The technological revolution has caused many in the traditional financial services industry to worry. With new startups offering convenient alternatives to their services, traditional firms and banks are realizing that they must learn to adapt in order survive.
In order for banks to survive and fintech companies to thrive, they must partner together. Startups can benefit from working with experts who know the industry. Traditional financial firms can maintain their relevance by teaming up with innovative startups using new technology in order to provide a superior customer experience.
It appears that banks and fintech startups have been relatively slow to actually put the idea into action. There are many possible reasons why this is so. One is the fact that fintech technology is still relatively new.
Thus, it’s smart to study the ways in which some fintech companies and existing financial services firms have already worked together to each other’s benefit. Knowing how a partnership should manifest makes it easier to confidently pursue one.
Fintech Companies Targeting Millennials
Fintech isn’t popular among just one demographic. It’s easy to imagine why anyone would want to embrace products that simplify essential financial tasks. However, it may come as no surprise that fintech’s early adopters have tended to be younger. People who’ve grown up with digital technology are not only more comfortable with using it in this capacity—they’ve also come to expect a certain degree of convenience from financial service providers.
That’s why many fintech companies have begun to target millennials. Some provide them with apps that provide a range of banking services tailored to their expectations.
It’s clear this type of product could easily become a major success if it achieves what its creators set out to do. Unfortunately, since fintech companies don’t qualify as banks, they are unable to hold savings and checking account balances for users.
Some have figured a way to get around this problem by partnering with banks. The bank retains its customers by offering them advanced technological solutions, while fintech startups can make money by sharing the revenue that the banks earned from interest charged when loaning customers’ deposits to others.
Luckily, reports indicate that small banks have been far more willing to take advantage of fintech partnerships than larger banks. That’s because large banks generally had the resources necessary to survive the fallout of the 2008 financial crisis. Many small community banks did not. By partnering with fintech startups, many have been able to recover when they otherwise would have been forced to close their doors.
More Banks Creating Mobile Apps
The example described above illustrates a fairly basic way in which banks and fintech startups can work together for mutual benefit. That said, it’s also valuable to study how similar tech companies have partnered with banks to help one another in less predictable (but equally effective) ways.
In an attempt to continue serving customers in the midst of the fintech revolution, some banks have sought to create their own mobile banking apps.
This is not always as easy as it sounds. Due to certain laws, banks in the EU have to verify the identity of all customers who want to make mobile accounts in person before they can do so. That means potential customers have to visit a branch directly. For those who did not live in the area of a branch, that would not be an option.
Fintech startups can help to solve this problem. They can find a way for banks to verify the identity of customers signing up for mobile accounts through computer or smartphone videos. This solution would allow the bank to adhere to applicable EU laws while also reaching far more potential users than it could have been able to do without outside help.
Developing Mutually Beneficial Fintech Solutions
That brings up another point worth considering. When banks partner with tech companies, the latter don’t necessarily need to be strictly devoted to fintech. Instead, banks can partner with a range of tech firms to develop their own mutually beneficial fintech solutions.
Genuine collaboration between traditional firms and fintech startups can be valuable for everyone involved. That includes the customers. When two companies work together to leverage each other’s strengths, the customer experience improves as a result.