How FinTechs Fit into Your Payments Strategy

Strategic partnerships between financial institutions and financial technology providers (FinTechs) could play a significant role in a post-COVID environment. Once viewed as competitors by banks, fintechs are now forming collaborative partnerships with financial institutions in response to the rapid acceleration of digitization and shifting consumer and cultural changes in the wake of the pandemic. But how, exactly, can FinTechs fit into a financial institution's payments strategy?

Let's start by taking a closer look at the services and products FinTechs can provide.
 

How FinTechs Can Support FI Strategies

Earlier this year, we highlighted five FinTechs to watch, which illustrated the products and services companies like these offer that can benefit financial institutions and their customers and members. These companies offer services ranging from complex data analytics to conversational artificial intelligence payment hubs that leverage open Application Programming Interfaces (APIs), which allow programs to talk to each other, centralize business and consumer payment processing, monitor, and report compliance.

For example, based in Boston and Ontario, Boss Insights focuses on payments data strategy and digitizing the loan application and approval process. According to its website, the company provides "data as a service with a single API to capture real-time business financial data," according to its website. The company's broad access to financial data analytics could support financial institutions for Know Your Customer, lending, account management, and more.

Further, Boss Insights' affiliations and experiences with the DCU FinTech Innovation Center and other Boston-based accelerators and sandboxes give the company a unique understanding of New England financial institutions' opportunities and challenges today. This company's relationship with the DCU FinTech Innovation Center also ensures it understands the regulatory and compliance landscape financial institutions must navigate, creating common ground for the partnership from the get-go.

With FinTechs growing their knowledge of how financial institutions operate and stepping up their roles in supporting payments strategies over the past few years, many are well-positioned to offer solutions for streamlining back-office operations, strengthening relationships with customers and members, making financial institutions more efficient and effective overall.

Also coming into play is the increasing use of APIs by major providers over the past year or two, opening a world of new possibilities for financial institutions. Financial institutions no longer need to rely solely on their cores for innovative technology releases and solutions. APIs can open doors to advanced financial technology solutions to financial institutions of all sizes without developing their own program. And, using APIs, these platforms can even update the core in real-time in many cases.

Where to Start

The case for partnering with FinTechs to increase efficiencies, streamline processes, and enhance customer relationships is strong. However, sometimes the biggest obstacle to successful partnerships is knowing where to start. What serves as an effective solution for one financial institution may not work for another financial institution.

To determine whether a FinTech fits in your payments strategy, start by assessing and analyzing lessons learned during the pandemic; consider technologies, and solutions you've already implemented; and critically examine the existing and anticipated needs of your customers and members.

It may also help to consider these questions:

• Where would partnering with a FinTech be a way to solve a specific payments problem for my institution?
• Would it help to reach out to a FinTech participant in the DCU Innovation Center or another Boston-based accelerator or sandbox to discuss my FI's needs?
• Where would partnering with a FinTech help me create a better customer experience, particularly in COVID's wake?
• What changes do we need to make to ensure success not just for today but in the future?

In many instances, FinTech providers have become true partners for FIs, enabling technology-forward solutions that better meet customers' needs and preferences, especially post-COVID. If strategic FinTech partnerships are not yet part of your payments strategy, they need to be if you want to remain relevant and meet growing market demands. While not every FinTech is right for every FI, what they offer may take you where you want to go. So, take the time to explore new opportunities that are emerging. You don't want to be left behind.

To further explore bank/FinTech relationships, join us for the virtual Future of Payments Symposium, scheduled for December 8 and 9 (more information coming soon). To develop your faster payments foundation, check out our Building Blocks of Faster Payments modules.

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