A recent article in Raconteur's "Future of Banking" supplement in The Sunday Times (U.K.) posed the following question:
"Can banks and fintechs ever work together?"
The short answer is of course yes, they can – but with a number of essential caveats that need to be considered in order to promote harmony and success with these types of collaborations.
Many banks are either partnering with or even acquiring fintech businesses in an effort to rapidly introduce more innovative products and services. However, the relationship between the banks and the fintechs can be tricky, especially since both entities
are accustomed to being competitors. Furthermore, their cultures are often vastly different, and clashes can easily ensue when the fintechs – with their high-risk appetites and a need for speed – are brought in to work with traditionally risk-averse banking
We must recognize that the culture of every business is different and is constantly changing. Incorporating a risk-taking culture into a legacy bank is exciting and can spur on innovation, but there are lessons to be learned on both sides. For example, incumbent
banks have the experience and in-depth understanding to offer fintechs valuable guidance on data protection, transaction security and customer retention, all of which are fundamental to a fintech scaling.
As the banks and fintechs begin to work more intimately, they need to learn the right lessons in the right way, with the right leadership. There is no doubt that this collaboration can work. But, if this collaboration is taken the wrong way, that is when
innovation can be stifled or customer security and retention can be compromised.
Tension and collaborative conflict is natural, and is actually a good thing provided that each camp embraces the notion that "1+1 = 3", where the desired result is purposefully meant to be more than the original assets each party brought to the table. Mutual
respect should prevail. Financial institutions must recognize the fintech is offering capability that the institution itself could not, and any "Big Brother / Younger Brother" undertones must be squashed. Likewise, fintechs need to seek and respect the financial
institution's expertise regarding financial services requirements. Both parties must apply constructive criticism appropriately.
Another success factor is for the fintech to be confident in its solution vision and direction; the fintech should not blindly accept all requested changes from the incumbent bank which could quickly take both parties off course and threaten the traction
needed to progress in the engagement.
The best outcomes thrive in the tension that exists between challenging the status quo and driving robust stability in a healthy balance. The banks and the fintechs must each be willing to think and behave differently, and have the patience to "measure twice
and cut once".