Banks and Fintechs: Partnerships for Innovation

When fintechs first popped up a few years ago, these startups had a goal of disrupting and displacing banks in the world of financial services.  Banks stood their ground and made small reactive changes, but kept systems and processes mostly the same.  The relationship between these rivals has dramatically changed, with both fintechs and banks now working closely together to impact the future of finance.

Fintechs focus on specific customer pain points and then quickly solving them - - targeting new solutions that are faster, simpler, resulting in streamlined processes, user friendly apps, and easy to understand products.  These benefits did make an impact on the industry, but only earning a small portion of total market share for fintechs.  Clients with long-standing relationships and lack of trust, resisted making a permanent change away from large institutions, but also requested more innovative, enhanced experiences from banks.  

Fintechs began working with banks to blend their innovative insights and design, with the bank’s history, customer base, and regulatory knowledge. Partnerships have become commonplace in the industry, with some banks deciding to create something in-house, or purchase smaller tech companies outright.  Some of these take the form of more of a vendor relationship.  In particular, JPMorgan Chase has implemented a build - buy - partner strategy when it comes to adopting fintech initiatives.  It’s own neobank project, Finn, launched earlier this year allowed best practices from the online-only platform to update digital account opening processes in branch product offerings online. 

Customers stand to benefit from the increased collaboration and partnership, without having to make any changes.  Some of these benefits have already helped with transaction and back office operations, while others on the horizon will offer alternatives to traditional bank products.  These other options will most likely come from an affinity relationship in which the fintech will complete the customer request on its platform (as a 3rd party) instead of the bank.

Far from adversaries, banks and fintechs have learned to co-exist in today’s financial marketplace, working together to drive much needed industry improvements.  The next level in collaboration will see the lines blurred between both groups, with established fintechs offering an array of bank products and services, and banks reducing their physical infrastructure for a robust digital fintech platform.

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