# Banks face a four-fold challenge and the race is on: May collaboration win
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-02-27
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Tech Behemoths vs Traditional Banks: The Battle for Financial Services
Meta Description: Discover how traditional banks can adapt and compete against tech behemoths in the digital age, with insights from Ian Bradbury, CTO of Fujitsu UK &
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/banks-face-a-four-fold-challenge-and-the-race-is-on-may-collaboration-winhtml

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_By **Ian Bradbury**, Chief Technology Officer – Financial Services Business at Fujitsu UK & Ireland_

Last year, the [McKinsey annual banking review](https://www.mckinsey.com/industries/financial-services/our-insights/a-brave-new-world-for-global-banking) laid out in black and white what many have been talking about before: banks in the major developed markets must be wary of the finance ambitions of tech behemoths.

![Ian Bradbury, Fujitsu](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd270218-1-1736842961094-compressed.jpg)

Ian Bradbury, Fujitsu

Although for the past years the financial services industry has excelled at offering customers new digital services for engagement and interaction, as e-commerce giants eye up the sector, banks must think of new ways to adapt and compete.

If traditional banks continue to increase their efforts to explore the potential of robotics and automation, cloud and apps – to name a few – they could secure an extra £264bn of [profit over the next three to five years](https://www.financedigest.com/uber-rival-bolt-seeks-to-turn-profitable-next-year-ipo-in-2025.html "Uber rival Bolt seeks to turn profitable next year, IPO in 2025"), according to the same report.

As digital continues to reshape the business world, we have already seen tech companies enter new markets: Amazon, for example, has shaken up the [retail market](https://www.financedigest.com/retail-shelving-system-market-growing-at-a-cagr-of-8-8-through-2021-to-2031-persistence-market-research.html "Retail Shelving System Market Growing At A CAGR Of 8.8% Through 2021 to 2031: Persistence Market Research") with its acquisition of Whole Foods, which is set to further merge the tech and retail industries.

In the [coming years](https://www.financedigest.com/refrigerated-trailer-market-to-exhibit-increased-demand-in-the-coming-years.html "Refrigerated Trailer Market to Exhibit Increased Demand in the Coming Years"), this trend is likely to extend to the financial services sector.

**Why are tech [companies successfully](https://www.financedigest.com/key-ingredients-to-formulate-and-communicate-a-successful-company-ethos.html "Key ingredients to formulate and communicate a successful company ethos") entering other markets?**

Most [tech companies today](https://www.financedigest.com/getting-smart-with-the-school-run-how-todays-tech-can-safeguard-our-children-when-travelling-to-school.html "Getting smart with the school run: How today’s tech can safeguard our children when travelling to school") are primarily platform-based digital disruptors. The nature of their business model makes them agile data collectors who amalgamate large amounts of information – and increasingly look for physical networks, locations and products to [turn the data](https://www.financedigest.com/sterling-falls-vs-dollar-as-focus-turns-to-uk-data.html "Sterling falls vs dollar as focus turns to UK data") they hold into profit.

This means that collaborations between traditional companies and disruptors in various industries – including financial services – can lead to efficient, long-lasting partnerships that are equally [profitable for the firms involved and their customers](https://www.financedigest.com/uks-nationwide-to-pay-340-million-pounds-to-customers-after-profit-leap.html "UK’s Nationwide to pay 340 million pounds to customers after profit leap").

The tables turned when banks found a way to [join forces](https://www.financedigest.com/sordin-and-cardo-crew-join-forces-to-create-new-generation-of-smart-hearing-protectors-for-professional-teams-on-the-move.html "Sordin and Cardo Crew Join Forces To Create New Generation Of Smart Hearing Protectors For Professional Teams On The Move") with fintechs. For instance, a year ago seven European banks – [Deutsche Bank](https://www.financedigest.com/deutsche-banks-rollercoaster-ride-towards-more-stability.html "Deutsche Bank’s rollercoaster ride towards more stability"), HSBC, Natixis, KBC, Rabobank, Société Générale and UniCredit –agreed to develop a blockchain-based shared platform for domestic and international commerce for SMEs.This collaboration project proved that cross-sector collaboration benefits all.

Another great example of a partnership between banks and fintechs came in December last year, when a group of banks and fintech startups [backed a pilot project](https://www.financedigest.com/hm-backed-project-pilots-co2-capturing-aprons-at-stockholm-restaurant.html "H&M-backed project pilots CO2-capturing aprons at Stockholm restaurant") with Malawian tea farmers. Here they created a system that used blockchain technology to try to [create more sustainable supply chains](https://www.financedigest.com/how-to-create-a-sustainable-supply-chain.html "How to create a sustainable supply chain").

