In the face of increased competition from digital alternatives, many leading banks are turning to FinTech partnerships to drive innovation.
According to a recent survey by Economist Impact, commissioned by WSO2, 48% of banks have partnered with FinTech start-ups in the past three years.
These partnerships can range from white-labelling FinTech solutions to investing in FinTechs to support the development of new technologies that can be easily deployed by the bank.
Kirsty Rutter, FinTech investment director at Lloyds Banking Group, said of the trend: “The FinTech industry has matured rapidly over the last decade and they are great at imagining the future…FinTech companies tend to be led by industry professionals who have stepped out of large corporates to build purpose-led businesses that solve niche banking problems…They are doing all of this while also focusing on improving the speed of interactions and the customer experience.”
Many leading UK banks are also setting up incubator and accelerator hubs for FinTech entrepreneurs, providing support and resources for the development of new technologies that the bank can deploy.
Lloyds, for example, has its Launch Innovation Programme, which offers entrepreneurs the opportunity to run a proof of concept with the bank and pitch their proposals to secure a partnership.
Anil Sawrup, the management consultant at FinTech Moneycorp, noted that banks and FinTechs collaborate in different ways to deploy innovative technologies and solutions. Some banks are opting to integrate FinTech solutions into their existing systems, while others are setting up standalone platforms that use FinTech solutions.
The benefits of such collaborations are clear, with both banks and FinTechs able to leverage their respective strengths.
FinTechs bring innovative thinking and agile development to the table, while banks have established customer bases and regulatory compliance expertise.