As the financial services industry continues to traverse a changing landscape, companies both old and new are considering how best to compete. Behemoths such as Google and Apple are fundamentally changing the way consumers spend, and tech giants are on the path to make today’s financial ecosystem unrecognizable.
While fintech companies have served as innovators and highly agile boundary pushers, the looming threat of tech titans moving into financial services has some fintechs feeling a newfound pressure to keep pace. For many, this means increasing collaboration through smart partnerships that ensure both companies’ long-term viability. Rather than being at odds with one another, fintech companies and traditional financial institutions are both reaping the benefits of working togetherto retain and grow their market share.
But not all partnerships are a match made in heaven. In fact, a poorly planned business relationship can be a major headache for everyone involved and could create situations in which businesses see a downturn in customer satisfaction, and even decreasing revenue.
When it comes to implementing successful fintech partnerships, keep these three main factors in mind:
1. Establish common ground. Before embarking on any partnership, the players should establish whether their missions are compatible. Without alignment on the driving force behind doing business, i.e. the “why,” it’s unlikely the relationship will be symbiotic.
There is no one-size-fits all, plug-and-play partnership model. While a partnership model may work with one group, it might not be suited for others. Each potential partner must be vetted to ensure success on both sides. This is one area where company culture really matters, and while cultures don’t need to be identical, they should at least be congruous. It might be possible to do business without this, but there will be far fewer bumps in the road if teams are aligned around shared values early on to ensure compatibility.
As an example, traditional banks and fintech companies have begun partnering to fight fraudand create more seamless user experiences. These symbiotic relationships foster deepened innovation in the industry while benefiting both the participating companies and their end users. In this respect, the best partnerships are formed around a deliberate and strategic goal, shared emphatically by each partner organization.
2. Create a plan for scaling the partnership and expanding its scope. Any partnership’s success will depend on building in contingencies for changes in the industry, allowances for each partner organization’s changing needs and even plans for unforeseen demand.
Once these plans are set in motion, data takes the lead. By monitoring and closely watching performance, businesses can ensure corrections are made in a timely manner. While customer satisfaction is already top of mind, partners must zero in on these metrics within the partnership, identify gaps in service and use this information to determine whether the partnership is performing at peak. After launching a few successful partnerships, this data can also help set realistic expectations for future relationships.
In the financial services space, trust and referrals are tantamount. When partners refer clients to another service provider, its team must do everything possible to ensure a positive and seamless experience, which in turn strengthens the client’s loyalty to the referring business.
Especially within the fintech space, technology cannot take a back seat. Integrating technology to create a seamless experience, both for the end user and internal teams, is an essential part of any winning business partnership. Product and development teams should be involved at the outset to ensure relevant systems can communicate readily.
3. Support implementation and measurement. A partnership’s success hinges on a strong internal launch program to educate team members on the mission, process and specific goals. When companies strive to create as little extra work as possible for their partners, this enables them to focus on doing what they do best.
While bank-fintech and fintech-fintech partnerships have been referred to as standard operating procedurenowadays, successful co-branding strategiesbetween fintechs and companies outside the financial services space are also becoming commonplace. To access core markets outside their current reach, many companies are turning to co-branding projects with major players in varied industries.
Within the discovery phases of such partnerships, participating companies must set clear expectations for co-branding. Creating products and selling services that align perfectly with both brand’s guidelines and values can be a challenge, but if both parties are on the same page beginning with the implementation stage, it’s entirely manageable and potentially game changing.
The classic Peter Drucker quote, “If you can't measure it, you can't improve it,” applies in spades here as well. When building a co-branding strategy, data can help to first identify customer pain points, and then once through the implementation phase, continue to inform and optimize product development and solutions.
In an industry where it’s increasingly important to carve out a niche while also providing top-notch services to a broad base of customers, both start-ups and legacy financial institutions will look to more partnerships, as well as co-branding programs with companies outside the financial realm. While these relationships can have great benefits such as cutting costs, boosting revenue, expanding the customer experience and more, they should always be approached in deliberate, strategic and mutually beneficial ways.
Denada Ramnishta is head of business development and partnerships at Lendio, the largest small business financing marketplace in the U.S. As a fintech executive, Denada has led strategic partnerships with U.S. and international corporations, executing business strategies across borders and under challenging market conditions.