As the industry has evolved rapidly, it has created a unique blend of challenges for both traditional banks and fintech firms that make a symbiotic relationship between the two more critically important. Looking at the history of this evolution and towards the future, there is a growing realisation that a fierce rivalry is long gone and, in its place, partnership and friendly competition.
That initial clash of financial titans stoked a large amount of fear within the industry for the banking future but as Claire Verville, head of ventures & strategic partnerships, M&T Bank put it in her FinextraTV interview: "That feeling maybe 10 or 15 years ago that fintechs were really exclusively disruptors to the traditional banking ecosystem and that banks as we know it would cease to exist, I don’t think that has really materialised. I think the relationship has moved from one of competition to [...] highly collaborative."
In many discussions around their partnership, the focus has often been on the digital and innovative benefits gained from fintechs, however, banks also offer positive improvements for fintech within this collaboration: "Traditional banks have a very strong efficiency in a very complex industry that fintechs can benefit from in terms of regulatory expertise, experience with scale, protection of customer data."
Speaking alongside Verville, Sarah Biller, co-founder, Mass Fintech Hub, said: "What we’ve seen too is a desire for the fintechs to better provide solutions that are interoperable. Initially, that was a barrier to that partnership. If you had two technology stacks that didn't easily speak to one another, we were challenged in any sort of adoption framework but I think what we’re seeing now is that that evolution that is natural: more experience coming into that fintech startup world."
When discussing how the partnership might evolve over time and what the future may hold for the consumer experience as a result, Verville gave her insights into both the collaboration and the encouragement of healthy competition: "I think the fintech collaboration and even the early years of fintech competition has been really productive for the industry as a whole. I think competition and innovation drives us all to really be better and up our game, whether you're at a fintech or a traditional bank [...] and I think technology and your ability to engage with fintech and have a really effective partnership strategy is going to be a real key differentiator to how you bring products and experiences to market and how you serve your customers. Like I said there's a lot of complexity to that but I think it's critically important."
It is clear that where it was once believed that banks and fintech firms were equivalent institutions vying for the top spot, it is now understood that they are distinct parts of the industry that cannot work without each other.