Transforming Banking Sector through Fintech Partnerships

Fintech partnerships allow traditional banks to maintain a competitive advantage, offer better customer service and unlock the full potential of technology-driven financial services. By collaborating with fintech corporations, banks can enhance their innovation and agility and boost growth in an ever-evolving financial landscape.

FREMONT, CA: The emergence of digitisation and automation in the financial industry has driven the rapid growth of fintech (financial technology), outpacing the traditional banking system. The facilities, like platforms for receiving alternative funding sources and investment opportunities outside traditional banking channels, attracted customers to rely more on fintech corporations. Indeed, the fintech-driven robo-advisors have made investing more accessible and cost-effective for individuals with varying levels of wealth.

With the growing popularity of fin-tech startups for their innovative and agile approach to developing financial products and services, traditional banking channels are now turning to make partnerships with those companies. Indeed, tapping technological advancements and expertise has become crucial for banking channels to maintain a competitive edge in an evolving digital landscape.

Banks are often more efficient in building loyalty and trust within customers, whereas fintech companies offer secure and convenient transactions such as mobile payment apps, digital wallets and contactless payment technologies. Integrating these facilities can open a new trend in banking where customers can benefit from a more secure and automated process. While fintech companies develop financial products or services such as open banking, regtech, peer-to-peer lending platforms and blockchain-based solutions, banks can use it as a  white-labels and integrate the product into their banking features. Banks can focus on compilation and regulation, and fintech offers technological support.

A fintech partnership allows it to leverage the consumer base, extending its reach as a whole.  Though scandals have driven Individuals to shift their preferences to digital platforms, some folks, especially senior citizens, are more reliable with traditional banks. In fact, it is often challenging for fintech companies to navigate the complex regulatory landscape and build trust with customers. Therefore, fintech companies can bridge the demographic gap and earn trust by utilising the reputation and regulatory frameworks of the banks, reducing potential risks, whereas banks can widen their access to younger consumers. One partner's brand reputation enhances others' acceptance by making their work corporation public.

Application programming interfaces (API) allow data sharing and communication within different software systems, enabling fintech to research various advancements, relying on banks' infrastructure, facilitating faster developments and innovations for both partners. Indeed, banks can act as a regulatory sandbox for driving new products from fintech, ultimately leading to the benefit of upgraded technologies and technical expertise to offer the best user experience for consumers.

Considering the types of partnerships, there are referral models where banks can earn a commission for referring consumers to fintech or assisted-private labels in which both partners will be responsible for customer experience. Purchase of fintech solutions and the opportunity to sell them after customising allows banks to adopt private-label partnerships. However, internal resources from sales and marketing remain a determining factor for better performance. Moreover, facilities like debit cards and small business loans provide opportunities for individuals who prefer not to be connected to the traditional banking system.

In an ever-evolving financial industry, fintech partnerships will aid traditional banking systems to maintain a competitive advantage by offering enhanced customer service and improved operational efficiency, leading to long-term growth.