How FinTech-Bank Partnership Can Redefine Digital Banking

Date:

Share post:

As the digital payment ecosystem evolves, banks recognize the importance of partnering with FinTech companies. However, many of them have yet to realize the value of these partnerships fully.

Why Must Banks and FinTech Partner?

Banks consider FinTech to be disruptors in the financial sector. But that point of view is shifting with the rise in e-payments and digital financial service models, prompting banks to automate their processes.

Rather than expanding their branch system, banks are now focusing on developing technically advanced services to enhance customer acquisition and retention.

By collaborating with FinTech, banks can offer better online services. It will also help align with both the regulatory changes and customer-centric digital ecosystems.

Banks can use FinTech’s expertise to build strong relationships, comply with regulations, and create innovative financial solutions.

Ultimately, FinTech-bank collaboration will bridge the gap between legacy and digital finance to kickstart partner-centric financing.

What are the Key Drivers of FinTech-Bank Partnerships?

  1. Bank Reputation

Banks have long-term great market reputations. With effective collaboration, FinTechs can benefit from the bank’s stature and quickly build a loyal customer base.

  1. Digital Innovation by FinTechs

Digital innovations and payment solutions digital banks offer are changing how customers act. The FinTech-Bank helps them both to sustain the change and grow together.

  1. Customer Base

The collaboration will help both parties to tap into each other’s existing customer base. This can enable them to target an untapped segment of customers and broaden their market demands.

  1. Budget

Banks have massive budgets, which FinTech can use to improve their tech and customer-centric services. Moreover, FinTechs can instil newly developed services into the bank’s system and help them scale and become a differentiator in the market.

  1. Compliance 

FinTechs can significantly benefit from all the legal experience around regulatory fortes, which banks are skilled in.

What are the Fundamental Principles for a Successful and Responsible Fintech-Bank Partnership?

A successful Fintech-Bank partnership has strict controls and governance processes, a strong oversight relationship. Its strength together is that it prioritizes positive customer outcomes. These fundamental principles are essential for a successful and responsible collaboration.

  1. Compliance and Risk Management

Compliance and risk management play a vital role in the partnership. FinTech leaders must foster a culture that prioritizes compliance.  They also need to ensure that this mind-set is reflected in the company’s investments and development efforts.

For instance, Coastal Community Bank collaborates with Bluevine, a FinTech that focuses on fulfilling the banking needs of SMEs in the US. The reason for this partnership is Bluevine’s compliance approach. The approach aligns with regulatory standards and expectations and their shared goal of supporting underserved communities.

  1. Innovative Mindset

As per a recent report by Plaid, “The FinTech Effect 2023,” 90% of FinTech users say FinTech has helped them in some way.

  • 42% said it helped them save money
  • 56% said it helped them save time
  • 48% said it has helped them feel more in control

FinTech firms bring a customer-focused approach to banking, prioritizing the needs and preferences of customers. Banks should be open to adopting customer-centric innovation, while FinTechs need to be mindful of their partners’ requirements.

Strong partnerships will help both use each other’s expertise to provide the end user with a great experience. Hence, innovation is essential for success, and a strong partnership will help ensure that.

  1. Transparency and Accountability

Plaid's-report-also-states-that-51%-of-customers-want-FinTech-apps-to-help-them-be-more-

FinTech firms must comply with consumer financial protection laws and regulations when working with their bank partners.

These regulations include anti-money laundering, credit reporting, debt collection, privacy, treatment, and electronic fund transfers. For instance, if a FinTech collaborates with a bank to offer loans, they must adhere to fair lending requirements.

  1. Digital Technology

84% say they have benefited from using tech to manage their finances, states Plaid’s latest report. During the pandemic, the Cloud became a critical facilitator, and the FinTech industry used it thoroughly.

Cloud-based FinTech tools have transformed the way customers manage their finances. Using the power of the Cloud, these tools have enabled customers to access their financial data anywhere, anytime.

They have also made it easier for customers to track their spending, create budgets, and manage their investments. With these tools’ help, customers can make more informed financial decisions, and have greater control over their finances.

Also, cloud-based FinTech tools have made financial services more accessible to people who previously may not have had access to traditional financial firms.

In addition, the FinTech industry is enhancing the banking sector by incorporating Blockchain into its operations. With the help of the Blockchain, banks can have complete control over all their online transactions and data, eliminating the need for third-party integration.

Furthermore, Blockchain is now being used to secure assets and decentralize functions. This helps prevent fraudulent activities, phishing attacks, and social engineering attacks and protects online payments.

