In the midst of the fintech revolution, banks are realizing that they need team up with fintech startups in order to thrive. This blog has often pointed out before how partnerships between fintech startups and banks can result in mutually beneficial relationships. This isn’t merely a theory. Real-world examples have already demonstrated the value that these partnerships can offer to all parties involved. The following are among the more noteworthy ones:
How Fintech Helped TD Bank Stay Afloat Amid the Pandemic
The rise of fintech has been perceived by some as a threat to banks because fintech products offer a degree of convenience that traditional banks cannot yet match. By allowing customers to undertake essential financial tasks through mobile apps and similar means, fintech products enable people to save time that they would have typically spent traveling to a brick-and-mortar location.
The COVID-19 pandemic has demonstrated that convenience is not the only benefit of completing financial tasks through the use of a fintech product. At a time when people around the world have had to quarantine and limit their visits to brick-and-mortar businesses as much as they can, fintech has proven essential.
These unexpected circumstances have left some banks scrambling to respond to changing consumer behavior. Once the pandemic began, fintech products became particularly attractive to customers.
However, not all traditional banks have struggled in the last few months. TD Bank Group has fared relatively well in comparison with many others.
TD’s chief digital and payments officer, Rizwan Khalfan, believes that the institution has managed to do so well thanks to early partnerships with smaller fintech companies. Long before the pandemic, TD was proactive about coordinating with fintech startups to develop digital products and services for its customers. After the pandemic began, TD’s customers already had access to a wide range of tools that have become very useful.
That said, TD has not only continued to succeed in the age of COVID-19 solely because its customers use the digital tools it already had in place. TD has also partnered with fintech startups to efficiently develop solutions designed specifically in response to these circumstances.
For example, many people and businesses have had to seek relief due to the economic impact of COVID-19. TD simplified the process of doing so by partnering with developers to create digital relief application forms that customers can fill out easily and quickly. This is just one component of TD’s overall strategy in the coming years, which involves prioritizing digital development.
Discover Financial Services Taps into AI
While this example covers how a fintech partnership was specifically beneficial to TD Bank Group during the pandemic, it is also important to keep in mind that partnerships between fintech startups and banks can yield measurable rewards at any time.
Consider the example of Discover Financial Services’ partnership with ZestFinance. Discover enlisted the help of ZestFinance in order to improve the credit underwriting process. ZestFinance offered an artificial intelligence solution that analyzes data far more efficiently and actively than a human ever could in order to help Discover make better-informed lending decisions.
The benefits of this partnership were measurable and almost immediately apparent. Discover found that by applying this new AI solution, default rates fell substantially without any additional portfolio risk.
In a statement, ZestFinance’s CEO pointed out that many traditional banks don’t have the means to quickly develop their own AI solutions in-house. By partnering with fintech startups that can devote their time and resources solely to AI development, banks can adopt these solutions much more quickly than they otherwise would.
Fintech Startups Help PNC Bank Speed Up the Small Business Lending Process
Another benefit that fintech startups provide to customers is speed. Many fintech products and companies leverage technology to offer efficient alternatives to traditional financial services.
PNC Bank recognized how this could benefit their approach to small business lending. Usually, when a small business owner applies for a loan at a bank such as PNC, they need to wait at least a few days before hearing back.
Increasingly, small business owners are becoming aware that fintech startups provide much faster service. Recognizing this, PNC collaborated with a fintech startup to develop and implement a solution to enable it to respond to a loan request within minutes. As a result, PNC became a significantly more attractive option to new entrepreneurs seeking credit.
These are merely a few examples. They serve to make it clear that banks are willing to adapt in an effort to survive. When banks and fintech startups work together, they will ultimately improve the customer experience.