CFOs and treasurers are ready to switch banks if their current financial service providers are not able to keep up with technological innovation, said East & Partners that recently released the results of a survey.
The survey results are based on direct interviews with 737 corporate treasurers and CFOs from the top 100 firms across eight markets including Australia, China, France, Germany, Hong Kong, Singapore, the UK, and US, according to the research firm.
The survey report, titled Financial Technology and the Corporate, indicates that about 13% of corporates have either partially or fully switched banks in direct response to newly released financial technology solutions, with a further 20 percent currently considering doing so.
China, Hong Kong, and Singapore more bullish than other regions
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%). Meanwhile, less than 5% of French, German and US based corporates report having changed providers off the back of new fintech releases.
The Asia markets of 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.
Treasurers: Fintech firms to take market share away
In addition, 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 United Kingdom, 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.
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 indicates yes and 5 no.
Interestingly, enterprises in the markets reporting the lowest instances of switching (France, Germany, US) also reported that banks were not keeping up with fintech innovation. Overall, those regions scored banks between 2.69 to 3.11, while firms in China were most positive at 2.11.
Areas that financial services need to improve through technology
Risk and compliance was highlighted as an area of opportunity for fintech firms and banks to improve through technology, according to the report. Globally, more than 27% of corporates nominated it as an area of focus, led by France (37.8 %) and Germany (33 %). The research also found that Cross Border Payments & FX (22.3 %) and treasury functions were also high on corporates’ radar for improvement.
Investment allocation for fintech: Less than 10%
While the report found no region plans to allocate more than 10 percent 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.
“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 added.