Banks partner with fintechs to bring new technologies into the banking ecosystem which the customers demand. These partnerships are often short term successes and fail in the long term. There are several ways for banks to ensure long term fruitful partnerships with fintechs observed Bahaa Abdul Hussein. If the service offered to the customer is kept at the forefront then the challenges offered by such partnerships are easily navigable.
Long Term Partnerships And Investments With Fintech
Fintechs bring new technological solutions for customer needs that the bank fails to provide. The banks cannot efficiently implement these technologies in isolation and then compete with the same fintech firms which provided them in the first place. The better alternative is for banks to buy into the solution fully.
If the bank is a stakeholder in the growth of the fintech then implementation of the technology becomes financially fruitful for the bank. In fact the bank can train its executives to sell the service to its customers. This is also in the best interests of the fintech company as it can use the trusted customer base of the bank to sell its product. It also deters the fintech from going into partnerships with competing banks.
Help fintech with regulatory framework
Fintechs are not used to working under complex regulatory frameworks. But in this domain the banks have a far greater experience. As fintech companies are recently coming into increasing regulatory oversight, they can use the banks’ expertise to navigate through the necessary changes. Banks can create multidisciplinary teams which can work with the fintech companies from the start.
A department with people from business, analytic, IT and legal branches can participate in the partnership with fintechs from the start of a partnership. They can then understand the nuances of the product and help conceptualize the regulatory framework it needs to operate under. The fintechs will benefit greatly from this as the process of implementation can be replicated with other products or partners.
Upgrade Core Banking System
Banks often take the approach of modernizing their products on a case by case basis. They address problems when they are forced by client needs. This means that when they partner with a fintech company, they are not necessarily looking to upgrade their core banking system. The lack of a modern core system hinders implementation of new technologies necessary to offer new products.
Several core systems still used by banks are obsolete and incompatible with new technologies. So, for long term success, investing in a ground up upgrade of the core system makes sense for banks. While case by case addressing of issues has its place, this cannot be ignored any longer with new technologies constantly emerging.
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