Finastra research reveals that fintech partnerships are a critical part of a bank’s strategy, with 3 in 4 global banks planning to connect with an average of 3 fintechs in the next 12-18 months. The largest proportion of respondents want to plug into a platform of integrated fintech solutions (56%), with only 6 per cent preferring to build capabilities in-house. This is particularly prevalent in Europe, where this is 73 per cent and 5 per cent respectively.

The research, conducted by East & Partners, finds that the core motivations of global respondents to integrate fintech solutions is reducing operational costs (46%), deploying new technology with greater ease (43%), and aligning more closely with evolving compliance needs (37%).

Digital transformation remains a priority, with global institutions investing an average of US$367.6 million in transformation in 2023. European banks are investing substantially more, at an average of $886 million. However, while global respondents say they have digitized 47 per cent of their digital processes on average, only 1 in 5 feel they are ahead on their digital journey (20%), and 1 in 2 (54%) believe they are behind. This is substantially lower in the Middle East, where only 12 per cent feel they are ahead and 62 per cent say they are behind.

The research was conducted amongst 783 interviewees at 260 banks in the UK, Europe, the Middle East, Asia Pacific, and the Americas, as well as 393 interviews with North American community markets banks and financial institutions. The findings explore the current appetite in the marketplace for fintech investment and integration, and Environmental, Social and Governance (ESG).

Other insights include:

Banks are using fintechs to enhance the customer experience – when searching for a new fintech partner to improve their customer offering, global banks are prioritizing online portals / banking channels (55%), transparency across processes, such as providing the customer with real-time updates on onboarding progress (45%) and improving end-to-end connectivity and value-add services (44%).

Organizational ESG priorities vary globally – reducing their own carbon emissions is the primary ESG goal for 49 per cent of global banks, followed by board and management alignment on sustainability initiatives (46%). These stats are similar for banks in the Middle East. In Europe, a larger proportion (74%) are prioritizing reduction in carbon emissions, followed by settling on definitions and terms (67%). In APAC, the main priorities are securing longer-term funding internally (63%) and board and management alignment on sustainability initiatives (61%).

Appetite for green lending continues to soar – 3 out of 4 global banks plan to increase their exposure by more than 16 per cent in the next 12-18 months or more. The main barriers banks face in relation to ESG are:

The lack of ESG products being delivered by fintechs that banks can offer to corporates (40%).

Keeping pace with rapidly evolving regulatory compliance requirements (20%).

“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” said EVP Lending at Finastra, Isabel Fernandez. “Our survey demonstrates the recognition from banks that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs.

“The research also shows that ESG is continuing to expand throughout a bank’s internal operations and external offerings. At Finastra, we champion the idea that finance is open. Whether through our open platform for collaboration and innovation – FusionFabric.cloud – or our belief in open technology, mindset and culture, we are helping banks future-proof their offerings and drive a better future for the communities they serve.”

“Major inflection points in recent years have had, and are still having, a dramatic impact on how financial services is evolving,” said East & Partner Global Head of Markets Analysis, Martin Smith. “This is forcing institutions to reconsider how they manage risk, increase their agility, and fast-track innovation to evolve with new demands. We partnered with Finastra to better understand and showcase how banks are adapting to this environment. 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 great benefits for financial institutions and their customers, today and in the future.”.

Survey methodology

East & Partners conducted 783 interviewers, including 250 interviews with banks’ ESG heads, at 260 major banks of multiple tiers globally, coupled with 393 North American Community Markets banks.

The markets covered are: Kenya, Nigeria, South Africa, Tanzania, Hong Kong, Singapore, Japan, Australia, Germany, France, UK, Nordics, UAE, Gulf States and North America, including North American Communities Markets.

The respondents are Corporate and International Banking (CIB) Heads, CTOs and Heads of ESG within the banks.

The average asset size of the banks surveyed is $344.5 billion.

All interviews were conducted directly over Teams or Zoom by an accredited East interviewer. Fieldwork was executed over an eight-week period concluding in January 2023.