Banks work with Fintech companies to solve banking problems

As a danger and an opportunity, fintech startups are a double-edged sword for the world’s largest banks.

Fintech companies, such as those that make it easier to lend money online, threaten traditional financial institutions when they steal their consumers. However, Fintech companies that help banks make better choices, increase efficiency or serve consumers through digital channels offer many great opportunities.

Some banks may see fintech as a threat, while others see it as an opportunity to integrate their solutions and learn from their digital-first approach through partnerships. Collaboration can yield quantifiable results if handled properly. This article will focus on the main benefits for banks by working with fintech companies and the problems that can be solved through partnerships.

Benefits of fintech and banking partnerships

Several fintech companies explicitly seek to steal market share from large banks, while others are better suited to work as partners instead. FinTech companies are often new startups with little capital and a modest physical presence. Their creativity and speed can be an excellent match for the size and resources that large banks have to help innovative solutions flourish.

There are several benefits that large banks can take advantage of when working with fintech startups. Innovative products and services for specific markets can help large banks gain a competitive advantage. Fintech startups are often born out of a single innovative solution or service that fills a market that has not previously been served by traditional financial institutions, such as peer-to-peer lending programs.

In addition, as the world becomes more and more digital, banks are embracing digital payments. To make their services more sophisticated for their customers, banks have begun to partner with fintech companies. In fact, Wallester is one of the most prominent companies providing banks with card-related services. For example, using the API, as shown on this website, the chances of falling victim to scammers and hackers can be significantly reduced. As time goes on, more and more hackers are stealing private information from bank consumers; But when banks choose to rely on Wallester’s solutions, the chances are minimal. In addition, customers can take advantage of the fast payments guaranteed by Wallester. The fact that the company helps banks to become more efficient and attractive to customers confirms that fintech companies and banks can have a beneficial partnership.

It is possible that new goods and services, if demanded, allow large financial institutions to improve their products. Fintech companies offer specialized solutions for a wider range of customers. People can make an online purchase and pay for it later by using services that allow them to pay for the purchase later.

Loyal customers from major financial institutions will be attracted to this viral invention. Other fintech companies can improve financial transactions and procedures. Consumers of large banks can benefit from new services such as electronic notarization, AI-driven banking security and bill payment. Many banks will require fintech partners in their B2B and B2C companies to develop their development strategy. Customers of large banks require more online functions than ever before.

Faster time-to-market for banking solutions can be achieved through collaboration with fintech companies. Banks that work with fintech can serve customers better and lay the foundation for long-term growth. Anyone who uses new technology to digitize financial services or improve transactions and procedures is a fintech company. The worldwide fintech business was worth $ 7 trillion by 2020.

What will the future bring

Financial technology companies can help banks compete against non-banking companies that go into embedded finance. The Economist Impact survey found that only 12 percent of bankers saw increasing competition from fintech, while almost half reported collaborating with fintech in the past year. Financial technology (fintech) was previously considered a threat to established banks. Today, it is seen as a source of mutual benefit for the established and emerging and an increase in cooperation to ward off non-financial competitors.

A bank or credit union that “fends off” means that it has strategically decided to “join them instead of fighting them.” For payment or lending services integrated in a non-banking product, incumbents can use fintech’s technical skills and reap the benefits. As with conventional institutions, neobanks use their charter to offer insured deposits and other options in the form of banking-as-a-service providers.

Treasury Prime, Synctera, Unit and Bond are just some of the fintech companies that McKinsey mentions as having formed specifically to work with banks to mediate BaaS and embedded banking relationships. Although some banks are still cautious about cooperating with these or other fintech companies, this stigma must be overcome in order to remain competitive, especially for banks that lack significant internal IT expertise.

“Many banks are concerned that selling their products through partners is undermining their customer relationships, but banks may have little option if end users start using built-in financing in significant numbers,” McKinsey argues. Making it possible for partners to sell financial goods is good news for banks since it is a business with a low margin and high volume. It is not uncommon for banks to be charged with high operating costs due to outdated technology and manual procedures.