Traditional banking is currently faced with the need to be constantly innovating its financial services, while at the same time adapting to the habits of its customers, these factors have shown that collaboration (and not competition) with Fintech is the best way to survive in a highly competitive digital environment. Thus, we see that in the case of financial services, the collaborative approach between banking and Fintech companies is gaining strength every day.
In the case of Fintech companies, these tend to focus their efforts from the beginning of the most profitable areas, such as payment methods and consumer or retail banking. They are sectors where they develop better knowledge about consumer behavior, new tools, and disruptive solutions. At the same time, traditional banking also enjoys its place in the equation, as they have more trust and credibility from their users. Likewise, they have more resources to implement and test solutions that Fintech companies have developed. For a financial technology (Fintech) business, banking is generally its main customer, and at the same time, traditional entities see the solutions offered by Fintech as a great tool for attracting and retaining customers.
New collaboration models between Fintech and traditional banking
Fintech companies have a lot to contribute to the transformation of traditional banking towards digitization, and this is the reason why financial services increasingly seek the collaboration of Fintech companies since new solutions will offer a better experience for the final consumer, which implies more income, lower costs, greater opportunities for growth and better preparation to face competitors.
The current outlook indicates that the new models are more collaborative, so it seems that the financial sector is not yet ready for full integration, so the conservative approach still persists. Here are some collaboration models:
Startup development programs
This is the model that has spread the most in the development of Fintech companies. In this case, the bank finances the programs and obtains benefits, depending on the types of agreements made by the progress achieved.
Partnership-collaboration or association agreements with Fintech companies consist of reaching agreements to use or acquire a solution/platform developed by them, or also, to contribute in part to their growth through the historical knowledge of the entity with the sector.
Acquisition or financing of Fintech
This model is the least widespread, it has a more integrative approach, in which the entity finances the Fintech or the development of a service/product, it is also used for the acquisition of the Fintech by the banks. This model implies taking more risks, or at least having the change of orientation more integrated into the business culture.
Purchase sale of services
The model for buying and selling services to Fintech companies is the most widespread and generally tends to be oriented towards the joint development of new solutions. In this model, the most widespread form of collaboration is the white label, which consists of the entity buying / renting a product or service from Fintech (or doing so under its own brand).
Prepare for changes
The financial entities that best prepare for current and future changes in the sector will be those that make a combination of the best of traditional banking and Fintech, taking the user very into account and offering an optimal combination of experience and technology and personalized treatment.
What do you think about this topic? What do you think is the importance of the collaboration of traditional banking with Fintech companies?
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