Digitization within the financial industry continues to grow and becomes more essential for survival. So, it is no surprise that banks are increasingly partnering with fintechs to fulfill the new demands of the sector. Businesses are aiming to outsource their fintech services rather than developing them in-house and that is where FinLeap answers industry demands and increasingly popular trends.
Together with PwC, FinLeap has published a whitepaper to explore current outsourcing trends for banks in Germany and the new providers entering the market in relation to the financial services industry. The partnerships from the established banks and outsourcing partners range from relationships with corporate companies such as IBM or Google, start-ups, and BaFin licensed fintechs. And the results show increasing use of outsourcing within the financial industry in order to drive efficiency and flexibility in traditional financial services business models. Flexible fintechs, who along with financial institutions, are taking the approach of co-operation as oppose to competition.
The paper identifies an emerging form of outsourcing: Full-Fledged Outsourcing, where BaFin licensed fintechs, who are able to overcome the regulatory hurdles, are successful. These players are able to cover many more functions (e.g. product development & operations up to regulatory reporting & risk management) than typical outsourcing providers, due to holding the same banking licence as their cooperation partner. Our very own venture, solarisBank, “a technology company with a full banking licence” is used as such an example. For instance ABN Amro, the second largest bank in the Netherlands, was able to launch a fully digital credit product in Germany together with solarisBank. Furthermore, solarisBank has just closed a very successful financing round, proving the success and growing demand of this outsourcing model.
Here’s a hint at our findings: The pressure on banks is going to continue, not only from domestic competitors, but also increasing international competition. Large technology companies, challenger banks and “state-of-the-art” fintechs are questioning and pressurizing traditional business models and entering the financial services sector with more attractive products. Customers will choose the most appealing banking and further service offerings, which fulfil their needs and are more convenient. Therefore, to be “fit for survival”, banks have to find new ways to generate profitable growth and strengthen their efficiency.
Click here to find out exactly what banks and the financial industry are doing to stay competitive in this increasingly crowded market.