According to research from Fraedom, half of US banks are looking to improve their in-house technology skills with almost a quarter (24%) using fintech partners to do so. These partnerships would be particularly beneficial as, at present, 22% of banks feel they don’t have the expertise in-house to implement new technology. Collaborating with fintechs is a great opportunity for banks to address and futureproof their financial ecosystems, while making best use of the skills they have internally. Fintech partners can provide community banks with the technology and expertise needed to attract talent and new corporate clients.
There is no doubt that fintech partnerships are becoming more common as banks realize that these relationships can help them achieve more than trying to do everything alone. In fact, PwC found that 82% of banks, insurers and investment managers plan to increase fintech partnerships over a period of three to five years. By partnering with the right fintech, community banks will be able to focus on what they do best, while gaining the technical skills and expertise needed to provide added value to their clients. This form of outsourcing allows banks to plug in-house talent gaps without the significant investment of both time and resources required to gain these skills internally. So, what should they look out for when finding the right fintech to collaborate with?
Picking an established partner
To get the most from these relationships, banks should ensure the partner they work with has the longevity, credibility and ability to scale with its demands. It’s important that community banks find an established partner in order to gain peace of mind that they know exactly what they are doing and have previous experience of such relationships to fall back on. Banks must ensure that the fintech they choose to outsource to is capable of doing the things they say they can in order to avoid any reputational damage.
Finding the right expertise
One of the main benefits of working with a fintech is being able to rely on their experience and expertise in areas that a community bank may not traditionally have. Fraedom has found that currently, banks most want to attract technology risk analysts (36%), data scientists (34%) and security specialists (24%). However, hiring for these positions and skills can be costly for community banks. Banks should, therefore, look for fintechs that are able to support the skills that they may not currently have in-house. The right fintech will be able to provide the insight and knowledge in these key areas.
The pace of change and innovation we have seen in recent years are developments many commercial banks have struggled to keep up with due to a lack of technology skills in-house. Banks should look to partner with fintechs that can offer them a competitive edge and the innovation needed to provide their clients with the right services. When looking at the technology platforms on offer from fintechs, it is vital that banks ensure they are compatible with their ERP solution and are capable of adding an extra element to its service
There are several benefits to using these technology platforms, including not having to invest in developing in-house technology and having access to the latest technological developments, such as automation to improve the experience and increased opportunities to self-serve. Beyond technology platforms, fintechs can also provide the innovation needed to expand an organization’s product and service offering. For instance, fintechs can help banks develop commercial card technology which can be used by banks to streamline the often bureaucratic and time-consuming spend management process within their business clients’ organizations.
Improving the experience
The right fintech partnership should offer banks the opportunity to gain a better understanding of their corporate clients and ultimately improve the experience on offer. According to PWC, for 75% of financial services the most important impact fintechs will have is an increased focus on the customer. Community banks should, therefore, look to a fintech partner to help gain a better understanding of their corporate customers and the industry more generally. The right fintech partner will also have an in-depth understanding of industry regulatory requirements and have rigorous compliance standards in place.
Ultimately, finding the right fintech partnership will allow community banks to tap into a wealth of knowledge, expertise and innovation to support in-house teams. This will allow community banks to devote more time to their areas of strength while also developing a stronger offering of products and services for their corporate clients. In doing so, banks will be able to keep up with the latest technologies and regulations and avoid being left behind in a fast-moving industry.
Jonny Davis, Head of Regions – Americas at Fraedom