Tradeshift, a business commerce platform, partnered with HSBC to develop a simple digital platform. The platform enables firms to manage their global supply chains. It also helps them streamline working capital requirements from any device. While this partnership generates significant revenues for both parties, it facilitates international trade processes.

Moreover, when a FinTech company collaborates with a banking services company, the bank can provide its customers with helpful web and mobile app features and functions.

With AI, chatbots, and virtual reality, banks can now enhance their online interactions to provide a smooth banking process. Seamless customer service and mobile app services that expand banking modules create options for customers to use from any location.

  1. Data Security

Ensuring the sensitive data is safe and secured from any unauthorized access or breaches is crucial.

FinTech tools are designed with extra layers of security to protect private data from data breaches. While banking and financial operations strive to comply with security and privacy regulations, integrating FinTech tools helps keep data secure from potential threats.

Why do Banks Struggle with FinTech Partnerships?

Banks expect highly from what FinTech partnerships can deliver. But, the partnership lifecycle has some challenges. Partnerships are adversely affected due to poor go-to-market strategies or scalability issues. These challenges are often aggravated by a lack of structure and guidance around the purpose of partnerships and implementation. Here are a few key pain points.

  1. Governance Framework

The lack of a defined process for how partners interact with the bank and achieve strategic goals can drive performance.

  1. Operational Alignment

Lack of proper operational alignment makes it hard for banks to achieve strategic objectives and win organizational buy-in.

  1. Partner Selection and Onboarding

It is challenging to identify and prioritize partnership targets. So, it is essential to consider the prospective partner’s reputation, technology strength, and scalability to ensure the right choice is made. At the same time, legacy architectures, inefficient approval processes, and lack of support can prolong onboarding.

Also Read: FinTech in Banking: Technologies Making Banking Easier

  1. Partnership Value

Most banks do not possess the requisite business models and metrics to capitalize on partnerships fully.

How Can Banks Enhance the Value of Partnership Value?

The increasing trend of FinTech partnerships has led many banks to search for a more professional and agile approach to managing their pain points. Hence, creating a partnership framework can help banks enhance the value of the partnership.

Here are some key actions.

  1. Aligning Strategy and Governance

A process that ensures partnerships align with and support the bank’s broader enterprise strategy can lead to success. Developing a governance structure to guide the actions of stakeholders can help the company achieve its objectives.

  1. Understanding Market Opportunities

Assessing market needs, trends, and the competitive landscape can help target growth opportunities and strategy development. Benchmarking these findings against the bank’s internal capabilities can also be helpful.

  1. Assessing Partner Readiness, Partner Identification, and Selection

Conducting a partnership-readiness assessment can provide actionable insights into two critical areas: the operational maturity of the bank to execute partnerships effectively and the ability of ecosystem partners to meet the bank’s strategic needs.

A structured partner identification and selection approach can help narrow down the best-matched partners. Partner scans, due diligence, and risk and tech evaluations can help avoid conflicting strategies or platforms that won’t adequately scale.

  1. Upgrading Technologies

Investing in tech platforms that allow for flexible collaboration can help integrate partner capabilities more quickly into the bank’s systems.

  1. Improving Onboarding, Implementation, and Value Realization

Building partner-specific business models and refining onboarding processes can help minimize turnaround times and accelerate time-to-revenue. Establishing KPIs and benchmarks to assess the performance of partnerships is critical to realizing value.

Conclusion

The rise of e-payments and digital financial service models has led banks to automate their processes and focus on developing technically advanced services.

Collaboration between FinTech and banks can offer better online services, bridge the gap between legacy and digital finance, and kickstart partner-centric financing.

By following the fundamental principles, FinTech and banks can achieve a common goal of providing the end-user with a great experience while complying with regulatory standards and expectations.

Check Out The New TalkFintech Podcast. For more such updates follow us on Google News TalkFintech News.

