Swipe right: Here’s what banks need to know before choosing a fintech partner

More and more banks are turning to fintech firms to help them transform their businesses into competitive and efficient digital enterprises. Partnerships with start-ups can certainly accelerate a bank’s digital transformation but collaboration is not always easy.

Banks once viewed fintech firms as unruly upstarts set on disrupting their businesses and snatching their customers. Now, they’re more likely to see them as potential partners who can help them navigate their way into a future dominated by digital technologies.

“The narrative has changed a lot,” says Roberto Ferrari, the Lead at Qorus' Digital Reinvention Community. Some of the conditions that triggered the rise of fintech start-ups more than a decade ago, such as legacy technology, entrenched corporate cultures and strong regulatory controls, still persist. However, the spread of increasingly powerful digital technologies, the emergence of open banking and embedded finance and shifts in consumer behaviour have prompted banks to change their stance.

“Fintech firms are not so much trying to disrupt and compete against banks. Instead, they’re working with banks to help them renovate and reinvent their businesses,” says Ferrari. New business opportunities such as mobile wallets, digital lending and account aggregation are also encouraging co-operation.

But what sort of start-up makes a good fintech partner? What are the marks of a successful fintech partnership? And what should banks do to make sure they’re attractive partnership candidates?

To answer these questions, we invited two banks and their fintech partner to share their experiences of working together. Representatives from OTP banka Srbija, Qatar International Islamic Bank (QIIB) and fintech firm NF Innova discussed what makes a successful partnership, at an online event hosted by the Digital Reinvention Community.

NF Innova is working with OTP banka Srbija, a member of the OTP financial services group centred in Hungary, to help the company advance its digital transformation. Formerly Société Générale Srbija, OTP banka Srbija is establishing itself as a digital retail bank and is looking to the fintech firm to help it deliver services faster, reduce customer churn, curb costs and increase efficiency. In collaboration with NF Innova, OTP banka Srbija recently launched a super-app that offers users a range of integrated in-house and third-party digital products.

A good fintech partner, says Vuk Kosovac the head of OTP banka Srbija’s retail division, must share the bank’s transformation vision. He warns that without a common vision it’s very difficult for the two partners to work together to do something new.

Kosovac adds that a fintech partner must also be able to execute.

“Vision and innovation are all nice but if the partner is not able to execute and make them a reality then everything is just a story.” A healthy business with good management is another essential. “Your partner must have longevity. You don’t want them to disappear.”

Other signs of a good fintech partner, according to bank executives polled during the online event, are commitment, trust and a sound business strategy.

Kosovac notes that fintech partnerships are often difficult for banks. Working with a fintech’s agile teams is frequently a challenge for banks steeped in a traditional cautious corporate culture. Relations with other businesses can also be frustrating. Kosovac points out that the development of the bank’s super-app was quick but negotiations with third parties whose services were linked to the mobile application took much longer.

Successful fintech partnerships are built on trust, says Milan Pistalo, sales and operations director at NF Innova. He points out that banks need to empower the teams brought in by their fintech partner and allow them to be as independent and as autonomous as possible. “You put a group of smart people together. Give them the freedom they need to perform.”

Pistalo acknowledges that such trust is built over time and deepens as relations between a bank and its fintech partner strengthen.

How can banks make sure they are attractive partners?

Hobeika, at QIIB, says banks can increase the likelihood of successful fintech partnerships by attending to some “housekeeping” before they start working together.

Banks need to ensure they are committed to the partnership and open to listening to their fintech partner. “They also need their technical systems to be in place so their partner can, for example, easily integrate their APIs. Their core banking systems, gateways, middleware, enterprise hub all need to be ready so they can start talking to their partner at a technical level. You don’t want to start the partnership and be told you can’t share files.”

“There’s a lot of internal housekeeping that needs to be done. Either banks attend to it and go through the necessary blood, sweat and tears or they’re going to fail. And their partner will fail,” warns Hobeika.