Cybersecurity risks remains a major hurdle to collaboration with fintechs, says Simmons & Simmons in a recent report.

The report surveyed 200 senior level respondents (30% at C-suite level) across five financial centres, including from 50 institutions in Hong Kong and Singapore.

“Our research demonstrates that cybersecurity concerns remain a major barrier to effective collaboration by fintech firms and financial institutions,” comments Melissa Chim, consultant at Simmons & Simmons.

Institutions in Hong Kong and Singapore report very high levels of interest in fintech, with focus on both external and internal investment. 92% of respondents in the two markets expect to collaborate with a fintech firm in the next 18 months.

The report highlights the following concerns for institutions in Hong Kong and Singapore:

M&A and Regulatory risk
• Almost two thirds (62%) of respondents report building in-house expertise to improve digital and fintech capability in recent years, while less than half (47%) consider consortia projects with other institutions to be effective in improving digital/fintech innovation.
• The acquiring of fintech firms or startups was a favoured approach by 100% of Singapore respondents and only 50% of Hong Kong respondents.
• 78% of respondents would need much stronger assurances of fintech firms' credibility in order to ‘hand over’ the regulatory compliance function, and more than 50% view transfer of large volumes of data to fintech companies as a potential threat.

Cybersecurity and the cloud
• 67% of Hong Kong respondents intend to increase their adoption of cloud-based services in the next 12 to 18 months, the highest figure globally.
• At the same time, 70% of respondents in Hong Kong and Singapore report that cybersecurity is the most significant risk associated with partnering with fintech firms.

Commenting on the results, Ian Wood, partner at Simmons & Simmons says, “It is clear from the research that large financial institutions view collaboration with the fintech start-up community as essential for innovation. However, in order to fully realize these opportunities work is required on both sides to structure investments so that innovation is not inhibited and to ensure the protection of customer data and comply with regulations.”