A financial partnership system will definitely help all financial institutions. But there are so many challenges with partnerships between banks and Fintech startups. One which is so obvious is – who do you partner with and why?
Another is – how do you get the partnership to work in the back-end?
Lastly is – how is the partnership delivered and positioned to customers?
For challenger banks, these partnerships will help them broaden their propositions in terms of functionality, products, and services and this will widen their market impact and appeal. But this is not to say that big banks can’t have partnerships like this. The tackling of these challenges depends on the overall approach of the bank and what the partner is also offering.
For finding the right partner, there must be a clear purpose for partnering and must be a partner with a common purpose or same vision. This is the foundation on which a mutually beneficial relationship should be developed and the relationship needs to deliver value for the bank, the partner and the customer.
Trust is critically important for building a strong foundation on the human level from the beginning. The partner will definitely interact with your customers and things need to go well so as not to destroy your relationship with your customers. Both parties need to agree on how to approach customers and treat them, the deepness and quality of support they offer, and also how they will impact the market.
The options available to challenger bank varies on the type of service or product they need to add – there are a lot of partners if the bank is looking at know-your-client (KYC) checks, if looking at pension consolidation there are some available partners here. Each brand may have its way of approaching this initial relationship building, but the main focus must be establishing trust. Immediately the decision to be partners has been made, the focus can be moved to the other challenges.
For the partnership to work at the back-end compliance and technology are required and the bank must get these foundational things right. Partners benefit by being registered with local regulators or being a licensed participant in the financial eco-system, but compliance is a key issue. Even where such regulations exist, there is a need to ensure that partnership will work from the legal side.
For the technology, there is a question of how to get the bank’s technology staff working with the partner’s technology. Making technology work in theory is very straightforward, but there are things that need to be optimized and adjusted. The key is that let the engineers at both sides of the relationship do their jobs effectively.
Partnerships are a striking term for the moment and could occur between banks and Fintechs, Fintechs and Fintechs and definitely between any two players in the financial ecosystem. First City Monument Bank (FCMB) launched a tech-focused co-working space Hub One in Yaba, Lagos to support tech-startups. Including other banks.
It should be noted that neither banks nor financial technology startups (Fintech) can leverage the full potentials of technology and innovations alone. Because they both have their strengths and weaknesses. Banks have an institutionalized structure and large customer base, but they are slow in adapting to ever-changing customer expectations. Fintechs are agile and innovative but lack the experience and much-needed resources to upscale, hence the need for a partnership.