In the past, fintech and bank partnerships seemed extremely unlikely. Each looked at the other with skepticism and suspicion as their market share competition grew more intense. Recently, however, that stance has reversed as the financial services industry evolves and a more complex set of consumer demands often requires the services of both parties. As such, traditional banks no longer view fintech companies as invaders of their turf but rather as potential business partners.
Why Fintech Collaboration Might Be Essential for the Future of Banking
The way customers manage their finances changes continually as online banking platforms and digital documentation gradually replace their brick-and-mortar and print-form predecessors.
In turn, these technological advancements alter customer banking behaviors and increase their expectations. Four of those advancements include:
- Mobile device use: Most people own mobile devices for various purposes, including as a primary source for internet access. Banks that want to better connect with customers should consider providing mobile-friendly financial services.
- The introduction of the cloud: For many years, customers needed to wait until accounts settled overnight before they could view up-to-date account information. The cloud, however, allows customers to access real-time banking information and execute transactions from almost any location.
- Increased availability of online services: While many customers still visit physical bank branches, most have transitioned to online banking – particularly for everyday transactions such as fund transfers and check deposits.
- Enhanced security measures: Advancing technology also means enhanced malware capabilities, and banks must prioritize reinforcing security and protecting private data.
What do these four developments have in common?
They each require two areas of expertise, financial services, and financial technology, to fully meet client expectations. In these situations, the collaboration of banks and fintech can prove beneficial to both parties as they work together to meet shared objectives.
Benefits of Fintech and Bank Partnerships
While there are many benefits to these partnerships, four primary ones include:
1. Boosting Brand Reputation
If one of the partnering entities has an exceedingly positive reputation, that reputation can – by direction association – upgrade the other company’s standing with its customer base.
For example, suppose a bank partnered with a fintech company to introduce a new app to the market. In that case, that bank may benefit from the industry status and reputation of the fintech company within the technology industry, thereby enhancing the bank app’s credibility.
Collaboration also demonstrates to customers that both parties have their best interests in mind – not an intent to get a leg up on the other at the customer’s expense. This message can have the effect of boosting both companies’ reputations and gaining customer trust.
2. Simplifying the User’s Experience
Online financial service platforms and apps should be user-friendly and straightforward to navigate. When banks collaborate directly with fintech companies, their online services are augmented by the technological know-how of their business partners. Fintech companies typically have a solid grasp of what provides for seamless online customer experiences.
3. Broadened Consumer Base
The business partnership between banks and fintech companies is often an interchange for customer targeting. Each company will have access to the other’s customer base during the engagement, meaning that both can expand their target audience by tapping into previously unexplored consumer groups.
For example, a fintech company might discover it can connect with an older, less tech-savvy customer base because of its connection with a traditional bank. Conversely, a bank might find that the partnership helps attract a younger demographic who otherwise would not step into a physical branch location.
4. Increased Scalability
A partnership between fintech and banks promotes an added scalability component not necessarily available to either party in a stand-alone customer engagement. Partnered projects are adaptable and resizable to fit dynamic customer needs.
Types of Fintech and Bank Partnerships
Successful partnerships typically require some amenable give-and-take because one company provides something that the other cannot.
Bank and fintech partnerships are no different. Fintech companies are typically better positioned for tech-heavy services such as point-of-sale (POS) transactions, while traditional banks offer regulatory compliance and more substantial knowledge of financial rules.
Several different categories of partnership exist, depending on the product or service on offer. Three potential relationships include:
- Digital Banking: Traditional banks can partner with “neobanks,” otherwise known as “challenger banks,” to provide digital checking and savings accounts to individual consumers and businesses. Often these neobanks include services that traditional banks do not offer, such as online-only services and rounding up transactions and automatically saving the difference.
- Personal loans and credit cards: Consumers who are otherwise unable to secure a loan from a traditional lender may turn to a bank/fintech financial product that offers installment loans and credit cards.
- Debit and prepaid cards: Some partnerships include providing debit and prepaid cards to customers. These card programs often target consumers not affiliated with a traditional financial institution.
Skeps: Promoting Banking and Fintech Partnerships
Fintech and bank partnerships are essential for the future of both the financial services technology industries.
Fintech and bank partnerships can better address ongoing changes in customer behavior brought about by advancing technology. They can use their combined forces to capitalize on the higher levels of trust customers have in digital financial services that incorporate the benefits of both parties.
Skeps platforms provide you with the financial technology necessary to create simplified, streamlined consumer lending services that help build customer trust. To learn more, request a demo, email us at email@example.com.