Banks' fintech fight with apps heats up

Consumers' shift to digital offerings increase, as more favor fintech products over banks, industry survey says.

The banking business is heading to the smartphone at a growing pace, and Wall Street firms are fighting off a swell of financial technology start-ups targeting digital consumers.

The pace of change continues to accelerate, according to more than 90 percent of executives surveyed for a banking report prepared by financial consultant Capgemini and nonprofit Efma and released Monday.

It's showing up in their earnings as well.

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Bank of America reported a 4.8 percent increase in mobile customers from the fourth quarter of 2015, rising to 19.6 million users in the first quarter of this year. Paul Donofrio, the bank's chief financial officer, said it was the most new users added in any quarter over the last three years. In JPMorgan Chase's earnings report last week, the bank revealed a 19 percent increase in mobile consumers year over year, growing to 23.8 million.

As banks add mobile users, making acquisitions of technology may be losing its shine. Less than 18 percent of respondents to Capgemini's retail banking executive survey said they aimed to acquire fintech firms or technology.

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"Most have come to the conclusion that they're not worth buying," said Bill Sullivan, head of global financial services market intelligence at Capgemini. "There are not many fintechs out there looking to replace banks."

But it remains to be seen how long big banks can keep up with the digital revolution. The Capgemini-Efma survey said less than 13 percent of the bank executives interviewed said their core systems will support a broader digital ecosystem in the long run.

For banks challenged by prolonged low interest rates, the ability to at least match fintech companies' offerings is increasingly important. A majority of nearly 16,000 bank customers polled across 32 countries said that they would likely refer a fintech product they used to others. Just 38.4 percent said they would do the same for their bank, the survey said.

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A wild card for the budding industry could be dealt by the Treasury Department's Office of the Comptroller of the currency, which is weighing how to establish regulations for digital businesses.

Though they're trimming headcount elsewhere, banks are staffing up as more customers access accounts via smartphones instead of branches. On JPMorgan Chase's call, CFO Marianne Lake said rising headcount in the bank's consumer and community banking division could be attributed partially to increased staffing on the digital and technology side.