There is no tried and true approach when it comes to how fintechs and banks can engage with one another. Existing engagement models differ among the banks and fintechs based on who is driving it. In our view, the most suitable model is the one that underlines complementing product lines, pivots on gradual investment, and adopts a risk-balanced approach to partnership.
The type of engagement can vary based on multiple factors. From a bank’s standpoint they include the current state of fintech interfacing, technology maturity, level of productization and direction of investing tech dollars; for fintechs, key factors include strength and novelty of the core product, size of user base, extendibility of the offering, and uniqueness of the skill set that they bring to the table.
Some of the recent partnerships in North America make it clear that banks can quickly go to market with new capabilities and technologies that they lack, with moderate investments, while fintechs efficiently acquire the right to operate in all 50 states.