Collaboration between banks and FinTech companies is now critical to ensure their survival, according to a study from banking software firm Temenos.

The report states that with the EU’s second Payment Services Directive (PSD2) and open architecture framework set to come into force next year, regulation may tip the scales between banks and FinTechs for customer loyalty.

In a survey of 200 senior retail banking executives, the banks cited regulation as the most impactful trend in the coming years: bank capital requirement regulation (54 per cent), bank product suitability regulation (53 per cent), product design and transparency regulation (47 per cent), and regulatory fines and recompense orders (30 per cent).

The report also highlighted the importance of cyber security measures for banks and FinTechs, with a lack of system preparedness (65 per cent) and the ability to maintain data security (60 per cent) cited as the biggest concerns.

The possibilities of blockchain are still not fully understood, according to the study; 34 per cent think of it only as a tool to reduce financial crime, while another 34 per cent see its greatest value in increasing the speed and reducing the cost of back office functions

David Arnott, chief executive officer at Temenos, said: “The struggle between banks and FinTechs for customer loyalty is not new, however new regulation and technology change is now driving a shift towards collaboration. Banks with a modern core and an open and flexible architecture will be best placed to seize the advantage and thrive.”

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