If you can’t beat FinTechs… partner with them
In many sectors, tech start-ups are seen as a threat to the existing ways of doing business and the big brands that embody them. ‘Disruption’ is the name of the game, and the incumbents have an eye over their shoulders. Of course, new technology is impacting finance too, but in this case, it doesn’t have to be a zero sum game. Rather than seeing start-ups as a threat, many established financial institutions are actively collaborating with them.
Why should SME's and large financial companies parter with FinTechs?
Everyone knows technology is the future. More than that, though, incumbent players are smart enough to recognise smaller tech and FinTech companies have two big advantages over them.
One is sheer scale. When large financial institutions try to undertake their own digital transformation projects, it’s a bit like an oil tanker trying to change course. A project might take two years, and by the time it’s finished the technology will already be out of date. By contrast, smaller firms move faster, and are well-suited to agile working styles that lead to rapid innovation.
Secondly, in the UK, small tech start-ups benefit from tax incentives that reward high levels of R&D. This means they are constantly innovating with those high R&D budgets, leaving larger, less agile and less R&D-focused companies behind them in the dust.
No wonder a 2019 survey found 81% of banking executives believe the best strategy for achieving digital transformation is working with a tech partner. They are increasingly realising that partnering up is the only way not to fall behind.
FinTech partnerships allow companies to be more agile
Of course, partnerships between very different kinds of organisation are not without their problems. The very fact that FinTechs are so agile and innovative means there can be a culture clash when dealing with major banks with more rigid structures, as documented in another recent report. Some banks are finding it hard to move from test to deployment, and not all partnerships have led to the development of solutions to real-world problems.
2018 Deloitte report, ‘Closing the gap in FinTech collaboration’, suggests the best way to overcome these issues is for incumbents to take a fast-fail approach to the partnership, with a precise engagement path, while start-ups focus on demonstrating the industry and technical expertise needed to solve real-world problems. Clear goals make it easy to judge success or otherwise.
FinTechs take the time to listen to your business problems and support you
Most large technology companies wouldn't spend hours with you, trying to understand your problems and processes, but that's exactly what FinTechs do. We want to know every inefficiency that we can solve - anyway to give you value. FinTech's will map our your customer journey, analyse with a different set of eyes, and rapidly build technology designed with you in mind. It's like having your own personal R&D team.
With FinTech partnerships you can deliver cutting-edge tech much quicker, and stay up to date
At Nivo, we have no doubt what our clients are looking for in a partnership. The leading driver by far is speed of delivery. We can get them a fully-branded, bank-standard app within a month, saving time, money and risk at their end. And, of course, we’re not alone. Countless small tech companies are partnering with financial institutions to provide cutting-edge, cloud-based technology, often on a software-as-a-service basis, which means they can continue to test it and innovate iteratively at no additional cost to their clients.
It’s disruption but without the carnage. Instead of competition between incumbents and start-ups, the incumbents are competing with one another to cooperate most effectively with those start-ups. If you can’t beat them, partner with them. It saves time!