Many misconceptions surround alliances between innovative fintechs and traditional banking providers. Here’s how to manage some key structural differences to produce partnerships with greater potential for both parties.
Fintech Banking-Challenges with partnerships between fintechs and traditional banks and credit unions are understandable in a world where a financial institution tries to forge a partnership with a fintech from scratch, figuring out everything for itself. But a disappointment they surely don’t have to be.
Solutions exist that make it easier for both sides to participate in building the next generation of financial services. By serving each organization’s needs and simultaneously streamlining what each must accomplish, these partnerships help move innovative — and fully compliant — products to market.
The right partnerships, leveraging full-stack and customizable fintech platforms, eliminate potential roadblocks. Equally important is re-thinking what partnerships look like, and the number of players they involve.
First let’s examine some of the myths in this area.
Myth 1: Financial Institutions Can Build Their Own Digital Solutions
The overwhelming majority of traditional financial institutions don’t have the teams they need to build, launch, and maintain digital banking services, especially when they’re competing with fintech startups like Acorns, Qapital, MoneyLion, and others. Traditional players frequently lack expertise in product design, digital marketing, customer experience, and more. Conversely, the nonbank players built their companies on redefining an experience — and they started with both the people and expertise to do so.
Rather than attempting to compete where they don’t have competitive advantage, traditional players should consider partnering with such fintechs so they can reap the benefits they afford. These include opening new accounts and raising new deposits.
Myth 2: Partnerships Suck Up Time and Resources
Within the traditional model of a bank interfacing directly with a fintech, it’s true that most banks nationwide haven’t staffed teams dedicated to managing partnerships.
But there are solutions that take the onus off of banks and fintechs to do that — essentially, firms that serve as a bridge between the partners. They can speak “bank” to the banks and “fintech” to the fintechs. Everyone wins and no one has to staff outside of their core competency.