With this in mind, banks must [address their internal challenges](https://www.financedigest.com/rising-to-the-challenge-addressing-the-difficulties-of-pillar-2-reporting.html "Rising to the challenge: Addressing the difficulties of pillar 2 reporting") in order to fully capitalise on such opportunities.

**An evolving business**

The challenges [banks face today](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") is four-fold.

Firstly, banks must understand what they are not, and they are not [platforms where people go to for gratification like they would in the case of online shopping platforms or social media](https://www.financedigest.com/how-to-use-social-media-platforms-to-successfully-scale-your-business.html "How to use social media platforms to successfully scale your business"). [Customers go there to bank](https://www.financedigest.com/how-close-can-banks-get-to-their-customers.html "How close can banks get to their customers?"). Ultimately [banks may become](https://www.financedigest.com/becoming-more-than-a-bank-adding-value-through-financial-solutions-as-a-service.html "Becoming more than a bank: adding value through financial solutions as-a-service") platforms – and many banks are considering or even aspiring to this – but the journey will be long and difficult.  That’s why they have to progress on two fronts simultaneously: partner with other companies to help evolve their external offering and digitise internally to offer a more user-friendly experience.

This is tightly linked to the second point: bank’s [existing value is locked up inside ageing IT systems](https://www.financedigest.com/computerized-physician-order-entry-cpoe-systems-market-to-generate-profitable-avenues-for-existing-companies-as-well-as-new-players.html "Computerized Physician Order Entry (CPOE) Systems Market to Generate Profitable Avenues for Existing Companies as Well as New Players").

This prevents them from supporting new ways of working, being able to respond quickly to [changes in the marketplace or even create](https://www.financedigest.com/entrepreneur-investor-dale-w-wood-shares-how-he-is-using-his-funds-to-create-change.html "Entrepreneur & Investor Dale W Wood Shares How He Is Using His Funds to Create Change") new solutions.

By digitising their business, banks will be well positioned to combat the threat from the likes of Amazon, [Alibaba and Tencent](https://www.financedigest.com/china-regulator-says-alibaba-tencent-have-submitted-app-algorithm-details.html "China regulator says Alibaba, Tencent have submitted app algorithm details"), who have already made steps to prove themselves as chief digital threats to the banking industry.

Thirdly, [banks’ way of working and systems are less efficient when compared to businesses built from the ground up to be digital](https://www.financedigest.com/how-fs-organisations-can-enter-the-new-age-in-digital-banking.html "How FS Organisations Can Enter The New Age in Digital Banking") – like the big platform players.

Our [New Pace of Change](http://blog.global.fujitsu.com/financial-services-must-embrace-the-new-pace-of-change/) report found the majority of consumers believe interactions via traditional channels such branches, telephone calls, and letters will decline in the next five years and more automated interactions such as online banking, mobile applications or self-service kiosks and ATMs are predicted to grow.

Lastly, regulators want competition in the marketplace – and are willing to allow new entrants in to do this.

It’s imperative then that [banks think of ways they can collaborate](https://www.financedigest.com/why-open-banking-heralds-a-new-era-of-ecommerce-merchant-and-bank-collaboration.html "Why Open Banking Heralds a New Era of eCommerce Merchant and Bank Collaboration") with the new entrants, combining their experience and proven track record with fresh ideas and novel approaches to banking.

**Final thoughts**

The sector has the opportunity now to make the best out of collaboration– be it bank-bank or banks-fintechs – to reassure consumers that [digital services are here to make their experience seamless and secure](https://www.financedigest.com/maintaining-security-and-compliance-amid-digital-transformation-in-financial-services.html "Maintaining Security and Compliance amid Digital Transformation in Financial Services").

With the launch of initiatives such as Open Banking, the [importance of collaboration](https://www.financedigest.com/the-importance-of-a-proactive-and-collaborative-approach-to-reducing-contactless-fraud.html "THE IMPORTANCE OF A PROACTIVE AND COLLABORATIVE APPROACH TO REDUCING CONTACTLESS FRAUD") and knowledge sharing will only grow. And we look forward to seeing the historically traditionalist banking sector in the UK open up to introduce new [digital services](https://www.financedigest.com/constructive-digitization-to-let-the-remote-patient-monitoring-services-market-come-of-age.html "Constructive digitization to let the Remote Patient Monitoring Services Market come of age").


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