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Banks can meet changing customer expectations, but it won’t be easy. Partnering with the best Fintech firms will be a tremendous help. But what will characterize the best Fintechs?
This is the fourth in a series of articles exploring Fintech's role in transformation of banking.
Can Banks Ever Meet Customer Expectations? looks at the customer satisfaction problems for banks. It examines the effect of demands of the “connected customer”.
What Do Customers Expect From Banks? digs deeper into ways in which “connected” customers expect banks to behave, expectations driven by Apple and Google rather than the banks.
Banks Spend Billions on Digital Initiatives. Why Aren’t They Winning? looks at several business and technology challenges banks face, which make it difficult for banks to meet customer expectations without help.
Banks need help, and they have recognized that some of that help will come from Fintech firms. That is why so many banks have created incubators and accelerators.
Banks and Fintech firms need each another. It took a while to sink in, but most players now agree. But Fintechs struggle with how to partner with banks, and vice versa. What will a good Fintech partner look like?
Partners, not Vendors
Without a doubt, banks are looking for partners. They want companies that will share their business goals and understand their vision. They want partners who will measure success the way they do.
But what partnering model are we talking about? There are several existing or emerging models.
Fintech firms should be clear on the kind of partnership they are offering to banks. Banks, for their part will need to consider the implications of each partnering model. This includes such things as:
What Makes a Good Partner?
Most companies will call themselves partners rather than vendors. There may in fact be a case for being a vendor (there is less long-term reward, but also less overhead). Yet, if Fintech firms are to be a part of the transformation of banking, they will do so as partners.
So what are the factors that will make a Fintech a good partner? How would I advise Fintech firms to focus? What will make you a good strategic partner to your banking prospects?
Know Your Partner’s Business
There are several aspects to this. Only by mastering them all will banks view you as a partner, as a true peer as they develop and implement their business strategy.
Keep the End in Mind
One of the trickiest aspects of partnering is reconciling what sometimes may be conflicting business objectives. The bank is accountable to shareholders, regulators, customers and (not always recognized) their communities. The Fintech is accountable to funders, partners and customers, and sometimes regulators. They also are accountable to their communities, however defined - I will be blogging shortly on this community aspect of partnership.
An important early step is to identify common values, vision and goals. Without these, there can be no partnership.
The shared values may be publicly stated or implicitly held. They may be moral/ethical, or business priorities. For example, a common commitment to open and full communication becomes a business imperative. This is then a basis for partnership.
A shared vision is a mutual understanding of what the world will look like after our partnership has delivered. A shared vision dovetails into the broader vision of each partner. Without it, the bank and the Fintech will have different definitions of success, completion and direction.
Shared goals must be jointly set. They should be measurable, and with agreed contribution from both parties. Bank and Fintech must agree on what completion means. They should share metric determinants of success.
Choose Your Partner
An important aspect of partnering is that selection is a two-way process. Not only is the bank selecting the Fintech, but the Fintech is selecting the bank. To be a partner, you need to be sure that you can work together. That has to do with establishing shared values, vision and goals. It also requires being able to work effectively together.
Not every bank is a good partner for a given Fintech. Sometimes it is necessary to say no. Sometimes, failing to win a bid is good news, rather than bad. For long run established success, it is necessary not to be too hungry in the short term. That can be hard when you have impatient venture capitalists breathing down your necks. But a clear partnership strategy should help to satisfy them. So define in advance what your ideal banking partner looks like.
Fill in the Gaps
It is all very well to say Fintech firms should be strong partners to their banking clients. Fintech firms are usually built on entrepreneurship and good technology. But they are less often built on true banking expertise and industry experience. Fintech firms need industry professionals. Or else they need partnerships with industry consultants, to help them fill in the gaps.
In the early stages of a Fintech, it may not be appropriate to hire a full-time industry expert. The approach of a fractional executive may make more sense. This is an individual who can step into an executive role on a part-time basis. (S)he will share your business goals and learn your business. (S)he will provide deep and broad knowledge of banking, your particular domain, and your target banking segment. In other words – a model partner!
Banks cannot survive the ever-growing demands of customers and shareholders without good Fintech partners. Most Fintech firms will successfully partner with banks only by engaging their own banking experts.
Graham, a 30 year banking veteran, runs BankTech Consulting. He is an expert in commercial banking, and provides strategic insight and internal business cases to banks. He works as a fractional Customer Success Executive to Fintech firms, facilitating their partnership with banks.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
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