The Opportunities and Risks of Partnering with Fintechs

During the latest installment of RMA’s Risk Readiness Briefings, Denise Rinear, Managing Principal, CAPCO RISC Solutions discussed strategies for optimizing fintech partnerships.

With the backdrop of uncertainty in our current environment stemming from the COVID-19 pandemic and the economy, Rinear stated that opportunities can often present themselves that might not have otherwise emerged. Although uncertainty can’t be eradicated, your bank can operate with a level of confidence.

Rinear outlined steps to achieve confidence in a fintech partnership, starting with determining why your bank wants to pursue one. Is your bank looking for a partnership as a new business driver, as a cost-cutting mechanism, or as a cost of staying competitive? Proper planning is necessary to determine what your bank does well so those strengths can be leveraged in the relationship.

The World FinTech Report 2020 revealed several pain points in bank-fintech partnerships. For example, only 21% of banks say their systems are agile enough for collaboration with a fintech, only 6% of banks have achieved the desired ROI from collaboration, and 70% of fintechs don’t culturally or organizationally see eye-to-eye with their bank partner.

Rinear emphasized the importance of aligning fintech efforts with your bank’s strategic plan. Know your partner’s business model, strengths, and limitations, establish KPIs and KRIs, and focus on compliance and security to pave the way for successful integration.

Diligent monitoring is also essential. Monitoring is only of value when banks act on it and anticipate the roadblocks that are most likely to require action. If change is needed, or if change is imposed on the bank, knowing what options are available is a benefit.

A recording of the webinar is available for download here.

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