Changing perspectives on the Bank-Fintech relationship

Of James AllumSVP Europe, Payoneer

HTaking advantage of perspective is a wonderful thing. We have witnessed fintech’s transformation from a niche concept to a regular industry, and we have seen a lot of change. More customers, improved business models and a thriving ecosystem. An important change is the approach to the banks.

In the early days of the industry, many players emerged with a confrontational and almost tiring approach to the established banking system. Banking the unbanked, cracking the banks or even replacing banks – these were the high ambitions of many fintech companies. But as the industry has matured, there has been a recognition that in order to create a financial system that truly works for everyone, there is a role for everyone.

A change of approach

There has been a shift in thinking across the industry based on a mutually beneficial relationship. Banks have recognized the role fintech companies can play for them. For example, most banks are focused on a single market and serve their customers in that market. So when it comes to global payments, working with a truly limitless player in the global digital economy can help bank customers repatriate global revenue back to local banks. Banks can fully integrate this into their platform or mobile app, so they can maintain positive customer relationships and avoid having to send people to third parties.

From the point of view of fintech companies, there are a number of benefits to engaging in a real partnership with a bank. These partnerships can expand your customer base, offer opportunities to scale and ultimately drive growth. Established banks still have the keys to the financial system, and in order to innovate within that system, companies must accept it and look at how they can utilize that position.

Build strategic relationships

When you want to build strong banking partnerships, it is important that companies know that they are in it in the long run. The process of identifying the right partner and building synergies takes time and to get the best results it is a clear and sometimes quite long process. As such, it is important that companies are always in the market and make connections and have conversations. We recently attended Money 2020 in Amsterdam with a number of fintech innovators, which is a good example of a place where exploratory conversations can serve as the first step on the journey to a fruitful partnership.

Ultimately, it’s about building trust and it takes time. These early conversations are centered around understanding a potential partner’s challenges and strategic focus. When it is clearly outlined and the benefits of a partnership have been confirmed, that is when the work really begins. Advertisements must be negotiated and agreed before the real collaboration takes place during the integration period. It is then about building a service in collaboration and going through a rigorous testing process before it finally goes on the market.

These are truly strategic relationships that are not as simple as a buyer and a seller. It requires a truly cross-functional approach as you need to collaborate across areas such as compliance, legal and marketing. It is important to look at this as a long-term strategic project rather than a typical sale. This is what provides the best solutions whether it is for consumers or for companies because the products have been worked on so much and there is really no margin for error.

Set yourself up for success

Before your hands are shaken, you end up with a strong proposal that has been stress tested and measured on both sides for commercial returns. It is then important to look ahead and in ways you can expand the partnership to deliver more innovation and better experiences for customers. When you have an established collaboration and ways of working, you have the opportunity to look at other product areas and other functionality.

The global digital trading ecosystem is constantly expanding, and therefore there are always new ways to innovate and collaborate to build better financial services. If you take payments as just one element in it, you already have an area that is just that. Banks may be focused on enabling customers to send and receive global payments, but there are areas such as currency where there are many opportunities. The best partnerships between fintechs and banks first focus on the immediate needs and challenges before building that trust and then looking at other areas and opportunities.

You can get started easily and quickly, for example including a hook or a link through a web page. However, the most successful partnerships are when you can be fully integrated into the bank’s platform to offer your customers a seamless user experience. This is a win-win because it creates better products for the banks and provides fintechs scale.

A truly equal partnership: Privatbank

Privatbank is the largest bank in Ukraine and for a long time we worked with them for our local payments in the country. Over time, we have built a close and strong partnership with those who have enabled us to become fully integrated into their services, making it now a more equal relationship that works in two directions. We have collaborated with PrivatBank since 2015 and the partnership is the result of having a real collaborative approach that is centered around building trust.

One of the most important lessons from this partnership, and an important part of any partnership, is to have the right culture. When you want to develop a partnership, it is important that you not only communicate in their language, but that you conduct these business conversations in a way that fits with the culture of the specific country. This is where truly global fintech players with local teams in the market can really benefit because you can leverage the knowledge of these individuals. Banks are complex multilayer organizations, and it is key to have people on board who can help navigate the nuances and complexities.

A collaborative approach for a better future

It is important to look beyond the bankbashing rhetoric that has undoubtedly kept some fintech companies from reaching the goal of creating a better and more open financial system. Banks are the backbone of this system, and it is important to recognize that they can often be both a customer and a supplier. This is why it is so important to work together and strive to fully understand your banking partners, and the opportunities and risks they see in the market.

At Payoneer, we have a truly collaborative approach and have a large number of banking partners globally, some of which are new relationships, but some are organizations we have worked with for many years. That experience equips you with an awareness of what makes a banking partnership work well. The level of investment associated with these partnerships means that there is a comprehensive business case that is shared on both sides of the partnership. Maintaining a positive partnership is achieved through regular contact as well as business reviews that involve both management teams and ensure that we always learn about.

We all want the same thing – a financial system that best meets the needs of companies and individuals around the world. It is naive to believe that any company can deliver it alone, and therefore this shift from competition to collaboration is really the key to achieving it.