Financial technology companies have been around for more than 100 years, and banks have long allied with them to deliver services. But, more recently came the rise of fintech startups. Banks and fintechs initially sought to compete. These days, they are thinking differently about each other.
Banks and fintechs are combining their strengths for their mutual benefit. The positive impact of the partnership is helping to support new business models and better ways of doing business, with far-reaching implications for clients and markets.
The partnership imperative
A collaborative approach has never been more important. The rise of digital ecosystems and accompanying regulatory changes to foster open banking have been key drivers in the evolution towards bank-fintech partnerships.
Open banking regulations have aimed to cultivate banking innovation while strengthening security for electronic payments and protecting financial data. They support an ecosystem approach to financial services delivery, for example, fostering the use of Application Programming Interfaces (APIs) that facilitate real-time interactions.
That’s vital amidst the increasing expectation for on-demand commerce and its impact to corporate treasury and finance as well as a company’s network of suppliers and partners. The COVID-19 pandemic has been a global accelerator of e-commerce and of the corporate urgency for digital solutions that enable real-time treasury and finance.
Combining complementary strengths
A strong model for an effective bank-fintech partnership involves identifying complementary skill sets and mutually supporting areas of expertise and capabilities that combine into unique value propositions. The resulting propositions, stronger than what a bank or fintech could deliver on its own, aim to solve practical problems and advance strategic objectives for clients and markets.
Banks excel as trusted providers with fiduciary responsibility in longstanding client relationships. They combine financial stability and scale with expertise in banking, regulatory, and compliance as well as having secure connectivity to banking infrastructure, such as payment clearing systems. Fintechs are known for disrupting entrenched ways of doing business. They bring agile execution of the latest technologies, with a key focus on digitalisation, to accelerate speed-to-market. Both partners should bring innovative approaches in which each offers unique attributes and insights.
A partnership approach accelerates client access to that innovation. Meanwhile, banking clients can take advantage of the stringent due diligence that banks bring to vetting their fintech partners.
Connecting communities into more effective and efficient networks
Banks and fintechs each have their own client ecosystems. A partnership approach links these ecosystems while simplifying the connections between participants to make it easy to do business. A key benefit of joining forces is to connect communities efficiently, transparently, and securely to better manage risk, efficiently operate, stabilise supply chains and sources of working capital, and to enhance their performance - this becomes a platform for accelerating growth.
This affords an opportunity for a new level of interoperability that addresses longstanding challenges and enables transformational change for clients and their networks. Better, more efficient, and more effective ways of operating become the basis for successful new business models for both digital-native companies and for traditional businesses that seek to digitally connect to remain competitive.
Big ambitions for transforming the banking experience
At Standard Chartered, fintech partnerships are powering digital-first banking services that address diverse client needs. In the last 12 months, our partnerships and ensuing new capabilities have helped clients to connect quickly, easily, and seamlessly to banking services while improving financial access for their clients and suppliers or other ecosystem members such as institutional investors.