Fintechs and banks are poised to become the next power couple in financial services
Great partnerships lead to iconic duos: Michael Jordan and the ‘96 Chicago Bulls, Batman and Robin, peanut butter and jelly. Some things are just better together — banks and fintechs are no different. Together, they’re more powerful (and profitable) than separate.
Banks possess the data and infrastructure that make modern banking possible. Think of how we rely on banks to store money safely in high-interest savings accounts, issue debit cards, or provide loans. On the other hand, fintechs pair nicely with banks as they enable banks to offer their customers more cutting-edge experiences like virtual cards, giving developers a platform to test new financial apps, and instant access to their financial snapshots.
The partnership between banks and fintechs allows for banks to open their banking data to third-party fintech companies to use their banking solutions and win more business; it also allows for banks to put their third-party data to work to improve customer experience or build new banking solutions without having to reinvent the financial wheel themselves.
Fintech companies rely on existing banking infrastructure just as banks rely on the innovation and speed of fintech companies. Bank partnerships make it possible for fintechs to achieve their fullest potential; likewise, fintech partnerships enable banks to take advantage of cutting edge tech built by fintech companies. Fintech banking and financial services, overall, combine their strengths and provide a better customer experience with fingertip financial solutions.
Banks and fintechs work together via digital banking partnerships to bridge the gap between services that banks provide and the widely accessible solutions offered by non-financial companies, like how Evolve has partnered with Bond to launch the vision of our clients.
Today's customers are used to easy-to-use tech with customization and personalization options build in. Think of how easy it is to use Amazon on a phone, tablet, or website. Now, they demand that same level of flexibility and ease of use from the financial services they have come to rely on. Customers want flexible ways to pay; they want to be able to access their money whenever, wherever, and however they want. The more options they have available, the happier they’ll be — and this can spur the growth of businesses across industries.
By combining the best of both, fintech companies and banking institutions alike can offer more robust solutions to their customers and make their lives easier by providing everything needed in one place. Instead of going to the bank for a credit card and a fintech for a virtual card, a customer can get both in one space.
Heading into the future, it will become even more important for non-financial companies to embed financial services into their business offerings, providing customers with the personalized financial products they want.
For non-financial companies to offer financial products to their customers, they must abide by certain regulations. The main regulation is Know Your Customer (KYC), which is the gateway into gaining trust from customers regarding identity verification. Each bank-fintech partnership model and all bank-fintech partnerships should follow this rule as much as possible in order to deliver the best service possible to their customers. Enterprise fintech needs to keep these standards top of mind, as well.
There are a number of rules within the KYC regulation itself; one involves a customer identification program (CIP). Under this guideline, banks are required to form a reasonable belief as to the true identity of each of their customers. Banks must also comply with customer due diligence (CDD) which states that banks are required to gather relevant info about customers and evaluate potential risks for the organization or money laundering and terrorist financing activities. The enhanced due diligence (EDD) rule mandates that banks gather info to verify the identity of customers, but with additional information required to mitigate risk associated with the customer. Whether you're a long-established bank, a new emerging fintech company, or a non-financial company working with a fintech company to offer new products to customers — KYC is critical. The KYC process helps all parties establish and preserve customer trust while remaining compliant, two key ingredients that are essential to success.
Like any true partnership, benefits go both ways and the benefits of fintech for banks is extensive…and vice versa. Bank partnership examples can prove extremely valuable — especially when the relationship has already been established between the bank and fintech, enabling an easy and swift process of obtaining a BIN (bank identification number) for customers.
Fintechs can also negotiate customer bills and share a portion of revenue with their partnered bank. Additionally, they can create security services that protect against data breaches and identity theft, integrating with financial institutions to provide heightened protection for customers.
Other bank-fintech partnership examples also build products for virtual payments and to move cryptocurrency from bitcoin wallets into bank accounts. There are multiple ways companies benefit from the products and financial solutions that result from bank-fintech partnerships; banks are not the only institutions that offer financial services and fintech companies further prove the value of integrating services between banks and non-financial companies.
Embedded finance fintech can streamline financial processes for customers, providing them with the services they need, when and where they need them. For example, a customer might need to launch a new virtual debit card or roll out a credit card program that rewards loyal patrons. Digital banking partnerships with embedded finance and embedded finance products can offer valuable banking solutions to consumers online.
The difference between fintech and traditional bank services comes down to modern technology — technology designed to improve the use and accessibility of financial services and products — while traditional bank services are offered through licensed financial institutions, like banks themselves. Banks handle financial processes and fintech companies work to make them easier for users.
By integrating fintech products and services into financial institutions’ products and services, embedded finance can help customers access services online. You can’t have one without the other and creating partnerships between the two opens the door to greater customer satisfaction, increased loyalty for banks, and an opportunity for fintech and embedded finance services to gain a broader user base.
Fintech can help improve the productivity of banks. Essentially, banks open up their banking data to regulated, third-party software developers at fintech companies. These third-party fintech companies then build banking solutions instead of having the banks build in-house software solutions themselves. This provides more professional software solutions to banks.
Fintech banks are at a greater advantage because they have more options in terms of the products and services they can offer their customers. Just because they may lack the ability to create these solutions themselves does not mean they are out of luck. Fintech services truly come to the rescue here; banking fintech solutions pull the best features from both traditional banks and fintech companies to deliver quality solutions to their customer base.
An open banking API allows for the sharing of data and information by banks so that financial products can be built by regulated third parties. Whether you’re interested in an open banking app, open banking as a service, or open banking API providers, it pays (literally) to understand the benefits and drawbacks of API solutions so that you can make the best decisions possible for your business. An open banking API platform can be especially useful for managing and sharing financial information.
In recent years, U.S. bank-fintech partnerships have spawned an array of new industries and companies like financial services for the gig workers in the gig economy and a debit card for barbers and barbershops. By partnering and collaborating with their respective resources, banks and fintech have proved beneficial to a myriad of communities — some forgotten by traditional services.
Bond's fintech platform gives banks, as well as non-financial companies, the power to take advantage of its fintech infrastructure. Remember the perfect pairs we talked about earlier? Bond plays the matchmaker behind those pairs.
Through bank-fintech partnerships and the services and technologies that have come about due to this ongoing collaboration between business realms, Bond’s suite of embedded finance solutions are made possible.