Fintechs and financial institutions: making potential partnerships a business reality

By John Broy, Client Services Director

When the Fintech industry started to emerge as a strong sector within financial services a few years ago, all everyone could talk about was how on earth the big, established, traditional banking institutions were going to compete with the gutsy ‘start-ups’ which would change the way that the finance industry was run.

At a conceptual level, it’s true that Fintechs have overhauled the way that the quartet of central banks, capital markets, consumer banking and B2B banking and payments are run. Some of that transformational change can of course be attributed to the reaction and needs spinning out from the financial crash in 2008 and the various austerity measures that have followed around the world.

In retail banking, while the consumer banks started out by partnering with Fintechs to provide customers with more channels, services and options, some are now starting to venture out by bringing some of those learnings in-house and launching their own fintech-based businesses. They’ve watched those Fintechs bring an open and agile approach to digital service, including personalisation in both communications and payments plus diversity and control with payments options, and they want some of it for themselves.

Probably the most high profile retail banking example is when, earlier this month, Nat West announced the launch of Mettle, an app-only business bank for SMEs. The big ‘threats’ from those fintechs have of course been realised in the success from the likes of Monzo and Atom – innovating, yes, competing in customer experience, yes. And growing fast.

In the B2B space, partnerships have proven to be where the real value is still best added for the end user, the finance institution and the payments provider who operates between the two. In fact, just a few days ago, the importance of partnerships in the B2B paytech space was underlined by an announcement that new guidelines have been developed with the “aim of addressing the issues that prevent Fintechs and financial institutions from becoming successful allies.”

A key component of the Treasury’s Fintech Sector Strategy has seen a number of big banks and Fintech companies working with the British Standards Institute to create the new Publicly Available Specification – PAS 201:2018. In essence, any Fintech from the UK or abroad will now have a detailed framework to work within when gearing up to pitch to banks to ensure that they meet the complex myriad of compliance, data and security obligations that both parties will be subject to should they decide to work together.

This critical initiative underlines further just how much the fintech industry – and the broader financial market as a whole – has matured in recent years. And, whatever the outcome of Brexit is, anything that means that the UK can still be a financial services leader around the world, creating an environment where businesses have the landscape to innovate with support from Government and industry, is to be wholeheartedly applauded.

A business like Fraedom, one of our clients, which works with global banks to power their commercial cards and with businesses to manage their payments in nearly 180 countries is a case in point of the power of B2B paytech partnerships. Recently acquired by Visa, this company is making sure that its clients can stay competitive with personalised, convenient customer experience, improve user retention and ensure compliance to the current regulatory landscape. Here’s our case study detailing what we’ve been working on for Fraedom, which includes UK and US brand building and PR.