Fintechs were seen as a disruption threatening to replace banks a decade ago when they emerged.

But it didn’t take long for the counterparts to realize that both sides could benefit from working together. 

According to a 2017 research by EY dabbed Unleashing the Potential of Fintech in Banking, teaming up, instead of rivaling startups, can offer new-fangled technologies for traditional banking institutions.

Sharing experiences and services can help better products through various data analytics solutions, thus increasing customer engagement.

How Banks are Supporting Fintech

Although individually, banking institutions are working on internal tech to deal with the piling fintech pressure.

JP Morgan, for instance, created a new crew to help automate legal tasks back in 2017. Before the move, contracts ate up more than 360,000 job hours per year.

Thanks to a solution dabbed Contract Intelligence, JP Morgan has automated its agreement process, saving hours of manual work. Today, everything finishes in seconds, and errors have been reduced significantly.

The same year in Feb, Wells Fargo assigned its own AI team to offer more customer-specific services and reinforce its digital products. 

Wells Fargo even rolled a Startups Accelerator Program onboarding Fintech startups like Edquity, Hurdlr, Redrock Biometrics, and SimSpace.

The program seeks to explore developing technologies in analytics, artificial intelligence, cybersafety, payments, and other segments in need of better financial services.

Despite these functional relationships, studies show banks haven’t maxed the full capability of Fintech. According to EY’s survey of 45 worldwide banks, only 25 percent of banks had active engagements with Fintech companies.

Perhaps the refusal to accept change and the cut-throat competition against Fintech is to blame for the reluctance in teaming up.  

To implement strategically, banks should review their existing service models for inadequacies and target Fintechs that can help streamline processes. Eventually, fintech technologies will prove an essential part of growth.

Reasons to Team Up

• Innovative technologies

Fintechs have managed to develop better solutions and innovative methods that meet consumers at their point of need.

In Q3 of 2017, VC-supported Fintech startups gathered a whopping $4 billion across 278 Mergers & Acquisition agreements. 

Their significant role in banking institutions and increasing popularity explains why banks should adopt early for future growth.

• Increasing awareness in customers

Collaborations will provide the perfect opportunity to leverage the full potential of the technology and meet the demand of digitally savvy users.

According to EY, the number of digitally active customers went up from 1 in 7 back in 2015 to 1 in 3 in 2017. The same study indicates the number of Fintech-savvy customers rose to 84 percent from 62 percent in 2015.

Fintech services are also popularizing in the payment and money-transfer segments. Customer usage increased to 50 percent from a meager 18 percent in 2015.

Banks should seek to incorporate Fintech innovations into their systems to appeal more to customers

• Everybody Wins

By partnering with banks, Fintech startups benefit get access to the funding and resources they need to cease every expansion opportunity. Teaming up makes the Fintech model a more sustainable business.

Banks can also tap into the technologies Fintechs offer to make data-driven decisions, streamline processes, reduce errors, and cut on spending.

Working together can help build a robust financial system that favors all three parties””customers, banks, and Fintechs.