The Growing Collaboration Between Fintechs and Banks

It's the ever-changing world of digital finance, where partnerships between banks and fintech companies act as strong catalysts for innovation. These are no longer only transforming the space but also adding to its accessibility, operational efficiency, and personalization. Numbers keep increasing for the partnerships until the present moment in the recent years as the statistics for collaboration show. From 2019 through 2021, the average number of fintech partnerships increased from 1.3 to 2.5 for banks; with credit unions — the number jumped from 0.9 to 1.5 — denoting really active expansions in the finance sector. There is a growing interest in financial institutions all across the world where this collaboration with financial technology firms is concerned.

This medium proves to be a very fruitful ground for fintech-driven innovation. For example, fintech companies can adapt quickly to changes and find innovative solutions without the limits of legacy systems. Take a startup like Revolut or N26 as examples: they have changed banking to mobile services, offering intuitive interfaces that are flexible and instant payments via mobile apps. It has become surprisingly possible to enjoy mobile-first financial services without paying the high charges of conventional banks. Financial institutions bring additional stability and trust to operate such innovations at scale, with the infrastructure that these banks would have in place — an access point to many more customers in regions where traditional banks cannot serve the demand for such services.

Key benefits of fintech-bank partnerships for the financial industry

There was a period when all banks considered fintech start-ups as rivals, but today, the scene has changed with the magic of doing business with each other for inventiveness, operational efficiency, and customer service. Technologies offered by fintech companies allow banks to broaden the scope of services, thus retaining customers amid rapid changes. Fintech-bank collaborations offer several advantages that help maintain competitiveness and enhance the digital banking experience:

• A Broader Consumer Base: Partnerships enable banks to attract new clients from the fintech audience, and vice versa — going from more bank-savvy older generations appealing to the younger demographic of a fintech.
• Brand Reputation: Such companies would be usually trusted, as it is not weird to believe that a bank would be involved with an institution boasting integrity. If a tech partner's reputation is found to be good, then it creates trust towards that bank, when the bank becomes just one more service in a well-known app or technology ecosystem.
• Service Filtration: Banks associated with fintech sources can incorporate state-of-the-art solutions like process automation applications and AI-powered financial tools that may create entirely new types of financial products.
• Simple Operation: These are the whiz kids when it comes to the creation of user-friendly fintech platforms that consequently can send banks soaring in terms of online services and customer satisfaction.
• Innovation Speed: Fintechs implement the newest technologies rapidly — such as machine learning, open banking APIs, and blockchain for finance — to keep banks relevant in the perennial changes in the financial sector.

Such partnerships allow banks to diversify more for existing customers and even acquire new clients through wider offerings and better efficiencies in the service.

Impact of fintech innovations on traditional banking services

The innovations of financial technology have completely and drastically changed traditional banking models and have consequently made it necessary for traditional institutions to adapt to modernity. The fast evolution of technologies such as mobile banking, digital wallets, blockchain, and artificial intelligence over a period of more than ten years has changed the entire landscape of financial services. Today, customers want fast, efficient, personalized digital banking services that demand both internal and external actors to change how services are managed and delivered.

With such changes in the environment, traditional banks are becoming more and more customer-centric in their approach with use of data analysis and AI capabilities built into bank operations. It has been shown by research conducted by Edgedelta that improvements resulting from business analytic applications on banking processes can cut operational costs by up to 80%. Banks have also developed the scope of services with additional online banking and digital payment systems through mobile applications. Banks are adding cloud computing, automation technologies, and fintech integrations to streamline processes for more effective services.

Shaking off such disadvantages of pricing will surely make them unfit to compete in the world's emerging business environment. Traditional banks will have to innovate and develop ways synonymous with highly reputed fintech competitors, known for low-rate charges, very innovative models, and convenience. Most banks have started tying up in strategic partnerships with fintechs, allowing them to utilize very advanced technologies without costly and hefty in-house development costs. From such joint ventures, banks can enjoy all the flexibility and innovation that fintech entails while retaining the financial trust and stability of traditional banking.

Financial inclusion and accessibility through fintech-bank collaborations

In the post-pandemic era, banks increasingly find themselves having to transform according to the changed circumstances where digitization and financial inclusion become the main driving force in seeking more solutions for all populations. The need for collaboration between banks and fintech has therefore become increasingly vital from the point of view of improving access to financial services, thereby opening up new markets and serving people that have not been reached by traditional financial institutions.

Some major points on financial inclusion can be mentioned as follows:

• Broadens the provision of banking services for unconnected and underbanked groups. Financial services for the poor and those living in rural and remote areas are provided through the partnership of fintech with banks. The provision of such services is usually through mobile banking platforms for carrying out transactions without the requirement of a physical bank.
• Mobile banking solutions to improve financial literacy. Instead of regular payday loans, fintechs can offer alternative borrowings with more ethical rates. For example, they may offer the option of getting earned wages without having to wait until the end of the month.
• Mobile programs meant to enhance economic literacy and budget planning. Investment in educating users is essential for sustainable financial wellness. And for this reason, one can rely on mobile applications or platforms that observe behavioral changes in using financial education tools or services.
• Development of digital currencies and blockchain technologies. New financial products that are available to those without access to traditional banking services can benefit from cross-border payments and the new potentials opened up by blockchain and digital currency technology in financial inclusion.
• Embedding secure financial technologies. Reliably accessible financial solutions are also creating safer channels for the use of such facilities by different people. For this reason, trust must be built through the provision of transparency and compatibility between bank and fintech platforms.

The future of banking in a fintech-driven ecosystem: prediction

New doors are opening into the inclusive financial ecosystem with innovative financial solutions, banks, and fintech companies. Partnerships between traditional financial institutions and innovative technology companies will not only expand access to financial services but also help enrich the quality of life for millions of people left out of the more advanced traditional financial system. Efficiently utilizing these solutions would mean sustainable growth for banks in new markets and maximum financial stability to all social groups. All of the afore-mentioned makes this partnership a critical component of forward-looking strategy.

Indeed, current trends guide most of such domains — integration into more advanced technology, which includes AI in finance and machine learning for personalization. This would mean that financial institutions not only automate but also personalize services according to requirements of each customer. AI-focused forecasting of financial tendencies will assist consumers in taking wiser decisions on savings and investments.

We consider it possible that the use of digital currencies, stablecoins, and blockchain-based transactions will rise in the next few years, thus improving the processes of financial transactions. Such a way might generate opportunities for the building of speedier and less costly transaction processing in real time and open access to finance for people not previously able to use conventional banking products.

With more and more mobile technology development, we envisage a scenario in the future where branches would be reduced because banks would put their focus on last-mile financial services, mobile platforms, and digital wallets. Financial services would be made more convenient and available to clients, who would not patronize physical banks for services but would instead enjoy the same conveniences electronically.

Fintech and Lab42: our approach to innovation

In Lab42, there are trends observed, and we always put much effort into the enhancement and perfection of modern fintech SaaS products with future trends and breakthrough technologies. We do believe that the development of secure, scalable financial technologies has a strong influence on the quality in which the service is provided to clients. This is the reason why we have been implementing modern solutions that lead our users into a world of convenience, security as well as fast and latest financial services, based on industry standards.

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