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How to Create a Successful Fintech Partnership

May 29, 2018
Kevin Tweddle, Group Executive Vice President of Innovation and Financial Technology, ICBA

What is Fintech?
If you asked ten people to define “fintech” you’d likely get ten different answers. (You may also get a few four-letter words that aren’t fit for print!) Fintech is an economic industry composed of companies that use technology to make financial systems more efficient. Or to boil it down even more - fintech is the intersection of financial services and technology.

Why are community bankers using fintech providers? Quite simply, banks are using fintech companies to provide solutions that can be:

  • Faster: faster to market.
  • Safer: may provide a higher level of security to customers
  • Simpler: may offer a more frictionless interface for customers
  • Cheaper: may offer more favorable price point for customers

When going through the “Build-Buy-Partner” process, community banks more often go the partnership route due to these four factors. Given the battle for talent, competitive pressures and the need for efficiency, partnership provides more of a “win-win” for all stakeholders.

The four primary reasons community banks engage fintech providers, or frankly any solution provider for that matter are to:

  • grow revenue,
  • lower costs or gain operational efficiencies,
  • mitigate risk or fraud, and
  • improve the customer experience and/or gain a better understanding of customer activity.

How do community banks organize for successful fintech partnerships? In working with fintech companies, the following traits are critical to success:

  • Leadership. Going down the fintech path increases risk and potential failure. This requires a more educated and committed leadership team (both the executive team and the board of directors) to take a longer-term view, be open to change and be comfortable with learning from “fast failures” to improve over the long haul. Innovation should be built into the fabric of your strategy and not some committee buried in one of the departments.
  • Education. It is critical to educate your leadership and entire organization, so they understand what innovation options are available. They must also continuously monitor industry developments and keep a leg up on the competition.
  • Simplicity. Nothing kills a solution faster than making something so complex that it is difficult to use or understand.
  • Use cases. Make sure your fintech partner is solving a high priority problem for your current or potential customer base. Separate the “this is cool” hype from the actual solving of a relevant business problem and good things will happen.
  • Collaboration. Enterprise-wide collaboration is required for success. Having a diverse team, both culturally and organizationally, will yield better results. There also needs to be a point person accountable for fintech efforts with a direct reporting line to the top of the house.
  • Talent and Incentive. This is easier said than done. The folks you have executing fintech partnership efforts need to have a strong understanding of banking as well as strong technology and communication skills. Tough to find these days but it can work by developing internal staff and expanding their skill set and/or by bringing new skilled personnel on board.

Fintech partnerships will most likely become a critical part of your overall plan to generate more innovative solutions for your customers and a more critical part of your overall strategic planning process. Change and education will be constants going forward and strong fintech partnerships can be your recipe for success to staying relevant and thriving as a community bank.

ICBA recently released its Fintech Strategy Roadmap for community banks as they increasingly work in partnership with fintech firms to deliver services to their customers. This roadmap offers a look at how community banks can successfully create, collaborate, or invest in fintech partnerships while providing necessary considerations to ensure these strategic decisions fit within regulatory risk parameters. Download the Fintech Strategy Roadmap (member log-in is required).