Traditional financial institutions have historically viewed FinTech firms with caution, but their attitude toward them has transformed in recent years. FinTechs are no longer seen as intruders in the market by established financial institutions – instead, as helpful partners to achieve new goals or enhance client engagement.
FinTech firms continue to disrupt the financial services industry as innovations enable them to seize endless opportunities. Financial institutions can leverage this disruption to learn how to adapt and remain competitive, capitalising on potential growth prospects. This involves learning from the success of FinTech enterprises and building on their established reputation for dependability and security.
We previously published an article exploring the takeaways from Future Processing’s roundtable and how FinTech is shaping the future of FinServ. In this piece, Jarosław Granat, Head of Client Engagement at Future Processing, Ian Max Ewart, CRD Advisor at Acin, and Irfan Khan, CEO of mmob, will discuss the collaboration possibilities between FinServ institutions and FinTech firms.
Driving Strategic Collaboration
If you cast your mind back, FinTech businesses were viewed as competitors attempting to divert FinServ consumers. However, as traditional financial institutions realised that FinTechs were striving toward the same objective, the concept of partnership became the only innovative option. The lacklustre attempt, by financial institutions, to transform the customer experience accelerated the transition to partnering with FinTech start-ups. Not only did collaboration speed up the process of innovation to make meaningful change, but it also inspired true strategic thinking to stay ahead in a rather competitive landscape.
Working in silos, financial institutions frequently overlook opportunities to support growing enterprises – strategic collaboration is the solution to bridging this gap. FinTech firms may offer traditional financial institutions the agility, speed to market, and, of course, technology to improve their online customer experience, increase efficiency, and even expand their customer base. Financial institutions bring institutional knowledge, liquidity, and experience to the table, as well as a large client base and access to financing, which is the foundation of innovation.
According to the 2022 Edelman Trust Barometer, 63% of consumers distrust their current bank to assist them in making decisions regarding their financial well-being. Consumers are sometimes hesitant to seek assistance and guidance from traditional financial institutions because they lack trust in those organisations. In contrast, individuals have significantly more faith in technology firms than they do in financial institutions. The Edelman Trust Barometer states that 74% of people trust the tech industry and 84% of tech firm employees trust their employer.
When traditional financial institutions collaborate with FinTech firms, they can profit from consumers’ increased trust in such companies. When financial institutions and FinTech firms collaborate, they may benefit from ongoing shifts in consumer behaviour and heightened technological dependency, as well as the increased trust individuals, have in the tech sector, to develop services that successfully communicate with customers.
When it comes to possibilities to collaborate with traditional financial institutions, FinTech executives must approach these partnerships with a desire to truly understand the pain points that financial institutions encounter, as well as a high level of understanding for the regulatory scrutiny that they must adhere to. As the negotiations and the contract advance, both sides must establish a clear common ground, set KPIs for a successful collaboration, and enact adequate medium and long-term protection for their goods and services.
The financial services sector is changing at a rapid pace. Instead of vying for a piece of the old pie, they’re collaborating to make the new pie bigger, based on the core strengths of each firm. As a result, integrated FinTech will affect and shape the financial sector for many years to come. These two entities should continue to collaborate in order to remain viable, competitive, and relevant since it has a significant influence on long-term growth for all parties, but only if the overall partnership strategy and objective are clearly aligned.
Each entity will have distinct motives and goals for establishing a partnership. With this in mind, they must define what success means to them from the outset of the collaboration. FinTech enterprises stand to benefit from increased commercial and collaborative opportunities. Financial institutions will be able to expand their digital capabilities in order to meet the needs of a new generation of banking consumers.