In a world where technology changes by the day, healthy competition between banks and fintechs has helped drive solutions for some of the world’s most pressing payments problems. However, the “winner” won’t necessarily always be one or the other. Bank-Fintech collaboration will be the key.
The industry is also seeing new technology entrants that are looking to disrupt the banking and payments ecosystem. We’re seeing an expansion of technology companies that would not be classified historically as fintechs working to gain more control of the business banking and payment experience. For example, enterprise resource planning systems are working hard to bring new capabilities to their customers that would traditionally be in the realm of the banks or fintechs.
As a result, the lines between banks, fintechs, and other big tech companies will continue to blur. Through partnerships or investment relationships, banks can better understand the technology and even contribute to a fintech’s overall business strategy without having to take complex acquisition and business integration steps. This ‘try before you buy’ approach is very appealing to banks. Over time, this will result in more acquisitions as banks identify the right fintechs that fit best within their strategy and customer base.
While regulators will certainly play a role in influencing the nature of some bank and fintech collaboration, changes in customer demand will matter more than regulatory factors in how banks and fintechs collaborate in the long term. We’ve seen this play out throughout the space as people’s personal experiences influence their business expectations. Corporate users now expect finance and payment technologies to be easy to use, intuitive, as well as easy to integrate into other programs.
There are fewer barriers to bank and fintech collaboration now than in years past. While resources and technology capabilities may still stand in the way of some collaboration, the advancement of technologies like application programming interfaces (APIs) will allow banking and fintech platforms to work more cohesively together in 2020 and beyond.
The biggest risk to a successful collaboration, and one that in a lot of cases is underestimated, will be the alignment of the bank and fintech around what is important to each party and how the success of the partnership should be measured.
As some fintech solutions will make sense only for certain-size businesses or specific verticals, it will be important to address these considerations to ensure happiness. For banks looking for fintech partners, they should seek out not only a winning technology approach, but a shared vision.
Find a partner that can not only meet customer needs today, but that also has a relentless focus on innovating for what’s next in the business payment space. What is just as important is working with a partner that has an alignment of priorities and culture. A partnership shouldn’t just deliver new capabilities or technology, but should allow the bank to deepen and enhance customer relationships.
What Are the Experts Saying?
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