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Banks that wish to succeed in today’s competitive business environment cannot solely rely on a few leaders but should find ways to collaborate. It is crucial to understand that the most exceptional progress and effective decision making is not boosted by a lone man but by the collaboration of many minds. In this article, we shall discuss Collaboration in Banking.
As technology evolves from day to day, healthy competition between banks and fintech has significantly helped in driving solutions for the world’s payment problems. Bank-fintech collaboration is the key to the future.
The industry has also seen the advent of new technology that has disrupted the banking and payments ecosystem. There has been a rise of tech companies that will no more be classified as historical as fintechs are looking to gain more control of the business banking and payments.
With partnerships and investment relationships, banks can understand the technology better and can contribute to the fintech’s overall business strategy without taking complex acquisition and business integration steps.
The regulators play a crucial role in influencing the nature of collaboration between fintech and banks, but changes in customer demand will be more crucial than the regulatory factors for long term collaboration between banks and fintech. Today, there are fewer barriers to bank and fintech collaboration as compared to earlier days. Resources and technology capabilities may come in the way of some collaboration; however, the advancement of technologies like APIs (Application Programming Interfaces) will allow banking and fintech to work together in the future.
The greatest challenge to a successful collaboration will be the alignment of the bank and the fintech around what is crucial to each party and how the success of each party can be measured.
There are multiple benefits of collaboration between banks and fintech. In order to get those benefits, smart collaboration is required.
Following steps can help in collaborating smartly-
As the market keeps on changing and evolving, banks and fintech’s require staying agile, and they cannot afford to be complacent. They must ensure that their systems constantly adapt by staying agile.
The process of innovation is critical, and its process is not easy. It takes time to get innovative ideas to the market. Innovation is a pre-requisite and a focal point for future partnerships. Through innovation, banks and fintech can ensure that they are ahead of customer’s ever-changing needs.
Banks must demand a strong partnership with fintech that helps them to keep up to date about compliance, regulation, and licensing requirements that are vital for business and collaboration.
Banks and fintech are required to stick to their strengths with regular dialogue to align strategically with themselves and with any stakeholders involved.
Banks and fintech are required to take accountability of existing customer data, big- data models, and automated decision making and work vigorously on testing business resilience.
Banks must demand the highest level of security from their fintech partners as it is a crucial element.
The need for collaboration can be emphasized by studying the following factors:
Due to the vast amount of data, fintech start-ups have gained traction. With the advent of some innovative ways, they are offering products successfully and distinctive solutions for consumer demand. The growing popularity of fintech makes it even more crucial for banks to enter as soon as possible for the timely adoption of the technology.
The collaboration will provide the perfect path for leveraging the full potential of the technology and will allow them to satisfy the demands of digital-savvy users.
The appetite of digitally active consumers has risen significantly in the recent few years, and there are more consumers who are aware of the fintech facilities now as compared to earlier.
For startups, collaboration with financial institutions shall provide access to funds for future growth. With collaboration, their businesses are more likely to be scalable and sustainable in the long run.
For banks, such collaboration would result in a data-driven approach with reduced costs, less redundancy, solid technical knowledge, and increased efficiency. Banks can also mitigate structural costs and provide employees with more time for value-added tasks, thereby enabling enhanced regulatory compliance.
The focus must be on customer needs going forward as it the foundation for building strong collaborations. Without it, there is a risk of innovating for the sake of innovation and without any customer purpose.
Some of the goals that can help in successful long term collaboration in banking are as follows:
With multiple trends in consumer banking, fintechs arrived at the scene as a disruptive force in the financial services industry that intended to eliminate the dominance of established banks. However, the theme of disruption has evolved successfully to collaboration. The framework for successful fintech partnerships with banks includes strong alignment of strategic goals, establishing common ground, and implementing success metrics for the partnership. With a view to stay viable, competitive, and relevant, banks and fintech must continue to partner with each other in some way or the other as it can have an impact on long term growth, but it is possible only if the overall strategy and goal are in alignment.