Home Banking From Competition to Collaboration: Shifting Perspectives on the Bank-Fintech Relationship

From Competition to Collaboration: Shifting Perspectives on the Bank-Fintech Relationship

by internationalbanker

By James Allum, SVP Europe, Payoneer


Having the benefit of perspective is a wonderful thing. Witnessing fintech’s transformation from a niche concept to a mainstream industry we’ve seen a lot of change. More customers, improved business models and a thriving ecosystem. One key change is the approach to banks.

In the early days of the industry, lots of players emerged with a confrontational and almost abrasive approach to the established banking system. Banking the unbanked, breaking the banks or even replacing banks – these were the lofty ambitions of many fintech companies. However, as the industry has matured there has been a recognition that to create a financial system that truly works for everyone, there is a role for all.

A change of approach

There has been a shift in mindset across the industry which is based around a relationship that is mutually beneficial. Banks have recognised the role that fintech companies can play for them. For example, most banks are focussed on a singular market and serving their customers in that market. So, when it comes to global payments, working with a truly borderless player in the global digital economy can help bank customers repatriate global income back to local banks. Banks can fully integrate this into their platform or mobile app, allowing them to maintain positive customer relationships and avoid having to send people to third parties.

From the point of view of fintech companies, there are a plethora of benefits to engaging in a true partnership with a bank. These partnerships can broaden your customer base, offer opportunities to scale and ultimately drive growth. Established banks still hold the keys to the financial system and in order to innovate within that system companies must accept that and look at how they can leverage that position.

Building strategic relationships

When looking to build strong banking partnerships it’s important that companies know that they are in it for the long haul. The process of identifying the right partner and building synergies takes time and to get the best results there is a clear and sometimes fairly long process. As such, it’s vital that companies are always in the market forging connections and having conversations. We recently attended Money 2020 in Amsterdam along with a host of fintech innovators which is a great example of a place where exploratory conversations can act as the first step on the journey towards a fruitful partnership.

Ultimately, it’s about building trust and that takes time. Those early conversations are centred around understanding a potential partner’s challenges and strategic focus. Once that is clearly outlined and the benefits of a partnership have been confirmed is when the work really starts. Commercials need be negotiated and agreed before the true collaboration takes place during the integration period. It’s then about building a service collaboratively and going through a rigorous testing process before eventually going to market.

These a truly strategic relationships that are not as simple as a buyer and a seller. It takes a truly cross-functional approach as you need collaborate across areas such as compliance, legal and marketing. It is important to view this as a long-term strategic project rather than a typical sale. This is what delivers the best solutions whether it’s for consumers or for businesses because the products have been worked on so much and there really is no margin for error.

Setting yourself up for success

By the time that hands are shaken, what you end up with is a strong proposition which has been stress tested and measured on both sides for commercial return. It is then important to look ahead and at ways in which you can expand that partnership to deliver more innovation and better experiences for customers. Once you have an established partnership and ways of working you then have the opportunity to look at other product areas and other functionality.

The global digital commerce ecosystem is constantly expanding and therefore there are always new ways to innovate and collaborate to build better financial services. Taking payments as just one element of that and you already have an area which is so expansive. Banks may be focussed on enabling customers to send and receive global payments but there are areas like foreign exchange where there are lots of opportunities. The best partnerships between fintechs and banks focus initially on the immediate needs and challenges before building that trust and then looking to other areas and opportunities.

You can start simple and quickly, for example including a hook or a link through a website. However, the most successful partnerships are when you can be fully integrated into the bank’s platform to offer their customers a seamless user experience. This is a win-win because it creates better products for the banks and gives fintechs scale.

A truly equal partnership: Privatbank

Privatbank is the largest bank in Ukraine and for a long time we partnered with them for our local payments in the country. Over time we have built a close and strong working relationship with them which has enabled us to become fully integrated into their services making it now a more equal relationship that works in two directions. We have been cooperating with PrivatBank since 2015 and the partnership is a result of having a truly collaborative approach which is centred around building trust.

One of the key learnings from this partnership, and a vital part of any partnership, is getting the culture right. When you are looking to develop a partnership, it is important that not only are you communicating in their language but that you are conducting those business conversations in a way that fits with the culture in that specific country. This is where truly global fintech players with local teams in market can really benefit because you can utilise the knowledge of those individuals. Banks are complex multi-layered organisations and having people on board who can help navigate the nuances and complexities is key.

A collaborative approach for a better future

It is important to look beyond the bank-bashing rhetoric that has arguably held some fintech companies back from achieving the goal of creating a better and more open financial system. Banks are the backbone of that system and it’s important to recognise that often they can be both customer and supplier. This is why it is so important to be collaborative and endeavour to fully understand your banking partners, and the opportunities and risks that they see in the market.

At Payoneer we take a truly collaborative approach and have a large number of banking partners globally, some of which are new relationships, but some are organisations we’ve worked with for many years. That experience equips you with an awareness of what makes a banking partnership work well.  The level of investment associated with these partnerships means that there is a comprehensive business case that is shared on both sides of the partnership. Maintaining a positive partnership is achieved through regular contact as well as business reviews that involve both management teams and ensure that we are always learning about.

We all want the same thing – a financial system that best serves the needs of businesses and individuals around the world. It is naïve to think that any one company can deliver that alone and so this shift from competition to collaboration really is the key to achieving that.


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