• Gareth Lewis, Chief Executive at Delio


• 16.12.2022 03:45 pm
#fintech #banking

The symbiotic relationship between fintechs and banks is well established but reaching the point where both are happy to collaborate together means getting buy-in on both sides.

Much of this needs to be achieved at C-suite level, with banks’ Chief Technology Officers (CTOs) being key to engaging a fintech for any type of digitisation process. So, when fintechs are approaching banks to become business partners, one of the first things to remember is: “Don’t alienate the CTO.”

Talk their language

The CTO is going to be a key figure for any fintech looking to integrate their services with the bank’s existing infrastructure. As a result, you need to be talking their language from the outset and offering something they really need and, equally importantly, want.

There is little point in providing a solution to a problem that the bank does not feel is important or that is not particularly expensive to deliver themselves. Remember, large banks have such a wide range of products and services available to clients that they are more likely to be a ‘jack of all trades’ purely by design. This means if the fintech is providing a solution that resolves a problem in a single area, it needs to make a considerable impact otherwise the bank will either not be interested or could easily create the solution itself.

The CTO of any financial institution is also likely to play a vital role in working out the technical details of how any new and existing tech can be combined with the least amount of disruption. Legacy systems can be infamously complex to integrate with new technology, and this is often an area of friction when it comes to partnerships.

Collaborator, not competitor

For the most part, the primary benefits of fintechs and banks collaborating are improving the client experience and reducing the workload of current employees so they can use their skills more effectively elsewhere. A good example of how this approach can work effectively is the use of technology to distribute private market investment opportunities to eligible customers and automate the ongoing operational and regulatory processes.

This enables the bank to reduce their reliance on complex procedures that have traditionally been delivered through manual, paper-based tasks  –  in many cases, not very well – and move to digital workflows that can automate and increase client access to services that they might otherwise have been excluded from.

Be realistic

However, fintechs need to be realistic in their approach to potential banking partners. Do the banks perceive fintechs as competitors and disruptors within their own space? In some cases, the answer is yes. So that hurdle is potentially one of the very first that fintechs need to overcome.

The easiest way to do this is often to test the solutions on offer to the bank as part of a smaller proof of concept project. That could mean starting a project within a specific division of a bank that is more open to digital innovation and collaboration, or by demonstrating the value of technology with a smaller client first and working up to collaborate with larger banks over time.

Fintechs are well placed to define the use cases of technological development given that they are likely to have experience of developing similar examples for other organisations. Once the use case has been established, it can then be presented as a tried and tested solution that has been validated elsewhere, further mitigating risk to the bank. 

The importance of data

Reliable data is now vital to ensure that financial services firms provide the highest quality customer experience. The personalisation of services has never been higher on their agenda and data is central to informing how they can anticipate a customer’s needs, create targeted products and services, and prevent fraud - already one of the key uses of data within financial services.

Customers are choosing to share data more readily in anticipation of receiving an improved or more personalised service, receiving something they value such as a time or money-saving product, or simply something to make their lives easier. So, banks and other financial institutions must find ways to not only harvest this data, but also to use it as effectively as possible to help their customers.

This is where the interface between new and old technology can be successfully applied. If deployed effectively, it creates opportunities for banks and fintechs alike to deliver new and higher-quality services to the end user. 

Driving value for money

Fintechs, by their very nature, will be at the forefront of innovation and are ideally suited to develop new and exciting applications of their technology. In many cases, the main objective of digitising these internal processes is to help the bank to achieve cost efficiencies, either in terms of ongoing savings or by implementing a technology solution that the bank would have to invest great expense to develop themselves.

Therefore, it’s critically important for fintechs to be able to demonstrate the return on investment that banks will be able to achieve from implementing their technology. This will not only help to achieve internal buy-in from an early stage, but will also establish tangible metrics from which the success of a project can be measured.

In addition to this, it’s also important to highlight how new technology is adding value, rather than simply generating cost savings. For example, the data that is created as customers engage with digital tools should generate analytics and insights that will strengthen a bank’s ability to understand their customer’s behaviour. This can then be used to target new services more effectively, identify disengaged customers faster, and focus the team’s resources on revenue generating activity.