New research out from payments behemoth Fraedom, a UK-based global B2B services company specializing in travel, payments and expense management, offers some interesting insights into what technology holds for the future of the banking industry globally. Being US-centric, we know many are not familiar with the firm, but we learned that since its launch in 1999, Fraedom has managed over one billion transactions through its web-based platform, which translates to just under $270 billion (USD) in transactions to date. Fraedom’s technology has been used by over 173,000 organizations. The company boasts offices in the UK, US, Canada, Australia, New Zealand, Singapore and Hong Kong and manages transactions for a total of 5.7 million employees worldwide. Read up folks, and let’s remember the US is not the only international epicenter for fintech.
More than eight out of ten (82%) US commercial banks have pledged to increase fintech investment over the next three years as the sector continues to expand, with 86% of senior managers planning an imminent rise in investment
The in-depth research commissioned by global Fintech provider Fraedom, polled decision-makers in commercial banks including shareholders, middle managers and senior managers.
The study also found that more than seven out of ten (71%) respondents believe that the rise of technology within commercial banking threatens traditional one to one bank and customer relationships. This disruptive impact was felt greatest by shareholders (95%) as opposed to 67% of middle managers.
Kyle Ferguson, CEO, Fraedom, said: “The research reflects that a further fintech boom is on the horizon, which is great news for Silicon Valley and beyond. It’s important that commercial banks make the right selection when choosing a fintech partner. It’s equally vital that a trusted partner understands the challenges of local markets and how technological advances can support financial service offerings. Banks should not feel threatened by technology, working with a fintech partner can help provide the customer with a better service which in turn can strengthen relationships.”
The poll also discovered that 70% of decision makers within US commercial banks believe these banks are much more cautious in adopting new technologies than their retail counterparts. Intriguingly, this figure was significantly less in a UK survey, where just 56% of respondents thought that this was the case.
The most common reason found for commercial banking lagging behind retail is that ‘the market was settled and there was no strong competition from newcomers until now’ which was supported by 37% of respondents. Interestingly, the second most popular option was ‘there was no demand from customers to innovate’ supported by 26% of respondents.
“It’s time for the commercial banking sector to be less restrained when adopting new technologies, especially when fintech firms can enhance their service offerings by outsourcing operations such as commercial cards,” adds Ferguson. “When technology is quickly embraced, the gap between commercial and retail banks will narrow and the collaboration between banks and fintech providers will help boost the future of finance, benefitting consumers and the entire US banking industry.”