Banks and fintechs should collaborate rather than compete, says Deutsche Bank, in its new whitepaper ‘FinTech 2.0: Creating new opportunities through strategic alliance’. The whitepaper explores how fintechs and banks can work together, leveraging their respective strengths to revolutionise the B2B payments space and create sustainable business models in today’s digital era.
Against a challenging backdrop of low risk appetites and numerous regulatory constraints, Deutsche Bank examines the market drivers that should encourage banks and fintechs alike to pursue collaboration over competition, if they are to turn creative concepts into functional solutions and safeguard their ability to continue to innovate.
According to the whitepaper, the fintech culture and role as disruptor can be used as an advantage for banks, with fintechs’ position outside of bank walls providing the necessary gateway to innovation. Partnership projects can exploit a “sandbox” approach to experimentation – with the freedom to test new ideas away from banks’ infrastructural and cultural constraints – and can sidestep internal obstacles to innovation, such as over-familiarity with antiquated payment methods, or the parameters imposed by investment or regulatory pressures.”
“Two of the greatest difficulties fintechs face – particularly in the B2B market – are access to a sufficient client base (of corporates and their treasurers) and the ability to successfully scale-up a functioning solution for mass usage,” the whitepaper says. “While nimble and innovative, these corporates often lack the necessary global reach, processing infrastructure, financing capabilities and client-knowledge and experience to translate an in-demand market solution into a viable vehicle for long-term growth.”
The whitepaper says that the B2B sector holds even greater potential than the retail advances so far, with online sales estimates for B2B revenues in 2020 double those of B2C. Innovation in this sector will be driven largely by CFOs and treasurers, who, accustomed to the prevalence of technology in their personal lives, now expect the same capabilities and level of convenience for their corporate cash management operations.”
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