Citywire - For Professional Investors

Register to get unlimited access to all of Citywire’s fund manager database. Registration is free and only takes a minute.

Corporates unimpressed by banks’ fintech efforts

Corporates unimpressed by banks’ fintech efforts

Some of the world’s largest enterprises are prepared to switch financial providers should their banks not keep up with technological innovation, new research from East & Partners has found.

According to the study comprising 737 corporate treasurers and chief financial officers (CFO), around 13% of corporates have either partially or fully switched banks in direct response to newly released financial technology solutions, with a further 20% currently considering doing so.

China-based firms were found to be the most bullish in their intentions, with nearly one third saying they have in part, or in full switched banks. This compares to the next highest markets: UK (18.2%) and Australia (17.4%).

China (29%), Hong Kong (19.4%) and Singapore (19.1%) also reported the highest levels of current consideration in switching banks, indicating that traditional banks and financial institutions in these regions are most under threat.

Importantly for financial institutions, more than 75% of corporate treasurers said fintech firms would take market share away from incumbent providers over the next five years.

Across China, Hong Kong, Singapore and the UK, that figure jumped to around 90%, while around 1 in 2 firms in Australia and the US were as optimistic of fintech firms’ expansion in market share.

‘Although fintech innovation has been the domain of the retail and consumer market, corporate treasurers and CFOs within the largest companies from around the world are rapidly expecting the same levels of sophistication and innovation from business banking products and services,’ said Martin Smith, head of markets analysis.

‘Although banks in Asia and the UK are most susceptible to fintech competition, other markets cannot rest on their laurels, and ensure they keep developing both their digital offerings, and their positioning to ward off the increasingly competitive market,’ he said.

Globally, corporate treasurers were not overly impressed with banks’ efforts in keeping up with fintech innovation, awarding them an average score of 2.66 on reverse scale of 1 to 5 (where 1=yes, 5=no).

Risk and compliance was highlighted as an area of opportunity for fintech firms and banks to improve through technology. About 75% of respondents highlighted fraud and error prevention is the standout key regulatory and compliance need followed by transaction reporting and anti-money laundering programs.

While the report found no region plans to allocate more than 10% of new business investment towards fintech developments, corporates across China, Hong Kong and Singapore were most committed, forecasting between 8.5 – 9.8% of their new business investment would be allocated to new fintech products. 

In contract, enterprises in Australia, France and the US expect new business investment of around half their Asia-based peers, reporting just 3.9-5.5% will be directed towards new fintech solutions.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.