According to the World FinTech Report 2020 from Capgemini and Efma, despite a widening gulf between traditional banks on one side and BigTechs and challenger banks on the other, traditional banks have an opportunity to thrive in today’s market by embracing Open X and becoming “Inventive Banks.”

Both banks and fintech companies are currently frustrated by the lackluster results of their collaborations to date, according to the report, which found:

• Only 21% of banks say their systems are agile enough for collaboration
• Only 6% of banks have achieved the desired ROI from collaboration
• 70% of fintech companies don’t culturally or organizationally see eye-to-eye with their bank partner
• More than 70% of fintech companies say they are frustrated with the incumbent’s process barriers
• Half of fintech company executives say they have not found the right collaborative partner

“The world has changed dramatically over the last couple of months. Businesses will evolve and emerge from the COVID-19 crisis in different and profound ways. For traditional banks, this will translate into an even greater need for digital experience through further collaboration with fintechs. Since we began this report three years ago, fintechs have moved from disruptors to mature players, and it is now essential for incumbent banks to consider them not only as formidable competitors, but as necessary partners of choice to meet changing consumer expectations,” Anirban Bose, CEO of Capgemini’s Financial Services and member of the group executive board, said. “Effective collaboration requires people, business and process maturity. While, for traditional banks, failure is not an option, fintechs are fast to market yet ready to fail. Inventive banks with the willingness and capabilities to collaborate at scale and industrialize innovation are most likely to prosper within the shared Open X ecosystem.”

According to the report, to remain competitive and appeal to consumers, banks should prioritize middle- and back-end transformation through data-driven and customer-centric partnerships with fintech companies, which will ultimately also improve the front-end. Although overall investment in new IT development (vs. maintenance) increased from 24% in 2016 to 33% in 2019, middle- and back-end operations continue to be based on complex, often manual business processes, leading to a fragmented customer experience.

Capgemini’s “Open X Readiness Index” is a global benchmarking tool that measures the readiness of banks to effectively collaborate at scale with startups by measuring their maturity across people, finance, business and technology. Featured in the World FinTech Report 2020, the index shows that collaborative banks are those with a dedicated and autonomous startup partnership team and who demonstrate a fail-fast innovation approach to determine value and cut losses quickly. Readiness frontrunners are also early movers that invest in emerging technologies and have little dependency on legacy systems, making fintech integration easier.

“Traditional banks are at a critical juncture. They must embrace Open X or risk becoming irrelevant,” John Berry, CEO of Efma, said. “In order to keep up with ever-changing customer expectations in today’s marketplace, incumbent banks must transform into Inventive Banks with collaborative support from qualified fintech partners.”

Capgemini is a provider of consulting, digital transformation, technology and engineering services.

Efma is a global non-profit organization which was established in 1971 by banks and insurance companies.