Faced with the biggest transformation in the industry’s history, many banks still opt for the greenfield route ahead of fintech partnerships, writes Brian Caplen.

The message has been hammered out loud and clear on countless occasions. Banks’ ability to innovate is limited. They are too bureaucratic. They don’t have an entrepreneurial culture. This means they need to partner with fintechs to be on the cutting edge in their digital transformation.

Yet in a survey of more than 400 global retail bankers, conducted by the Economist Intelligence Unit on behalf of Temenos, 36% said their top choice innovation strategy was to build a greenfield digital bank. This was followed by 31% who opted for investing in fintech start-ups and 31% who favoured open bank hub initiatives allowing customers to connect their bank data with third-party providers.

What is interesting is that bankers are very much in the vanguard of digital thinking when it comes to embracing open banking and in their desire to create ecosystems with both their own and third-party products on board – 41% said this was their preferred digital business model. But they are less keen on collaboration and openness when it comes to the build-out.

The enthusiasm for the ecosystem is no doubt a response to the potential disruption to the industry from 'Big Tech'. Banks had hoped that Big Tech would be dissuaded from moving too far into their space by a combination of reputational risk and regulatory hurdles. But this has now turned into an acceptance that Big Tech is going to mount an assault anyway and may even do it in partnership with the fintechs – 22% of respondents recognised Big Tech/fintech tie-ups as a threat.

Banks now see that they must be able to match the prowess of the BigTech firms but perhaps because of regulation and local market knowledge they often feel more comfortable walking alone rather than hand in hand.

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Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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