FinTechs, particularly larger ones with more sophisticated requirements, are “underserved” by their current banking partners, according to new research from ClearBank.

The report found that a third of FinTechs have faced regulatory intervention due to agency banking resiliency failures.

The study, which surveyed 100 FinTechs across the top five leading FinTech markets in Europe – Lithuania, the Netherlands, Sweden, Switzerland, and the UK – also revealed that one in 20 FinTechs have suffered a service outage caused by their partner bank.

A further 15 per cent of FinTechs had their new product launches delayed by agency banks, while 48 per cent of FinTechs said they don’t think they receive Banking-as-a-Service.

Although over half of FinTechs see banks as mission-critical partners which help them maintain regulatory compliance, as well as unlock new revenues and reduce operational expenditure, a further 49 per cent said they don’t believe their agency bank has helped their business.

A quarter of FinTechs are not satisfied with their agency banking services especially access to payment rails like CHAPS (38 per cent) and operating accounts (35 per cent).

The report findings show that many FinTechs think their bank is more focused on offering loans and debt products than on facilitating payments and helping them manage their accounts.

The research also demonstrates that the bigger the FinTech becomes, the less well served it is.

While 71 per cent of larger FinTechs use a traditional High Street bank for agency banking services, many surveyed said they were missing out on important elements of agency banking.

50 per cent of larger FinTech respondents said they don’t have reconciliations logged in real-time, just 30 per cent are offered access to real-time payments, 66 per cent require at least two to three days to open a customer account, and 42 per cent are ‘indifferent’ about their agency banking partners.

Many FinTechs want more from their partner bank, but they are often hesitant to switch. 44 per cent of FinTechs stay with their agency bank because “switching looks painful.”

“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, chief executive, 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.”

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