Boston’s FinTech population is booming, bolstered by the likes of Digital Federal Credit Union (DCU)’s FinTech Innovation Center. Overseen by managing director Vasilios Roussos, the DCU FinTech Innovation Center provides seed-stage FinTech startups with what they need for success: mentorship, workspace, a professional network, and community. Perhaps most important? The pathway to partnerships.
“We built the DCU FinTech Innovation Center to attract entrepreneurs and help them with connections,” notes Roussos. “Partnerships are critical and having the right people and resources sets them on the road to success.”
But connections alone are not the answer; they must be the right relationships. There’s a science to identifying the best partner for a project, and Roussos believes before FinTechs or financial institutions get too far along in their journey, they have to assess their long-term relationship potential.
“The most important thing for either party is to understand what’s of value to the person on the other side of the table,” counsels Roussos. “You have to know what they want to get out if it and why, and how that aligns with your goals. Once you both know each other’s North Star, you can work together.”
Yet, even when banks and credit unions recognize their compatibility with FinTech partners, solving for innovation needs takes time. Each party must be willing to invest in the process to get to the right end state.
“In innovation, people want to get into the thick of things, and say, ‘Let’s get going on this.’ Sometimes you need to take a step backwards to go forward,” Roussos summarizes. “You need to lay the right foundation, establish trust in each other and in the process, and ensure you’re building and executing on the right things. It’s a willingness to look at a FinTech as a partner, not as a vendor.”
It also helps to have a firm understanding of goals for the partnership. Many times, particularly with early-stage start-ups, the technology exists and it’s looking for a problem to solve. If banks and credit unions can present their problem, all of a sudden, the solution is being created in a two-sided way, addressing a need the FI has while leveraging the technological innovation.
“Many FinTech start-ups are working in AI, blockchain, and other technologies at their earliest stage,” Roussos points out. “They are technologists, writing code, and they need a business partner to tell them where and how to use it. That’s where banks and credit unions come into play.”
And community banks and credit unions have a strategic advantage. They can be more effective partners with early-stage start-ups, because they make decisions quicker and take a little more risk in trying out new technologies. In essence, they more fully emulate the start-up mindset. It’s why those financial institutions are best positioned to take a leap, reach out to FinTechs, and explore the potential.
“Sometimes with FI/FinTech partnerships, we have a middle school dance situation: Both want to dance, but they’re not sure how to cross the room to take the next steps,” Roussos concludes. “There’s an opportunity for all financial institutions to connect with FinTechs. The question we want to be asking is, ‘How can the industry come together to work and adopt new solutions?’ We have more to gain by collaboration than we do by working independently.”
Steps to FinTech Collaboration
- Establish the problem you’re trying to solve. Partnering with a FinTech that offers a flashy new opportunity doesn’t always address strategic business needs. Go back to your business strategy and determine where a FinTech collaboration can help you more efficiently and expeditiously meet your goals.
- Determine what you want to get out of the partnership. Is it a new piece of technology? Is it a new process approach? How do you see the relationship evolving to support future needs? These questions need answering in advance of partnering.
- Choose the right partner, based on your values. Roussos underscores the importance of making sure the partner you choose offers the right fit. What matters to you should matter to them as your partner. Take the time to make sure you align.
To continue this dialogue, join us at NEACH’s Innovating Payments Conference, Nov. 14, at the Renaissance Providence Downtown Hotel in Providence, RI. This event will focus on keeping community banks and credit unions relevant and competitive, and help top executives, product owners, and strategy influencers in the financial industry leverage innovative technologies and align with the right FinTech partners.