their customers,” said Isabel Fernandez, Executive Vice President of Lending at Finastra.

“Our survey shows the recognition by banks that they cannot navigate these waters alone. They are instead choosing to partner with fintechs, with a preference to connect to a platform of integrated fintech solutions, to help them adapt quickly and at the same time reduce costs.”

According to the study, the top three motivations for APAC banks are: integrating fintech solutions to reduce operating costs (43%), easier deployment of new technology (47%) and leveraging technology expertise not available in-house (52%).

Another reason why APAC banks are adopting fintech solutions is customer experience. The study noted that APAC banks are prioritizing solutions for online portals/banking channels (52%), transparency across processes, such as providing the customer with real-time updates on onboarding progress (50%), and improving end-to-end connectivity and value-added services ( 45%).

“Major turning points in recent years have had, and continue to have, a dramatic impact on how financial services operate [industry] is evolving,” commented East & Partners global head of market analysis Martin Smith.

“We believe that despite the challenges facing global banks, the industry’s focus on collaboration and driving ESG initiatives forward, highlighted by the research, will ultimately have major benefits for financial institutions and their customers, today and in the future.”

Image credit: iStockphoto/AnnaElizabethPhotography