Financial technology experts say banks and the fintech industry must embrace “co-opetition” rather than direct competition to leverage the benefits of each others’ distribution channels and innovation.

Several fintech experts also predict that digital currencies, “blockchain” technology, data science and wearable devices will be the next major ­disruptive developments, but they could be used to better serve changing consumer desires.

“The future is not about one company winning. New commerce experiences are an additive to the current system and require multiple players to work collaboratively in order to serve consumer needs and adapt to technological developments,” says Libby Roy, the new managing director of PayPal Australia.

She told News Corp reporters this week that the US giant did not see banks as competitors, but rather another party with which to collaborate, like credit card firms.

The insiders say many in the fintech community believe they should be in direct competition with banks, but this may increasingly shift to more collaboration.

They claim that while fintech companies can adapt quickly and are not held back by legacy systems and processes, they lack the brand recognition and mass distribution of traditional outlets.

“Fintechs can often build products and services outside of the compliance, regulatory, governance and legacy IT system burden that the incumbents face and so can often deliver better products that deal with the needs of consumers and business much faster and at less cost,” said Lachlan Heussler, the managing director of lending platform Spotcap Australia.

“However, what fintechs make up for in superior products they often lack in distribution capabilities.

“Collaboration with the ­incumbents, who have established distribution networks, therefore makes a lot of sense.”

The head banks analyst at Macquarie, Mike Wiblin, warned that banks must join the fintech revolution and its drive for ­productivity or “face extinction, or at least marginalisation”.

“It is true that there are barriers to entry in offering the full banking product suite (such as a banking licence), however, that doesn’t mean that fintech players can’t team up with smaller banks or even apply for a licence themselves,” he said.

“In this sense, it is the oligopolistic market structure that is at threat longer term, something that should worry the big banks.”

For the future of fintech innovation, the experts say that ­payments and lending currently attract the most investment, but “wearables” will offer exciting ­possibilities in health, insurance, payments and cybersecurity and authentication.

They added that data science had the potential to disrupt financial services too, given its ability to deliver key individualised customer experiences.