Apoorva Kasam
Apoorva Kasamhttps://talkfintech.com/
Apoorva Kasam is a Global News Correspondent with TalkCMO. She has done her master's in Bioinformatics and has 18 months of experience in clinical and preclinical data management. She is a content-writing enthusiast, and this is her first stint writing articles on business technology. She specializes in marketing technology, data-driven marketing. Her ideal and digestible writing style displays the current trends, efficiencies, challenges, and relevant mitigation strategies businesses can look forward to. She is looking forward to exploring more technology insights in-depth.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

[tds_leads input_placeholder="Email address" btn_horiz_align="content-horiz-center" pp_checkbox="yes" pp_msg="SSd2ZSUyMHJlYWQlMjBhbmQlMjBhY2NlcHQlMjB0aGUlMjAlM0NhJTIwaHJlZiUzRCUyMiUyMyUyMiUzRVByaXZhY3klMjBQb2xpY3klM0MlMkZhJTNFLg==" msg_composer="success" display="column" gap="10" input_padd="eyJhbGwiOiIxNXB4IDEwcHgiLCJsYW5kc2NhcGUiOiIxMnB4IDhweCIsInBvcnRyYWl0IjoiMTBweCA2cHgifQ==" input_border="1" btn_text="I want in" btn_tdicon="tdc-font-tdmp tdc-font-tdmp-arrow-right" btn_icon_size="eyJhbGwiOiIxOSIsImxhbmRzY2FwZSI6IjE3IiwicG9ydHJhaXQiOiIxNSJ9" btn_icon_space="eyJhbGwiOiI1IiwicG9ydHJhaXQiOiIzIn0=" btn_radius="0" input_radius="0" f_msg_font_family="521" f_msg_font_size="eyJhbGwiOiIxMyIsInBvcnRyYWl0IjoiMTIifQ==" f_msg_font_weight="400" f_msg_font_line_height="1.4" f_input_font_family="521" f_input_font_size="eyJhbGwiOiIxMyIsImxhbmRzY2FwZSI6IjEzIiwicG9ydHJhaXQiOiIxMiJ9" f_input_font_line_height="1.2" f_btn_font_family="521" f_input_font_weight="500" f_btn_font_size="eyJhbGwiOiIxMyIsImxhbmRzY2FwZSI6IjEyIiwicG9ydHJhaXQiOiIxMSJ9" f_btn_font_line_height="1.2" f_btn_font_weight="600" f_pp_font_family="521" f_pp_font_size="eyJhbGwiOiIxMiIsImxhbmRzY2FwZSI6IjEyIiwicG9ydHJhaXQiOiIxMSJ9" f_pp_font_line_height="1.2" pp_check_color="#000000" pp_check_color_a="#309b65" pp_check_color_a_h="#4cb577" f_btn_font_transform="uppercase" tdc_css="eyJhbGwiOnsibWFyZ2luLWJvdHRvbSI6IjQwIiwiZGlzcGxheSI6IiJ9LCJsYW5kc2NhcGUiOnsibWFyZ2luLWJvdHRvbSI6IjMwIiwiZGlzcGxheSI6IiJ9LCJsYW5kc2NhcGVfbWF4X3dpZHRoIjoxMTQwLCJsYW5kc2NhcGVfbWluX3dpZHRoIjoxMDE5LCJwb3J0cmFpdCI6eyJtYXJnaW4tYm90dG9tIjoiMjUiLCJkaXNwbGF5IjoiIn0sInBvcnRyYWl0X21heF93aWR0aCI6MTAxOCwicG9ydHJhaXRfbWluX3dpZHRoIjo3Njh9" msg_succ_radius="0" btn_bg="#309b65" btn_bg_h="#4cb577" title_space="eyJwb3J0cmFpdCI6IjEyIiwibGFuZHNjYXBlIjoiMTQiLCJhbGwiOiIwIn0=" msg_space="eyJsYW5kc2NhcGUiOiIwIDAgMTJweCJ9" btn_padd="eyJsYW5kc2NhcGUiOiIxMiIsInBvcnRyYWl0IjoiMTBweCJ9" msg_padd="eyJwb3J0cmFpdCI6IjZweCAxMHB4In0=" msg_err_radius="0" f_btn_font_spacing="1"]
spot_img

Related articles

PlatOn Showcases Two New On-Chain Payment Methods

PlatON, a digital public infrastructure, showcased its latest advancements in deposit tokenization technology at the Money 20/20 Asia...

Nium Integrates Thredd API Into Its Platform

Nium, a company specializing in real-time cross-border payments, has recently expanded its partnership with Thredd, a payment processor....

Zetrix Foundation To Launch A Virtual Asset Fund

Zetrix Foundation and MY E.G. Services Berhad have signed a Memorandum of Understanding with MaiCapital, a licensed virtual...

Cowbell Introduces Prime Tech with Cowbell Co-Pilot, a Generative AI Solution to Optimize Underwriting Workflows

Cowbell, a leading provider of cyber insurance for small and medium-sized enterprises (SMEs), today introduces Prime Tech with Cowbell Co-Pilot,...