Time to choose the best strategy.

The fintech industry is like a perpetual motion machine. Even in the most turbulent times, when the world is characterized by crises and hardship, the speed has hardly decreased. Well, and over time, this rapid scaling up of fintech is increasingly making banks wonder – what’s next? And there are only two possible answers to this question: competition or cooperation between banks and fintech. Only time will tell which of these options will dominate in the future, but obviously cooperation will be far more beneficial. I want to share my thoughts on why.

A basis for saving time and money

The rapid growth of the fintech industry is a beauty to behold for all of us, but it is worth noting that many fintech companies are still just startups that are uncertain about the future. What does it say? Companies like these have very limited resources and any solution that allows them to save is extremely important.

Meanwhile, in terms of time and financial savings, banks are of great help, because when FinTech companies decide to work with them, they can help them have the most important things without eating up a lot of time and financial resources. In short, this is Banking as a Service (BaaS) offered by banks.

The BaaS model relies on banking institutions offering fintechs the opportunity to offer financial services through collaboration. For example, carrying out banking activities under the bank’s license or allowing the use, modification and adaptation of software they have developed themselves. As well as anti-money laundering tools (AML) or other important things. Fintech companies, such as Electronic Money Institutions (EMIs) or Payment Institutions (PIs), can partner with banks to avoid red tape and other lengthy procedures, thus entering the market much faster.

Experience has shown that it can take a year to build a fully operational infrastructure with own licenses and things like SEPA and SWIFT payments, opening a bank account, AML tools, reliable IT platforms and so on. But by working with banks, you can start in just a few months.

With the ability to integrate all bank payments and other banking services into their own, fintech companies can start offering services to their customers quickly and without large immediate investments. Furthermore, banks can use their own experience to help fintech partners navigate the strict regulatory rules that public authorities impose on the financial sector, which can sometimes be a significant barrier.

New products and services and increased customer satisfaction

Although it seems that the banks are able to provide slightly more benefits to fintech companies than they can get from themselves, fintech companies can actually provide no less important benefits by using the platform provided by the banks with all the tools .

Close relationships and cooperation between banks and fintechs are a unique opportunity to expand the range of services, since fintech companies, which are known to be highly innovative, tend to develop products that most banks do not yet provide to their customers, and then “lease” the products to the bank later. In other words, to use the bank’s platform for the realization of the product or technology that has been developed.

For example, a fintech company can develop a new AML tool or service and then go and offer it to a bank, and the bank can accept it and then provide it to its own customers.

This is a win-win situation. First, fintech wins, because they bring their product to an established business where it can be easily used, thus making a profit quite quickly. Secondly, thanks to the product brought by fintech, the bank’s customers win, because they get new and better services. Thirdly, the satisfaction of the bank’s customers is fully increased without investing many resources.

The bank can focus on day-to-day, central matters, and by working with fintech can offer customers new services and strengthen its position in the market without even spending too much time or money.

Give me opportunities and I’ll help you grow them

Service for a service. As in most other areas, the exchange of services also applies to cooperation between banks and fintech. And it is clear that the benefits can be far greater than when competing and trying to act alone.

Banks can safely use the speed and flexibility of fintech companies to develop new products and services. And fintech companies can expand by using the expertise and experience of the banking sector.

Only in this way will over time be developed and implemented even more innovative solutions that will improve the user experience and generate more income.

Everyone chooses for themselves what is best and most appropriate. However, it is clear that it is much more beneficial for banks and fintech to follow a path that may not be exactly identical, but similar. Learning from each other’s experiences and sharing them, and giving and taking opportunities, rather than just being content with ourselves and waiting for the other to make mistakes. This is one of the best formulas to push aside all thoughts of constant competition.

Ekmel Cilingir, head of the representative board of the European Merchant Bank