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US Banks Look to Silicon Valley as Fintech Booms

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.”

Fraedom works with banks globally to enhance their commercial card programmes and give their customers a better way to manage business spend through its easy-to-use spend management system. The platform helps banks to differentiate their service, drive card uptake, increase card spend and improve customer retention.

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