A partnership between a traditional bank and a fintech startup is in many ways a natural fit. Traditional banks have the infrastructure, resources, name recognition, and cash to provide the financial services we rely on every day. Speed, efficiency, and customer service are not their typical points of pride, however. Fintechs on the other hand are born out of the digital age, and live and breathe the product design, digital marketing, and customer experience needed to serve modern expectations.
But does this partnership model embody the future of financial services? How reliant are the banks that we all know on partnering (or acquiring) small startups? Let’s take a look at some of the challenges these types of partnerships face, and how things are shaking out as we head into the second half of 2019.
First, as noted by Forbes earlier this year, partnerships can be beneficial but they come with some real considerations, which many traditional banks may not be ready for. For example, bringing new customers on board requires more than sophisticated digital marketing – it requires solid customer service and addressing the financial needs of people across the country. Utmost safety and security, 24/7 fast and reliable account access, and helpful tools and resources can be improved by fintechs but still involve cultural commitment by banks themselves.
Banks also need to make sure they have the resources available to dedicate to a new partnership. Without teams devoted to managing a partnership and integrating services across the board, there is not likely going to be much meaningful change.
Aside from the challenges, we are seeing some interesting activity so far this year. In a recent survey covered by Business Insider, the top reasons for banks to partner with fintechs include digital account opening (70%), payments (53%), and lending / credit (48%). These areas of interest are driving activity for JPMC, who recently announced its partnership with 10x Future Technologies. This follows the bank’s series of partnership announcements that began last year.
This year is likely to see more major announcements as the market is ripe for investments in digital transformation. Fintechs have spent years perfecting their offerings and building their customer base; while the challenges of partnerships need to be fully considered, we can expect some exciting new offerings as banks and fintechs continue to combine their services.