Both danger and opportunity, fintech startups are a double-edged sword for the world’s biggest banks.
Fintech companies, such as those that make it easy to lend money online, threaten traditional financial institutions by stealing from their consumers. However, fintech companies that help banks make better choices, increase efficiency, or serve consumers through digital channels offer many exciting opportunities.
Some banks may see fintech as a threat, while others see it as an opportunity to integrate their solutions and learn from their digital approach through a partnership. Collaboration can deliver quantifiable results if approached correctly. This article will focus on the main benefits for banks of partnering with fintech companies and the problems that can be solved through the partnership.
Benefits of Fintech and Bank Partnership
Several fintech companies are explicitly looking to steal market share from big banks, while others are better placed to work as partners. FinTech companies are often young startups with little capital and a modest physical presence. Their creativity and speed could be a perfect match for the size and resources big banks have to help innovative solutions thrive.
Large banks can benefit from several advantages when working with fintech startups. Innovative products and services aimed at specific markets can help large banks gain a competitive edge. Fintech startups are often born out of a unique innovative solution or service that addresses a market need not previously served by traditional financial institutions, such as peer-to-peer lending programs.
Additionally, as the world becomes increasingly digitized, banks are embracing digital payments. To make their services more sophisticated for their customers, banks have started partnering with fintech companies. In fact, Wallester is one of the most prominent companies that provides banks with card-related services. For example, with the help of the API, as shown on This site, the chances of falling victim to scammers and hackers can be significantly reduced. Over time, more and more hackers are stealing the private information of banking consumers; however, when banks choose to rely on Wallester’s solutions, the chances are minimized. In addition, customers can take advantage of fast payments guaranteed by Wallester. The fact that the company helps banks become more efficient and attractive to customers confirms that fintech companies and banks can have a beneficial partnership.
It is possible that new goods and services, if in demand, will allow large financial institutions to improve their products. Fintech companies provide specialized solutions to a wider range of customers. People can make a purchase on the Internet and pay for it later using services that allow them to pay for their purchase later.
Loyal customers of major financial institutions will be attracted to this viral invention. Other fintech companies can improve financial transactions and procedures. Consumers at big banks could benefit from new services such as online notarization, AI-based banking security and bill payment. Many banks will need fintech partners in their B2B and B2C businesses to develop their growth strategy. Big bank customers are demanding more online functionality than ever.
Faster time to market for banking solutions can be achieved by collaborating with fintech companies. Banks partnering with fintech can better serve customers and lay the foundation for long-term growth. Anyone who uses new technologies to digitize financial services or improve transactions and procedures is a fintech company. Global fintech activity was worth $7 trillion in 2020.
What the future holds
Fintech companies can help banks compete with non-bank companies that are getting into embedded finance. The Economist Impact survey found that only 12% of bankers saw the growing competition from fintech, while nearly half said they had cooperated with fintech in the past year. Financial technology (fintech) was once seen as a threat to established banks. Today, it is seen as a source of mutual benefits for incumbents and newcomers and an increase in collaborations to fight non-financial competitors.
A bank or credit union that “walks away” means that it has strategically decided to “join them instead of fight them”. For payment or lending services embedded in a non-bank product, incumbents can use the technical skills of fintechs and reap the benefits. As with conventional institutions, neobanks use their charter to offer insured deposits and other capabilities in the form of banking service providers.
Treasury Prime, Synctera, Unit and Bond are just a few of the fintech companies that McKinsey mentions as having formed specifically to work with banks to broker BaaS and integrated banking relationships. Although some banks are still reluctant to partner with these or other fintech companies, this stigma must be overcome to remain competitive, especially for banks that lack significant in-house IT skills.
“Many banks worry that selling their products through partners will undermine their relationships with their customers, but banks may have a small alternative if end users start using in-app financing in significant numbers,” says McKinsey. Allowing partners to sell financial assets is great news for banks because it is a low-margin, high-volume business. It is not uncommon for banks to be burdened with high operating costs due to outdated technology and manual procedures.