A match made in heaven: banks join forces with fintechs

Financial institutions and fintech companies are increasingly forming dynamic partnerships to create trade finance solutions which improve the customer experience and eliminate inefficiencies. It can be a marriage of two very different company cultures but with obvious benefits to both parties.

The landscape is continually changing with 82% of banks, insurers and asset managers expecting to increase the number of fintech providers they work with over the next three to five years. Additionally, commercial banks are beginning to follow their retail counterparts in exploring potential collaborations. What is driving this trend and what do financial organizations need to be aware of?

All change

Over the last few years, fintech firms have been the source of a huge amount of disruption in the market. They have transformed the customer experience, prioritizing the user and created an ecosystem that fosters the collection of vast amounts of data which can be used to build trusted relationships with clients. They have pioneered the adoption of technological advances such as Artificial Intelligence, blockchain, biometrics and identity management and are exploring how these innovations can transform the customer experience, create increased security, more agile processes, and reduce costs.

“88% of financial industry executives said they feared their business was at risk due to financial technology companies in areas such as payments, money transfers and personal finance”

Many banks have recognized the pace of change which is being driven by aspirational and agile fintechs. According to a recent study by PwC, 88% of financial industry executives said they feared their business was at risk due to financial technology companies in areas such as payments, money transfers and personal finance. The majority of those questioned believe if they do not participate in fintech developments, they will lose business and revenue as consumers become increasingly comfortable with non-traditional players. Their concerns are backed up by the data – 30% of consumers plan to increase usage of non-traditional financial services providers and only 39% plan to continue to use only traditional financial services providers.

As a result, instead of competing with fintechs, banks are seeing the wisdom of partnerships which results in a truly symbiotic relationship. Fintechs require access to capital, customers and large data sets to test their models and banks can easily provide this. Banks in contrast are looking for ways to innovate more quickly, provide a slicker customer experience and leverage data to mitigate risk.

Collaboration with fintech companies enables banks to bring tailored, customer-centric products to market more quickly and for less cost than previously possible. Ultimately, the partnerships between banks and fintechs are creating a unique opportunity for the expansion of finance solutions, thereby adding real value for customers.

How does it work in practice?

This subject is very close to our hearts as we have recently teamed up with BNP Paribas, a leading international bank, to offer e-invoicing linked Receivables Purchase and e-invoicing linked Supply Chain Finance (e-SCF) to large corporates in the USA and Canada. Our customers can now obtain an attractive working capital solution through the same technology provider they use for e-invoicing and procurement activities. It is a unique partnership of its type and a sign that commercial banks are following the lead of their retail counterparts in collaborating with fintechs, such as ourselves.

By linking e-invoicing with supply chain and receivables purchase, customers are offered a one-stop solution that brings together process efficiency and working capital optimization in a single portal. They are offered attractive rates in a straight-forward, hassle-free way. From the bank’s perspective, a lot of energy can be spent connecting clients and on the payables side, on-boarding suppliers onto the system. This creates friction in the relationship and inhibits the supply chain. The advantage for a bank and for the customer is that by partnering with a fintech, these trade flows are already on our platform. Therefore, both do not have to onboard suppliers twice and deal with complex technology integrations. Ultimately, the partnership helps to make the supply chain process smoother for all.

We believe partnerships like this are enabling financial organizations to work more smartly and offer added value to customers. Speed to market is of the essence in our fast-paced, consumer-centric world and fintech providers are agile by nature and best placed to bring innovations to the masses.

As retail and commercial banks realize the mutual benefits of partnering with fintechs, we are certain we will see more and more collaborations that will delight customers around the world.