With Fintechs growing stronger every day by taking a bigger part of the financial market, banks have become more open to collaborations with these young companies. Those collaborations present a great opportunity for banks not only resulting in increase of revenue, but most importantly innovation.
Studies show that many banks have already established partnerships with Fintechs. According to the UBS bank management survey of 61 big banks, 38% have a partnership already – a number that’s only going to rise in the upcoming year. Different banks have approached the competitive Fintech sector in a variety of ways. Banks such as JPMorgan have teamed up with Fintechs. FinLeap’s venture Savedo has established collaborations with several European banks. Wells Fargo has established an in-house Fintech lab center, so they can get ahead. Across the pond, Deutsche Bank recently teamed up with an accelerators to support Fintech startups. Other examples include FinReach’s collaboration with DKB and Hypovereinsbank.
Not only do Fintechs gain benefits from collaboration, but also banks. The first benefit is simple: revenue. The report by UBS bank management mentioned above also predicted that Fintechs could contribute to a 3.8% bank revenue increase in the next three years. The other benefit is more complicated. It comes from the idea of “Startup driven innovation” – the fact that existing banks can no longer rely on just linear thinking. This is where Fintechs come into play. Fintechs have a new way of approaching the financial industry that is not tied down to a legacy of operations. They often provide services that are faster, easier, and/or cheaper than the banks. At the same time, banks can help Fintechs deal with regulations, gain a much larger customer base and access more capital. In other words, these partnerships will become a way to fill in the gaps, so banks and fintechs can complement each other.
Collaborations between banks and Fintechs can be very beneficial, but they are also very challenging as the organizational cultures between the two differ greatly. This means that culturally, banks and fintechs will have to adapt to each other while trying to avoid unnecessary dependence. To truly gain all possible positive outcomes, banks must really understand the partnership with Fintechs and all it entails, which might intend putting a limit on the collaboration at certain points.