Historically, traditional players have held and defended a competitive edge for decades. However, in recent years new digital-first businesses have stolen the spotlight and gained greater market share. Harnessing the power of mobile, AI, blockchain and cryptocurrency, these companies have transformed the user experience and made it easier for consumers and businesses to access a growing number of financial services, anytime and anywhere. With new standards for innovation and customer experience being set by fintechs, traditional FS incumbents are increasingly under pressure to launch their own digital services and technologies, or risk haemorrhaging customers.
From ‘us vs. them’ to ‘us and them’
According to Accenture, new entrants to the banking sector are now amassing up to one-third of new revenue. Unsurprisingly, this has led to many traditional players feeling threatened. An executive survey last year found that nearly 80% of top executives feared their firms were at risk of disruption and displacement from digital-first fintech competitors. It seems that this anxiety is for good reason. According to Gartner, 80% of heritage financial services will disappear by 2030, if they fail to adapt to changing customer behaviour and embrace digital processes.
So, what can traditional financial institutions do to ensure they survive? Traditional firms must embrace fintech companies as partners, rather than view them as the competition. This type of partnership provides an abundance of opportunity to remain relevant, plug the gap in their service offerings and ultimately reach more customers. In recent years, especially in a new era of Open Banking, players from both sides of the fence have realised that forming alliances and proactively collaborating may be the best path for long term innovation, growth and customer retention.
The benefits of these partnerships are plentiful for both sides. For traditional institutions, they can tap into the agility and technical knowledge that fintechs bring to the table, in order to streamline and enhance their offerings, provide a better customer experience and mitigate risks. Some banks have already responded to this trend by partnering with challenger banks. One of the first was Metro who formed an alliance with online P2P lending company Zopa a couple of years ago. Many others have since followed suit. A recent study found that more than 50 percent of banks say they are actively searching for acquisitions, partnerships, and accelerators to access new technology. What do the fintechs stand to gain from teaming up with their more established banking peers? Access a loyal customer base, financial backing, as well as regulatory expertise that has been honed over decades.
Colocate to innovate
To support collaboration between FS firms and fintechs, having the right infrastructure in place is fundamental. Colocating in a densely connected data centre with an established financial services community allows businesses to capitalise on direct connections to a range of pre-existing partners, suppliers and customers in the data centre, ensuring high-performance collaboration, low latency connectivity and endless innovation opportunities.
Interxion’s London financial services hub of over 300 financial services participants is one of the most established data centre communities in Europe. Positioned just a stone’s throw away from Square Mile, Silicon Roundabout and Tech City, and with access to facilities across Europe, this makes it the ideal location for any FS business that wants to securely house their data whilst also rubbing shoulders with the digital elite. It also offers private access points to the world’s leading cloud platforms, such as AWS and Microsoft Azure, which enable businesses to build and manage links to multiple clouds through a single, secure connection.
To find out how we can help you benefit from high-performance collaboration, get in touch.