Fintech companies and banks would appear, on paper, as competitors. The traditional banking system has had a watchful eye on fintech companies for some time now as they’ve begun to dominate the industry with new ideas of digitization, automation, and simplified processes. Suddenly, new ways of banking have become a viable option. And the truth is, when clients have the opportunity to receive more services, faster response times, and a simple-to-use digital platform from a competitor, they might leave you.
But they don’t want to, and nor do they have to. They’ve put time and energy into this relationship just as you have worked to build trust and loyalty in your bank. Fintech companies and banks can form strong and valuable partnerships that help your bank retain customers and continue to grow your bond of trust. With the right fintech partnerships, there’s a win-win. The financial services and tech industry continues to thrive and bank customers benefit from a more secure and automated AP process.
What are the Benefits of a Fintech Partnership?
Consumers are becoming increasingly untrusting of traditional banking institutions, due in part to scandals from banking giants like Wells Fargo and Bank of America. In fact, when surveyed, only 32% of people said they had high confidence in banks. On the contrary, the amount of trust people have for technology companies is a bit higher. A 2019 survey by Edelman Trust Barometer found that three-quarters of people trust the technology sector. As peoples’ preferences continue to shift towards financial technology companies, a partnership with a fintech company likely makes sense for the longevity of your banking business.
Some of the benefits of a fintech partnership include:
- Larger Consumer Base
- Brand Reputation
- More Functionality
- Ease of Use
Let’s dive into these benefits of developing a partnership with a fintech company.
Larger Consumer Base
A fintech partnership allows each company to leverage the other’s existing consumer base and broaden their reach as a whole. Maybe a particular bank has been very good at reaching older folks, but their fintech partner has been struggling to do the same. The fintech company receives the benefit of tapping into this new demographic and the bank can leverage the fintech’s ability to reach younger consumers. It’s a win-win for both.
If one of the partnering companies has a particularly good brand reputation, the other partnering company can capitalize on this when working together. For example, maybe the fintech company has a positively reviewed app. If the bank’s name is added to the app, it creates a positive association in the consumer’s mind.
A partnership with a fintech company allows you to offer updated functions and features to consumers. For example, maybe the fintech company offers accounts payable automation which can greatly boost your bank’s efficiency.
Ease of Use
When a bank forms a partnership with a fintech company, the bank can benefit from the fintech’s technical expertise and knowledge to provide consumers with the best user experience possible. After all, consumers want to be using online banking features and apps that are easy to use and provide an advantage over the traditional banking system.
What are the Different Types of Fintech and Bank Partnerships?
Fintech partnerships help your organization retain customers and grow your bond of trust. Here are 5 partnership models that you can consider when looking at fintech partners.
1. Referral Partnership
With this model type your institution earns a commission for referring customers to your fintech partner. You still vet your fintech partnership before offering any services. If your institution does not have the resources to invest in managing a new offering, this model may be what you’re looking for.
2. Assisted Private-Label Partnerships
A very common partnership where both your institution and your fintech partner bear responsibility and control over the customer experience. At the end of the day, your institution gets all of the benefits of fintech technology without having to do all of the work.
3. Private-Label Partnerships
Your institution purchases the fintech solution, customizes it, and sells it to your customers. Your customers will most probably never see the fintech company’s name anywhere on the product. You can bring a bank-branded product online and maintain a seamless experience for your customers. There is, however, more internal resources required from a sales, marketing, and support standpoint.
4. Small Business Loans
This allows fintech companies to focus specifically on developing loan programs for small businesses. The company can leverage the lending ability of a traditional bank where they otherwise might find it difficult to get financing from traditional lenders.
5. Debit Cards
Some partnerships involve banks distributing debit cards or offering a payment card program. This can be appealing to users who may not be connected to a bank or may be hesitant to open an account with a traditional banking institution. On the other hand, some fintech companies will offer their own secure, virtual card payment method – like MineralTree’s SilverPay.
You have to ask yourself, which model is right for your institution? Assess your current resources; staff, collateral, and time and determine which model best suits you and your institution.
One thing is for certain; our future is one that will be constantly evolving and the need to provide customers with the services they desire will be more present than ever before. At MineralTree, we are dedicated to keeping up with shifting consumer preferences by offering a fully-automated invoice-to-pay solution that provides access to payment execution directly from your bank account.
Ready to learn more? Request a demo today!