Legacy systems are preventing nearly two thirds (64%) of US commercial banks from developing Fintech applications, research commissioned by Fintech provider Fraedom has revealed.
Interestingly, 82% of the respondents that highlighted this concern were shareholders. Over half of those polled also noted a lack of expertise within banks as an important concern (56%), just ahead of limited resources (53%).
The study included decision-makers in commercial banks including shareholders and senior managers as well as middle managers.
Commercial banks outsourcing services to a Fintech provider is clearly a trend on the rise, with only 22% of US banks revealing that they do not outsource any payment services compared to 30% of their UK counterparts.
Kyle Ferguson, CEO, Fraedom, said: “This research highlights that legacy systems are standing in the way of US commercial banks developing Fintech applications. This in turn is resulting in certain services such as commercial card and expenses being outsourced by more than three quarters of banks. It is now recognised that Fintech firms can help banks overcome these technical issues and benefit from previously untapped revenue-making opportunities.”
The research also discovered a growing inclination among commercial banks to partner with Fintech firms. The main reason for this shift is to help bring new products to market faster, as recognised by 94% of respondents.
The second most popular reason given for partnering with a Fintech was that to attract ‘new customer segments’ supported by 82% of respondents, followed by 76% who said it was to help ‘differentiate themselves from competitors’.
“US banks are beginning to see the rewards of partnering with a Fintech provider, especially when helping to bring products to market faster.” Ferguson added: “Established Fintech firms can understand the technical challenges that banks are struggling to cope with in local markets and provide an easy yet very effective solution while often differentiating them from their customers.”