Collaboration, Not Competition, Is Key for Fintech Companies

Fintech providers and traditional financial institutions can both benefit from partnerships.

learn more about Michael Carter

By Michael Carter

monsitj | Getty Images

Opinions expressed by Entrepreneur contributors are their own.

For a number of years, fintech companies have been considered a threat to traditional financial institutions. So far, however, this has not been the case, and customer migration to digital-only solutions has remained low.

Related: 7 Things to Consider Before Launching a Fintech Startup

An evolution is taking place in both the new and traditional financial services models, as companies begin to collaborate rather than compete for greater market share. The opportunity is now: A recent survey by PwC found that 82 percent of banks, insurers and asset managers intend to increase the number of partnerships they have with fintech firms over the next three to five years. Before taking the leap on any partnerships, fintech companies and financial institutions have some things to consider. Differing cultures and infrastructures, as well as a variety of regulatory and compliance issues in both traditional financial services and fintech spheres, mean that due diligence must be undertaken if proposed partnerships are not to be derailed.

Here are three key elements to think about:

Consider the cultural fit.

Differing cultures can erode otherwise potentially powerful partnerships. Bringing together dynamic developers with Wall Street suits can be a challenging cultural match. To achieve mutually beneficial synergies rather than disappointment, fintech companies and institutional partners should be willing to collaborate, share data, restructure internally and become more agile. This willingness to adapt must be adopted by both sides of the partnership. Transparency, supported by clear expectations regarding scope, deadlines and success metrics is vital and should be established at the outset of the relationship.

Related: 4 Emerging Fintech Trends Relevant to Every Entrepreneur

Understand your partners' macro challenges and help to minimize them.

Collaboration with fintech providers could help financial institutions to alleviate the significant challenges brought about by the rapid expansion and diversity of the ecosystem in which they are operating.

A second challenge, the unbundling of products to single services, offers an equal opportunity for collaboration. Lloyds Banking Group in particular has adopted a forward-thinking approach to this, strategically targeting fintech startups, like the saving platform Swave, which have solved a single, meaningful problem for a specific group of customers and built a business model around it.

The partnership between my company, BizEquity, and TD Bank has helped the incumbent to engage a specific target audience, business owners, by providing a solution to a specific customer challenge.

Related: How Fintech and Payments Innovations Will Disrupt Global Ecommerce

Leverage data and apply innovation to improve the customer offering.

The deep data sets that financial institutions have at their disposal are some of their most precious yet underutilized assets. Technology can help traditional establishments to release value from this asset by extracting pertinent customer insights using AI and location-based services, helping them to meet the needs and circumstances of individual customers. Simple, user-friendly interfaces can make the customer journey quick, convenient and seamless, while simultaneously collecting data that can be reapplied to improve and personalize offerings.

The emergence of VR and biometric solutions is helping customers interact with financial providers in innovative ways. Advanced analytics, together with a broader range of data sources, have enabled fintech firms to test new risk management and underwriting models, resulting in costs efficiencies and expanded potential customer bases. Clear expectations and agreements surrounding data sharing and ownership must be set at the beginning of any partnership to avoid disappointment, frustration or at worst, data breaches.

Looking to the future, the critical question will be whether collaboration forged between new and traditional financial services providers will be sufficient to stave off the more intense competition that could come from the likes of Google, Amazon, Apple, Alibaba or Tencent as they move into the financial services market. Only by working together can such partnerships hope to deliver the level of personalization, speed and seamless delivery required to retain and grow their customer base.

Michael Carter

Founder and CEO of BizEquity

Michael M. Carter is the founder and CEO of BizEquity and the inventor of an online valuation service that's helping the small business economy. BizEquity was recently recognized as one of the top 360 companies in the United States by Entrepreneur Media for two years in a row.

Related Topics

Editor's Pick

Have More Responsibilities at Work, But No Pay Bump? Use This Script to Get the Raise You Deserve.
Black and Asian Founders Face Opposition at All Levels — Here's Why That Has to Change
Innovation

The Greasy, Glamorous Rise of Mascara

You won't believe the grimy gunk people used to smear on their eyelashes -- and still do.

Business News

'Our Kids Aren't Even Safe To Order Food': Mother Outraged After DoorDash Employee Uses App to Flirt With Teen Daughter

One mom is going viral on TikTok after catching a DoorDash employee attempting to flirt with her 15-year-old daughter through the messaging service provided through the platform.

Business News

An NFL Rookie Scores a $514,000 Jackpot in Las Vegas

Los Angeles Rams running back Ronnie Rivers sat down to play 3-card poker and left a half million dollars richer.

Business News

Police: 82-Year-Old Woman Found Alive at New York Funeral Home After Being Pronounced Dead

The woman was found breathing almost three hours after she was pronounced dead.

Business Ideas

How to Make Thousands of Dollars on the Side As a Virtual Assistant

Apply your skills and experience to create a lucrative virtual assistant side hustle or full-time business.