Businesses in financial services, no matter their size or location, should collaborate with distributors, technology vendors, small niche innovative companies, players from other industries, and even with competitors to gain an edge in the crowded marketplace.
The principles of good communication, mutual respect and knowledge sharing make for a good partnership, where both parties work together to meet common goals rather than fighting for the same piece of customer pie.
Fintechs face all the same challenges – getting their first reputable clients, market integration, trust from organisations, making use of limited resources and stretching finances early on.
A good fintech partnership is not only about going to market together, it is about sharing what you have learnt and leveraging each other’s strengths, learning from your weaknesses or past failures and leveraging each other’s PR and marketing reach.
A collaboration enables you to grow the whole market and benefit from ever-escalating technological improvements in the field. But it is also important to understand that for a collaboration to work, you need four basic areas to be in alignment – culture, governance, technical experience/knowledge and mutual buy-in.
Important questions must be asked and answered from the beginning.
- How can this partnership turn cultural differences into a competitive advantage?
- Which governance structure ensures both parties’ interests?
- How can a mutual technical vocabulary facilitate partners’ communication?
- How can partnership mandates promote mutual buy-in and openness between parties?
Successful partnerships proceed from the knowledge that better value is being created for the end customer by working together. Keeping the focus on the customer reduces the friction of sharing the pie – each partner may see revenue ownership decrease, but with stronger and wider customer propositions, more customers are likely to be attracted. Sharing insights can strengthen each partner and benefit the customer and this overlap allows for a balanced strategic partnership.
Benefits of partnerships
There are many benefits to fintech collaboration but the main five are new technology, customer acquisition, customer retention, new markets, and new talent.
The growing market in application programming interfaces (APIs) allows one fintech company to provide its underlying technology or software in the form of a white-label to another.
This speeds up time to market and helps with lowering the costs that would otherwise be required to build the new capabilities in-house. Regtech APIs can provide regulatory assistance from programs that enable biometric identification, such as fingerprint or iris scanning, to Know Your Client (KYC) verification programs.
The challenge of finding and retaining new customers is ongoing and a partnership immediately opens up the market, to not only new customers, but also new ways to monetise these leads.
Customers expect instant service from their online experiences and collaboration across new digitised services allows fintechs to improve customer service and retain their business in the ever-increasing demand for fast, efficient banking.
Fintechs often serve different market segments or even different geographical areas. Partnerships enable each one to expand and benefit from these new avenues.
The secret to success in the fintech market is having access to multiple skills, not just in financial services but also in software design, regulatory knowledge, marketing and sales. Partnerships increase the pool of talent and allow complementary exchanges that benefit both parties.
Partnerships offer businesses a mix of benefits and opportunities at one time. More particularly, fintech partnerships create a massive opportunity for levelling the playing field, streamlining internal processes, adding technological capabilities, and most importantly improving the end customer experience.
As an example of such collaboration, PayPugs has extended its relationship and partnership in Lithuania with Teslapay with the appointment of Alexander Zelinsky, Chairman, PayPugs Capital, USA as Acting Head of AML and Compliance for this rapidly growing payment system. In addition, PayPugs has engaged with Swiss Remit and a prominent bank in the Ukraine, which will allow for considerable expansion into such areas as the issuing of local insured bank accounts, savings, credit services and UnionPay cards.