Despite Fintech being initially regarded as an intruder by traditional financial services, the scenario – both consumer-facing and behind the scenes, has certainly changed. Fintech has evolved beyond being viewed as just competition to meet new goals and improve competitive advantage. Several traditional financial and banking service providers are now coming around with the idea of collaborating with fintech. While the gap between customer expectations and traditional bank services is as wide as ever, banks now see this as an opportunity to differentiate themselves by providing the finest front-to-back experiences for customers.
According to the World Fintech Report 2021, there is more pressure on incumbent banks to embrace digitalization than ever before, especially now that Fintech is maturing to new levels and the Covid-19 pandemic has further driven the need for going digital wherever possible to avoid human contact. While the pandemic has pushed the global adoption of digital models in various industries, this was mainly seen in the financial sector. Both individual users and businesses alike relied on Fintech for banking and financial services as a result of suggestions to avoid paying with cash whenever feasible and bank branches closing in various parts of the world.
Plus, the nearly exponential expansion of tech-savvy fintech startups has caused traditional bankers to rethink their conventional customer strategy. Ever-changing client expectations and digitalization have the financial sector facing many concerns. Experts have also suggested that unless banks and Fintech firms improve their collaboration to deliver essential financial services, neither will be able to fully profit from innovation.
Recognizing all these factors and challenges, traditional banks have now understood that collaborating with fintech and leveraging the possibilities through collaborative strategy is a considerably better idea. Banks are now actively seeking new ways to connect with these innovative organizations in an attempt to develop a value-creating partnership.
The strategic partnership between banks and fintech firms will undoubtedly result in the formation of an all-encompassing ecosystem in which both parties’ offerings can be integrated on a single platform. This would also lead to the development of platforms that integrate banking services in the best possible way. Simultaneously, banks can increase their visibility and customer base without having to compete with these platforms.
Opportunities for the bank and Fintech collaboration
Both banks and fintech firms have several opportunities they can leverage with their collaboration to improve customer satisfaction. Making financial services mobile-friendly is one such opportunity that the industry has been grabbing with both hands. A report from June 2021 stated that nearly 48.33% of the planet’s population owned a smartphone. It is no surprise that a majority of these use smartphones for internet access. Banks that are truly looking to better connect and interact with their customers should exploit this opportunity by offering mobile-friendly financial services that are easy to access and easy to navigate.
Subscription management is another arena that the bank and fintech collaboration can explore. A recent Deloitte report studied the subscription habits of Americans and revealed that an average US household had at least 9 paid subscriptions spread across video, music, and gaming. And there’s no doubt that the more subscriptions one has, the more difficult it becomes to keep track of all of them.
While several mobile apps help track subscriptions, very few of them do this with an exclusive bank partnership. This is a great opportunity for banks to collaborate with fintech firms and develop a subscription management app, or feature (into their existing app). This will allow bank customers to manage their entire subscription lifecycle, including the purchase of new subscriptions, tracking the amount of money spent, canceling unwanted subscriptions, etc. Another advantage of such collaboration for banks is the prospect for cost savings related to customer service.
Similarly, cryptocurrency investment and trading services are another area with great potential. The cryptocurrency boom, which started peaking in February 2020, is still at an all-time high. In fact, a report by Crypto.com, which came out at the beginning of this year estimated the total number of global crypto users to be over 100 million. While most banks seem to discourage their customers from buying cryptocurrencies using their cards, with crypto becoming more mainstream and being used even in the purchase of goods, several banks are now reconsidering this decision. Providing Bitcoin wallets and other crypto trading services can certainly be an opportunity to generate additional revenue.
In addition to these prominent opportunities, banks may also be able to take advantage of a variety of other opportunities such as data breach and identity risk management, wealth transfer management, etc.
Benefits of Fintech collaboration with banks
- Increased reputation
One thing you can expect when two companies collaborate is for one of the collaborating companies to have a strong reputation, which will be reflected in the other company as well. A fintech company that partners with a bank can benefit from the bank’s popularity and reputation, benefiting all parties involved. Customers will also perceive both organizations as looking out for their interests by doing this.
- Availability of new functions and features
In partnership with a fintech company, the bank can provide new services and features like money management tools and mobile check deposits.
- Ease of use and access
With the help of a fintech firm, a bank can offer consumers an intuitive and simple-to-use platform using the latter’s technical skills and user experience expertise.
- Wider customer base
Together, Fintech and banks will be able to tap into each other’s existing client base, expanding their market share and contacting previously unreachable customers.
- Reduced costs
It can often be more cost-effective for banks to collaborate with fintech firms on improving their digital services than enhancing these services internally.
Partnerships between banks and Fintech can offer several benefits, but they can also have potential drawbacks, particularly relating to legal requirements, security, and recognition issues. However, if the partnership overcomes these obstacles, the potential for growth and profit for both parties, as well as the benefits for customers, is endless. Thanks to Neobanks like Salt, customers can now fully experience the best of both worlds.