• Viktor Lysyuk, Global Head of Banking Infrastructure at TransferGo


• 02.09.2022 11:45 am
#fintech

The potential for fintech to completely disrupt the status quo in financial services has made it an attractive investment for VCs and investors. The UK’s fintech sector received over £7.6bn in funding this year, jumping ahead of 2021 levels despite the threat of recession. It’s a show of confidence in the industry’s long-term market position and a recognition that there’s more innovation to come.  

But despite its success, the typical fintech journey is far from linear and leaders often find themselves facing a plethora of choices as their business scales. Addressing a specific market pain point, choosing the right business model and growth strategy, and making the customer journey seamless is hyper important – and the choices do not end there. Success with the chosen customer segment and ability to scale requires the right partnerships to underpin the growth – and simply adding more partners is not always the right strategy.

Instead, fintechs might consider that doing less can actually mean executing more if they pursue the right fintech partnerships. It can also mean ensuring a robust service in a chosen market segment, ultimately providing a faster path to profit.

Making the right choice

Pursuing a simple additive growth in the number of partnerships to expand into new territories or increase market penetration is tempting. However, simply onboarding new partners without a full understanding of the fit from the product and process standpoint and, more importantly, from the organisation standpoint can impede rather than enable growth.

So what would a fintech look for in a partner? There is more than one aspect to consider and, whilst the specifics will undoubtedly differ from one market to the other, there are some common themes for choosing a bank or another kind of institutional partner.

Technical capability and local market access are obvious places to start. A partner with deep local knowledge and access to the market infrastructure of interest and desired payment methods would be essential to realise expansion ambitions in the market. These are the table stakes, however - fintechs need to dig deeper to understand the connectivity offered by a particular partner, its features, speed and bandwidth, which need to be commensurate with the growth ambitions for a particular market. The resilience of the partner’s infrastructure is equally important – partner outages and shutdowns can quickly mar the customer experience and even damage the fintech brand. Whilst the banking industry dominated the financial services arena for a long time, not all banks have been created equal and there is substantial variability in the technical details of different financial institutions’ offerings.

Having the right technology and market access does not on its own create a great service. And fintechs’, who ultimately exist to serve their chosen customer niches, would do well to understand their partners’ service organisations and their functional specifics. Delays, unanswered queries or lack of attention to support cases could spell doom for the ultimate customer experience. Conversely, good service organisations and processes make the partners (and the fintechs themselves) really shine even when things go wrong. Resolving a problem promptly and with a smile does earn undying customer gratitude, bringing more business in the future. Strong service culture at partner institutions can make a real difference to the fintech’s scale ambitions.

Being in a financial technology business these days does mean being in a compliance business - and strong and capable compliance organisation and efficient compliance decision-making are a must in a partner. Working together seamlessly, exchanging information quickly and efficiently and being able to have a direct and open dialogue are all highly prized qualities in a partner.

And so is the capacity to innovate. The one constant in the market fintechs are playing in is its state of constant flux – changing regulation, new financial infrastructures, and advances in technology constantly create new opportunities and challenges. Having a partner capable of identifying, anticipating the changes and working together to make the best of them can make a massive difference to the successful execution of growth plans.

Needless to say, all of the above needs to come at the right price. For financial technology firms, often facing very price-sensitive clientele, procuring services at a competitive economic level is vitally important.

There are many other factors at play, such as the ability to span more than one market or a unique position in a particular one. But, arguably the most important of them all is a cultural fit on the organisational level. Connectivity at different levels of the organisation and shared values are the true backbone of any partnership, creating the underlying structure which makes all the components form a coherent whole. This often comes from the existing experience of dealing with fintechs and understanding their needs and approach. Running a digital business in an analogue world is no mean fit and common values really do make the partnership possibilities infinite, with other things falling into place.

 No one goes it alone

By developing deep expertise in a particular service or market segment, fintech businesses can gain a thorough understanding of their customer, achieve product-market fit and gain market share.  Take TransferGo as an example - our mission is to make international payments faster, better, cheaper and more accessible for migrants. As a company built by migrants, migrants, we fundamentally understand the friction they face with money transfers and we’re committed to solving them. Our laser-like focus on this has resulted in steady and sustained growth, a $50 million Series C raise and over 4.5 million customers.

But we are not alone on our journey – our partners, ranging from traditional banks and global card networks to technology providers and fintech aggregators are underpinning and sharing in our success. Industry partnerships can sometimes be overlooked as a growth factor, but the ecosystem of symbiotic relationships created by fintechs over time can be a real differentiator and a value driver when done right. By partnering with leading financial services organisations, fintechs can expand their service repertoire, widen their network and knowledge-share rapidly enabling growth at scale.  For collaborations to be effective, partners need to share the same values and mission. At TransferGo, we are fortunate to have been able to build strong relationships with partners who understand the value of payment infrastructure in making financial services more globally accessible, complimenting our work to support the migrant community, wherever they are based – and are continuing to build out the partnership ecosystem along the same principles.