FinTech as an industry is considered a disruptive force when seen from the perspective of traditional financial institutions, and on the other hand the old-aged global financial industry is seen as an inevitable challenge in the path of ambitious and increasingly popular FinTech companies. Although this notion has led to a mild friction between those two entities, the developing scenario today is pointing towards mutually beneficial collaborations and successful partnerships between the digital and physical finance worlds, especially after COVID19 pandemic.
At the core of these potential partnerships is innovation. Financial powerhouses and FinTech startups alike are hungry for innovation in an increasingly demanding world, as consumers come to expect more from their banks, credit unions and similar institutions in less time than before. This high demand for faster and more convenient financial services like cashless payments, instant transactions and much more can be met through a collaborative environment, as opposed to one suggesting of either entity replacing the other.
Conventional financial institutions are coming to realize that the way forward is through partnering up with FinTech companies that fill specific gaps and fulfill specific needs for each of those FIs. Consumers are increasingly tech-savvy with rising access to connectivity on various devices, and expectations are at an all-time high when it comes to secure, fast and reliable access to bank accounts on the go.
Once financial institutions have seen the benefits of having a FinTech partner and have accepted that working together with them leads to better positioning in the market, whether a true partnership, a temporary one or otherwise, a new challenge presents itself: Finding the best FinTech company to join forces with can be a tedious process in and of itself, and the sheer amount of FinTech companies available in the industry today makes it even tougher to find the best fit.
Establishing a partnership in theory is the easy part, and then come the challenges of implementation and proper goal alignment of the entity as a whole. The right questions that need to be asked should be based on the strategic needs of both the institution and its customers, and all opinions should be considered and consolidated into a short list of Fintech prospects as a first checkpoint. Financial institutions and FinTech companies could aim to expect reasonable satisfaction in the beginning of the relationship, and then work towards achieving a more mutually favorable situation, as the symbiosis between these players develops into a smooth and successful endeavor.
As the merging of the two industries unfolds across the global market, competition intensifies and time is of the essence. FinTechs are usually accustomed to a faster pace of doing things due to their digital nature, which could prove challenging when compared to the classic finance industry that relies more on a traditional, slower pace within its strict regulatory framework and accompanying entities. However banks have also been exerting more effort and investing more in the digital sector of their operations lately, and customers are getting more and better digital products and services from their local banks. This trend could facilitate the partnership with FinTech companies because the growth of financial institutions’ digital presence means that the gap is narrowing, and that the union of the two will be more seamless when compared to FIs that haven’t ventured into digital yet.
On the other hand, banks and financial institutions have the upper hand when it comes to the most prominent advantage; their legacy. FinTech players have growth as their ultimate challenge, an aspect of FinTech that several popular e-finance providers are struggling with at different levels, despite their success. FinTechs need to overcome a fiercely competitive market to achieve meaningful growth in the first place, and that gets harder when compared to their traditional counterparts and potential new partners.
Another area where FIs have leverage over FinTech companies is regulatory compliance with financial authorities’ rules and regulations. FinTech concepts and ideas might be innovative, but they still need to adhere to agreed-upon principles by the financial industry, acting as an entry barrier to the market as well so young FinTechs have to comply to current financial regulatory policies in order to operate.
So in order to try and minimize the impact of these fundamental differences, FIs should research thoroughly to find their right FinTech partner with the right offerings and strategic vision. Several online directories and resources are available with reviews of FinTech companies and vendors by financial experts and leading figures of the industry. Institutions can also inquire at incubators and accelerators that have graduated several FinTech companies from their programs and get more valuable, hands-on information.
The team behind leading the integration of the FinTech product or service into the institution’s operations needs to be a highly competent one, featuring a well-balanced distribution of business representatives, financial and digital experts to guarantee that all aspects of the core business are covered and represented. These professionals that drive the first stage of the implementation will pave the way to the partnership’s roadmap and ultimately define their progress and achievements, also minimizing risks of time and money loss during the transformation.
Eventually, processes will align and the common vision will be made clear. FinTechs will continue to create innovative solutions while gaining access to a wider customer base, and financial institutions will benefit from new technologies and communication channels that elevate their operations to the next level.
The seamless integration of these strengths and weaknesses that both of these industries have is where the partnership will bloom, and considering they are branches of the same tree, the perfect relationship for perpetual success is achievable as we enter the increasingly-digital future of finance.
FinTech partnerships, disruption, innovation, digital banking, FinTech startups, FinTech partners, integration, traditional finance, financial institutions, FIs, Coronavirus, COVID19