Fintech - Bank Partnership - Friction Part 1

Fintechs have started collaborating with banks across multiple areas and have begun helping the bank in building innovative products / services. This collaboration is happening across lending, deposits, payments (UPI leads the way), investments etc.

This new relationship amongst Banks and Fintechs is creating immense pressure on bank’s internal systems, structures and processes as they are typically built for usage by their customers / employees through their own applications. Key areas of concern on bank side include KYC, Credit Validation, Security, Process Automation, Audit, Scale, Financial Viability etc.

Similarly, from Fintechs perspective, dealing with many banks causes pressure on their precious resources i.e. senior management’s team as well as time to market.

Key Insights for Frictionless partnership with banks are:

• Get a Sponsor: 
  • Founders should focus diligently on getting a sponsor at Board level / Top Management level for the partnership. In the current model, banks may have too many internal teams (Fintech teams, Digital teams, Business teams, Technology teams and more) tying up with Fintechs without clear sponsorship at management level. This results in competing priorities internally and potentially the partnership can get lost in execution. S
  • Sponsorship at Board / MD / Business Head level will help in getting through the execution. Getting sponsorship at right level is directly linked to business value and innovation that the partnership would create.

• Get Clear Ownership
  • Identify the owner in the bank, appointed by the sponsor, who will execute the partnership and will be accountable to the sponsor. Sometime, Fintechs may have right sponsor, but without clear owner on the ground, the partnership may just go down the drain.

• Be Ready to invest in Compliance
  • Most of the Fintech partnerships tend to push compliance function to its limit. It is best for Fintechs to get a Compliance person as an Advisor to help in aligning with banks. This may initially appear to be a large investment, however, this may save the day for Fintechs.

• Get Ready for Technology Integration
  • Technology integration is the Elephant in the Room. This is complex and costly affair for the bank as well as Fintechs. This process is normally iterative and lack of clarity generates sense of despair on both sides.
  • Before approaching the bank, Fintechs may document end to end solution. This would include functional as well as technical integration requirements amongst Fintech, Banks and Third Parties (CIBIL, E-KYC etc). The cloud approach should also be documented with clear security mitigation approach.
  • Multiple rounds of face to face discussions should be done with Technology as well as Security team for ensuring that the work is clearly identified and executed.

More in the next one….