In the ultra-competitive financial sector, Financial Institutions (FIs) understand they need to innovate to stay relevant. Given competing priorities, they often fall behind or struggle to keep up with the latest technology when trying to tackle innovation on their own. FIs that choose to partner with fintechs that match their organizational objectives to help cover the gaps in their products and services, on the other hand, thrive. Experts predict that the market for embedded financial services will expand by 40.4% annually over the next several years.
As FIs tighten lending criteria in 2024, embedded fintech partnerships can provide key services to help institutions sustain customer growth. Embedded fintechs enable FIs to offer the innovative tools customers need to build credit, access loans and achieve financial success.
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Fintech partnership perks
In many cases, FIs will delay initiating fintech partnerships because of uncertainty around the organizational value of the solution, but the advantages of these solutions far outweigh the risks. Here’s how the three keys to success for embedded fintechs can benefit FIs.
- Trustworthy solutions are a linchpin for success, and FIs can prove their trustworthiness through transparent communication and clear data practices. By openly communicating solution features, user data processing and risk mitigation strategies, fintechs can foster trust and reduce uncertainty for potential partners. Traditional FIs approach adopting new technologies with caution because of regulatory and risk concerns, but reliable, secure fintechs can bridge this innovation gap by providing the modern, high-tech solutions that consumers crave.
Partnering with an agile fintech allows FIs to tap into a constant stream of cutting-edge technological advancements that help FIs stay ahead of the curve to offer competitive products and services faster, without the burden of internal R&D investments. Fintechs often possess deep expertise in specific areas like digital payments, credit scores or lending. Partnering with fintechs allows FIs to expand their service offerings and cater to diverse customer needs without internal staff expansion.
User-friendly and efficient solutions that streamline processes and personalize services lead to increased customer satisfaction and loyalty. A trustworthy fintech can also mitigate certain risks by sharing the responsibility for compliance and security, further reducing the burden on the FI.
- Easy implementation translates to shorter onboarding times and quicker access to the fintech’s value proposition. FIs can start reaping the benefits of the partnership sooner and accelerate their ROI. Simple and adaptable solutions minimize the risk of complex integration issues or misalignment with existing systems, reducing the potential for costly project failures.
Minimal disruptions to existing workflows decrease staff training requirements and ensure smoother continuity throughout the implementation process, keeping business running as usual while the new solution takes root. When the learning curve for bank employees is minimized, the solution can be adopted more quickly and result in higher user satisfaction.
- Institutional goal alignment puts everyone on the same page. Strategic alignment can speed up goal achievement. When both parties share clear objectives, the partnership becomes a focused collaboration, driving faster progress toward shared benchmarks. Aligned goals minimize friction and confusion, ensuring resources are channeled efficiently on the path to achieving joint objectives such as helping consumers improve their credit scores.
FIs can leverage the fintech’s expertise in specific areas to free up internal resources for core functions, leading to cost-effective operations. Aligned goals ensure the partnership prioritizes future-proof solutions that adapt to changing needs and can be scaled efficiently as the FI grows.
Though it’s true that fintechs must check many boxes for the FI, partnering with easy-to-implement, problem-solving fintechs will be a huge win for FIs. These partnerships will help consumers access the products and resources they need to improve their credit scores, take control of their finances and achieve financial peace of mind.
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