Financial Institutions are adopting new and improved digital services to meet consumer expectations. Innovative financial technology (fintech) companies focus on leveraging technology to offer financial services to consumers. Fintech companies are driving the evolution of digital. Financial institutions look to fintech partnerships to keep pace with digital offerings but must be diligent to avoid disappointment from their fintech providers.
A simple definition for fintech is “An innovative technology designed to disrupt traditional financial services.” Many view fintech companies as small, agile, tech-savvy young people developing solutions that offer services utilizing a website, smartphone, Alexa, Echo or another connected device. However, increasingly the dominant financial institution system providers are creating or acquiring technology to compete directly with fintech companies. For example, five of the country’s largest banks formed Early Warning Services LLC and launched Zelle to compete with Venmo and other payment platforms.
There are varying degrees of risk with a fintech partnership. Implementing Zelle for a P2P solution has a different set of risks than working with a startup on a new deposit acquisition product. The most critical step you can take is to clearly define your business goals and align your training, monitoring and overall risk strategies with the goals you have established.
Ask the following questions about initiatives that you are evaluating:
- Where are the biggest opportunities in my market?
- Which of my current strategies have the best chance for success?
- Which of my current strategies best align with potential fintech partners’ strategies and capabilities?
- Which potential partners have the best prospects for success?
Use a clearly defined set of goals to evaluate potential partners. As you go through the selection process be sure to consider monitoring and reporting needs:
- Measurements should be aligned to the goals of the partnership
- Include volumes, impact on revenue, incident reports, customer complaints as appropriate
- Ability to obtain data needed to track performance must be addressed up front when considering the partner
Finally, assign ownership for the relationship to an executive in your organization. An executive level owner is necessary to promote the services provided to customers and within your financial institution. Educating associates so that they are better able to explain, support and promote the product to customers is essential to success.
Financial institutions face challenges to develop a digital strategy that effectively leverages rapidly evolving technology and fintech relationships. RSM helps financial institutions develop a comprehensive digital strategy encompassing technology, products, peer analysis, and support. Click here to download the Digital Banking Rapid Assessment overview or contact us today to learn more.