Introduction- Collaboration for Innovation?
Businesses that work together reap benefits from the partnership. In 2017, HSBC formed a partnership with Tradeshift, one of the largest business transaction platforms in the world, and this is exactly what happened.
75% of banks said they will work with at least three fintechs during the next year and a half.
By leveraging the bank’s existing systems, the fintech company in this form of relationship engages in direct customer interaction. The bank in these arrangements may be viewed as a silent partner, and fintech clients may not even realize that a bank is processing their payments or handling their transactions.
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Collaboration Offers Benefits to Fintech Startups
When it comes to providing value to its consumers, German neobank N26 has developed an ecosystem of collaborations with fintechs and a wide variety of other service providers and retailers.
- Increasing the potential for reaching a larger audience by using the existing clientele of business partners.
- Enhanced Customer Base
- Name Recognition
- Enhanced Capabilities
- Simplicity of Operation
- Growing the company’s footprint and customer base
- Providing savings and an advantage over the competition
- Accelerating the development of new financial technologies.
- PwC found that 82% of fintech companies agree that working together helps them innovate more quickly and efficiently.
- There are further upsides to working with others, such as expanding one’s consumer base through tapping into the clientele of one’s partners.
- Developing a larger customer base and expanding the company’s reach.
- Providing savings and a market advantage.
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Exploring the 5 Types of Fintech Partnerships
Collaborations with fintech companies can increase consumer loyalty and strengthen your brand’s credibility. When searching for suitable fintech partners, think about the following five collaboration models.
Joint Venture for Referrals
In this structure, the financial institution receives compensation for referring customers to the fintech company. You still perform due diligence on your fintech partner before commencing service provision. This strategy could be ideal if your organization lacks the means to devote to the administration of a new service or product.
Private-label partnership facilitation
The customer experience is shared between your institution and the fintech partner. This is a frequent type of relationship. Finally, your organization reaps the rewards of fintech without shouldering its whole burden.
Private Label Collaborations
After making certain adjustments, your financial institution then offers the fintech service for sale to its clientele. Your clients will likely never see the fintech brand on the actual goods. It is possible to introduce a bank-branded product to the web without disrupting the user experience. However, more internal sales, marketing, and support resources are needed.
Term Loans for Small Companies
That way, fintech firms can tailor their efforts toward creating SMB credit programs. When it would be difficult for the business to secure finance from more conventional sources, it can instead take advantage of the lending capacity of a regular bank.
Debit Cards
Banks may team up with other businesses to provide debit card and payment card services. People who don’t have a banking connection or are hesitant to open an account at a bank may find this attractive. However, some fintech firms, such as MineralTree, provide their own proprietary, encrypted virtual card payment system, known as SilverPay.
Which model would work best for your organization?
- Analyze your organization’s personnel, assets, and available time to determine which structure works best for you.
- Constant change is inevitable in our future, making it more important than ever to give customers what they want in terms of products and services.
Why financial institutions are teaming up with fintech firms?
According to recent findings by the financial software firm Finastra, financial institutions will look to fintechs for a solution.
Its survey of over 750 banking leaders around the world found that 56% desire to use an ecosystem of interconnected fintech solutions, while only 6% favor creating in-house solutions.
When compared to developing or purchasing similar capabilities in-house, forming a partnership with a fintech can be a more efficient and cost-effective option for many financial institutions. As the market value of many fintech companies has fallen, forming partnerships is a viable option for testing the waters of future acquisitions.
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[To share your insights with us, please write to sghosh@martechseries.com]
