Commercial Banking and Fintechs: 3 Reasons They’re Better Off Best Friends Instead of Foes

The way we bank began shifting long ago and commercial banking is now being confronted with similar challenges as corporate clients expect online/mobile banking, touchless processing and overall improved efficiency. Fintechs, offering the power of automation paired with payment processing capabilities and gateways to swiftly bring new products and services to market, effectively and expeditiously meet those expectations. It’s logical for the two to work together, but are they willing?

Retail banking has already seen the union of banks and fintechs with individuals preferring mobile options. According to Mastercard, of the 1.8 billion millennials worldwide, nearly 33% think that banks may not be needed at all in the future. (Source: Fraedom) When it comes to commercial banking and fintechs, it’s a mutually beneficial relationship that makes sense looking to the future and accelerating towards going totally digital.

Let’s look at a few reasons they can, and should, play together in the sandbox.

Efficiency

By using financial technology, commercial banks can take advantage of improved efficiency with regard to service, automation, customer communications and even payment processing abilities. Corporate clients looking to effortlessly connect existing gateways can get a one-up on their competitors by having an improved customer-oriented operating model.

The same result applies on the fintech side. A partnership can mean scaled distribution at a lower cost and rapid pace versus what some fintechs can achieve on their own.

Increase revenue

Partnerships result in increased profitability. Through financial innovation banks are not only able to cut costs, they’re in a position to improve a traditional business model and enhance their product offerings.

The competitive landscape that has brought financial services into the digital age has shown that speed to market with new products and services means more eyeballs and share of wallet. (Source: PYMNTS)

For banks, the customer experience has been tightly intertwined in their core competencies and innovation is not at the forefront due to risks and compliance. To weather the current storm, they will need to build and connect to eliminate siloes and embrace external partnerships to gain a bigger piece of the profit.

Security

A security breach on the banking end has devastating effects for customers. Fintech platforms can inherently bring added security for commercial banks’ customers. PCI DSS compliant and SOC 2 compliant are just a couple of the security measures corporate banking customers demand for today’s security standards.

Whether its accepting payments from customers in the many new methods available to simply adding extra authentication and verification – the tools that fintechs bring to commercial banks are already built-in. The risk control capabilities are strengthened thanks to the partnership.

Now is the time for banks and fintechs to come together. It’s a win/win for each and there is no need to be foes when the support they each provide can enable them to thrive.