Fintech is going from strength to strength. Part of its incredible growth is down to the nature of what we call fintech partnerships within the industry.
While the financial sector is still largely maintained by the old guard, the tech sector is very much a younger, more open arena for people to build relationships and show off the value of their products and services.
Let’s consider what to look for in a successful fintech partnership.
Fintech has allowed financial services companies to be able to produce digital products for end users that weren’t on anyone’s radar 15 years ago. Mobile banking is probably the most obvious example. Now, managing your personal finances is easier than ever given the constant access we all have to our bank accounts. Plus a far larger section of the public have an awareness of investments and how markets shift on any given day.
So with all the positive exposure why wouldn’t you partner with a fintech firm? Well four key points stand in the way of any good fintech partnership.
Now more than ever, we see that cultural differences between financial corporations and fintech firms can cause real issues in the development of partnerships. As we’ve mentioned the relative cultures of each firm are likely to be quite far apart and this can cause tension early in a partnership.
The best way to tackle this potential problem before it occurs is through honesty, both about yourself and your partner. If you understand that your fintech partner isn’t as mature a business because of its age and you accept this, it will help you understand the decisions they make. The same is true in reverse, you shouldn’t expect a classical financial corporation to be agile in its methodology so don’t be disappointed when it isn’t.
Naturally, any company involved in financial transactions or management is going to be held accountable to a large amount of regulations. Adhering to these frameworks is critical in protecting customers and businesses alike.
Banks and financial services providers typically have a great handle on the relevant legislation and will likely expect any fintech partner to be on top of PSD2. If that isn’t the case, it can cause friction – or worse a partnership breakdown. As a fintech, it’s best to be prepared during every stage of contractual negotiations, and if you feel out of depth, engage with an expert. For financial corporations, be ready to provide a guiding hand to your fintech partner, it will help both of you in the long term.
While banks and financial services companies may have extensive technical teams in house, it’s unlikely they’ll have people dedicated to the exact technology of any given fintech firm. One of the great attractions in finding a fintech partner is the expertise they can offer. On the flipside, a well established financial institution can offer a huge amount of experience, market knowledge. and industry contacts.
To get the best out of each other, make sure the other party knows what you need to make the partnership a success. Consider having staff from each company swap their working environments so that they can begin to fully understand how each partner works and what they are best at.
Last, but certainly not least, we have mutual buy-in which we understand as how much investment – emotional and financial – that each company has in the partnership. Clearly, when a large bank partners with a fintech startup, the level of financial investment will likely be greater from the bank. But how much do the banks and financial services businesses care about the success of the partnership? This might be the investment the startup needs to operate for 5 years, so to them it’s crucial.
Deciding on common goals is a great way to firm up mutual buy-in. If both parties understand what they want to achieve, they are far more likely to make the effort. Having senior members of each business discuss feedback on issues is a great way to show the investment of each side’s best people.
What’s On Offer?
With these pain points in mind, and some clear ways to get past them, let’s just touch on how much fintechs can add to large corporations. If your classic model involves providing banking services wouldn’t it be great to offer apps to your end users – to give them value, more awareness of your brand, as well as more data for you to analyse? In this respect, fintechs certainly help increase product offerings. Given their size and agility they’re often able to deliver those products and services to market far quicker than large financial institutions.
If you’re going to invest in a business, knowing they are experts in their field is going to go a long way in giving you peace of mind that your objectives will be taken care of. It’ll also give you more time to focus on what you already do best. If you make the right fintech partnership choices then you can give them more responsibility to develop platforms they can manage for you. It’ll cost you less and still give you all the upside of working with a fintech company.
If you’re looking to launch your own expense management solution, Findity can help. Get in touch with us today.