Financial services companies are turning to FinTechs for help developing their payments technology, according to research into digital transformation across the industry.

A report by law firm DLA Piper, based on a survey of 270 international financial services companies, revealed that 61 per cent of businesses plan to collaborate with FinTechs to improve their services officering, with 41 per cent viewing payments technology as the primary area for investment.

The survey also showed that the introduction of Open Banking and Application Programming Interfaces (APIs) are transforming the way financial services companies are engaging with FinTechs.

Nearly a quarter of those asked (24 per cent) said that APIs and Open Banking technology were the most compelling area for innovation, followed by payment platforms and infrastructure (18 per cent) and real time payments (15 percent).

The appetite for expansion into new technologies and business models, whilst retaining a core offering, is changing the model for engagement between incumbent financial services organisations such as retail banks and more nimble FinTech challengers.

The survey found that 29 per cent of financial services companies were planning to engage with FinTechs in a number of ways, including partnerships, collaborations or joint ventures.

A further fifth (19 per cent) plan to invest in FinTechs, either directly or through their corporate venture capital arm, and 13 per cent plan to acquire or buy FinTechs on an outright basis.

Martin Bartlam, international group head of finance and projects and global co-chair of FinTech at DLA Piper, said: "Payments technology is set for profound transformation in this new era for the financial services industry.”

He explained: “This concentration of investment in payments tech makes sense in today’s digital era, as it represents the interface between financial services and its client base, so is likely to be highly impactful on a number of levels, from customer experience to transactional efficiency."

He concluded that in order to achieve their ambitions of creating a digitally transformed proposition, driven in part by EU Payment Services Directive legislation, financial services companies are viewing “true and embedded collaboration with FinTechs” as the order of the day.

The findings come after a new report from the Association for Financial Markets in Europe (AFME) and PwC found that 95 per cent of banks still see cost reduction and efficiencies as the primary driver for investment in technology.

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