In a world where bank-fintech partnerships are the best hope for payment innovation, Matthaeus Sielecki, Head of Working Capital Advisory, Deutsche Bank, explores what constitutes best practice for such alliances in Finextra.
With the financial services sector undergoing digital transformation, Sielecki notes that not only are products and services changing, business models and approaches to industry disruptors are also being radically reframed.
Sielecki argues that rather than seeing technology firms as competitors, both banking providers and technology companies are quickly learning to think of each other as potential allies as they negate each partner’s weaknesses by drawing on the other’s strengths.
But for those companies considering such partnerships for the first time, what exactly should they be looking for? Above all, Sielecki points out that prospective partners’ core competencies should be complimentary, not competing. Typically, the bank partner will contribute its extensive customer experience, tried-and-tested operational capacities, and well-honed risk management and regulatory expertise. In turn – alongside a high degree of technical competence, innovativeness and knowledge of online behaviours – tech partners must be able to facilitate working outside the restrictions of bank culture and processes to deliver swift responses to market needs.
Sielecki explains that, once identified, prospective partners must choose a partnership model that suits both their objectives, as well as the type of organisations involved. Sielecki identifies three models that seem to be most popular. The first consists of a technology player partnering with a financial institution with no existing retail banking presence. In a second model, a traditional bank can become a central platform connecting disparate and niche services from an ecosystem of alternative providers. The bank acts as a depository of trust, managing customer relationships, thus liberating the fintechs to meet customers’ banking needs at various points of the value chain. The third model might see a bank collaborating with technology players to offer customers banking services seamlessly integrated into, and perfectly embedded in, their daily lives using a combination of virtual channels.
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