Of the various trends and changes driving the financial services industry at the moment, one that has prompted a lot of discussion is the growing importance of collaboration between established financial institutions (FIs) and smaller, emerging service providers, most notably fintechs.
While these parameters are likely to vary depending on the business and the project in question, there are some key characteristics established FIs will be looking for when considering a possible fintech collaboration.
- Agility – Larger institutions are often hindered by their size when it comes to developing and rolling out new products, or providing new experiences to their customers. Fintechs can offer the agility required to respond to trends in the market and changing consumer needs.
- Tech innovation – One of the descriptions often used to characterize fintechs is that they are, first and foremost, technology companies, which use their expertise and innovations to come up with new ways to provide financial services. Bigger organizations that are still reliant on legacy infrastructure can gain real benefits from this forward-thinking attitude.
- Proven results – It’s important to have confidence when entering into a new partnership, so look for potential collaborators that, regardless of their size and experience, have shown that their methods can deliver tangible results.
- A good fit – The firm you choose to work with should complement your own in some way – in terms of its philosophy around customer experience or long-term ambitions, for example. This will maximize the likelihood of the businesses working well together and pulling in the same direction.
- Flexibility – A successful collaboration between two businesses is a two-way street, with some give and take likely to be required on both sides. If you are considering working with a fintech, make sure you feel satisfied that your prospective partner is able to show the flexibility required to make the project a success.
- Risk – It is important to consider the risks of working with fintechs, many of which are in early startup phases with unproven operating models or results. This should not deter you from the opportunity of working with highly innovative companies, but as an organization you need to understand your appetite to risk as part of any partnership.
Once the collaboration is underway, it’s crucial to have clear processes in place to measure success.
Introduce some key performance indicators (KPIs) to help you gauge the results of the project on an ongoing basis and determine if you are receiving a worthwhile return on investment. Possible KPIs include:
- Customer feedback and satisfaction with partner-led services
- Revenue or leads gained as a direct result of the collaboration
- Cost reductions and efficiencies gained through partner technologies
- Partner adherence to targets and deadlines
Evaluating performance against these and any other relevant criteria can help your business to make timely decisions about how the collaboration is progressing. If you are not satisfied with the results, be ready to implement meaningful changes or make quick decisions about whether the project is deserving of further investment.
Collaboration with fintechs is not a one-off exercise, FIs looking to stay ahead of their competition need to continually evaluate the commercial opportunities and identify the partners to help them achieve those goals.
In cases where collaboration between established FIs and fintechs is successful, the businesses involved will be in a strong position to meet future challenges and seize opportunities in a rapidly changing industry.