According to a new report by ClearBank, the cloud-based clearing bank, 33% of fintechs have faced regulatory intervention due to agency banking resiliency failures.
As well as this, it was also discovered that over 50% of fintechs see banks as ‘mission-critical partners’ which help them maintain regulatory compliance, unlock new revenues and reduce operational expenditure.
The report ‘How well are fintechs served by banks? The state of agency banking across the UK and Europe’ seeks to gain a greater understanding of how well served European fintechs are by their banking partners.
“Every fintech needs to work with an agency banking partner and the nature of this relationship is coming to define our industry,” said Charles McManus, CEO at ClearBank. “These partnerships are critical, yet as they stand agency banks have not been meeting the needs of fintechs. Firms are losing out.
“There is also a reputational impact and the potential for hefty fines as operational resilience becomes an increasingly bigger priority. Providers need to do better and unless things change, the fintech sector will not reach its full potential.”
The report reveals fintechs, particularly larger fintechs with more sophisticated needs, are underserved by their current banking partners. The scale of these issues, including severe outages and operational failings, are not only detrimental to the success of the fintech industry but the financial services sector as a whole.
The research is based on an independent survey of 100 fintechs across the Netherlands, Lithuania, Sweden, Switzerland and the United Kingdom. These are the five leading fintech markets in Europe. The research aims to understand how well served fintechs are by their agency banks and the impact of agency banking services on fintechs.
Agency banking is when a fintech offers its customers a service that is provided and managed by a licensed bank as the “agent” of that service. Common examples of these services include access to payment rails like Faster Payments in the UK or the provision of customer accounts.