Fintech companies, Banking and Financial Institutions: Unequally yoked? No more!

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The tryst for one-upmanship between the old-timer banks vs. new-comer Fintech companies in the money movement and financial management game appears to be taking a whole new turn these days.

Time was, when the plethora of Fintech start-ups who were trying to break into the financial digitization space with their innovative and research-based IT/ITeS based technology apps and models, were simply frowned upon by the tight-lipped, decision-makers of the banking circles all along.

Reason? The patriarch-like attitude at the knowledge and experience of handling money movements and banking technology which the latter had honed over the centuries, and never-admitting that anything better can come their way, ever.

However, with IT/ITeS technology conquering the mindset of the consumer worldwide at laser-speeds, even the great bastions of the banking industry experienced the mighty fall into the hands of the champions of tomorrow – the Fintech specialists.

The playing field became a different level altogether, suddernly. With consumer demands making a marketing ‘pull’ at the retail level, and steadily moving into the B2B counter as well, banking pundits behind closed doors had to perforce sit up and take notice of the ‘johnny-come-latelys’ – even the start-ups, with their amazing tech-models for Fintech operations.

For instance, in a BSFI Vertical environment, the days of the galaxy systems and number-crunching servers of the past became redundant as the new, more economical, and more efficient, digitized technologies of IMH/EMH process knowhow and the like, arrived at their doorstep overnight. Not a moment was lost after that eye-opener change.

The green signal to walk in and discuss the terms of engagement between each other was just matter of time.

The tenor that hitherto remained as contentious to say the least, and perhaps adversarial at the peak of its relationships, finally toned down to leverage on each other’s capabilities and reap mutual benefits.

According to a leading Fintech business strategist, “ It would be fair to say that among the financial institutions we talk to, they all have some kind of FinTech partner program or digital innovation initiative. Everyone is involved in the conversation,”

The agency he represented did a number of pairing up operations between banks and Fintech organizations, so he knew what he was talking about.

The exact type of services offered by the Fintech organizations of today vary from one banking environment to another. Different banks need different services in different packages as customer profiles are different in usage patterns. Hence, customization is the name of the game.

In the B2B payment sector, for instance, the need for continual checks and balances offers amazing opportunities to not only develop an upgrades customer service facility but also opens up the doors for improving the customer’s brand experience of the bank, and thus enhance CRM.

The second example of how this partnership has changed the banking procedure is the area of trade financing.

With API capabilities, both the customer and the banking institution can benefit from the process. With increasing visibility and interactions with a client through its ERP system, the banks can approach a client with closer relationship initiatives.

The banking partner can delve into the client’s business and improve their financial picture by understanding their business needs, cash flow programs, inventory management and customer base.

‘The bank can’t underwrite to the consumer whose profile doesn’t fit their balance sheet, but through an API relationship with a third-party lender, the customer can be smoothly handed off’, comments the spokesperson.

With API, the permutations have expanded for banks and B2B customer interactions. In fact, today, API has become a buzzword for the flexibility it creates and the new business approach it opens up.

The Fintech space renders the banks enough leverage to pick what they exactly need and nothing more or less, with some inevitabled thrown in, as mandatory – eg: security and safety of transactions and similar operations of classified and confidential nature.

As for the banking partner, the opportunity opens a wide range of support services to the B2B customer from financing to payments to offering an entire universe of core banking and other services that improve a business’ life cycle.

The good news is that FinTechs and the businesses they serve come as an extensive leverage in the management of the business relationships and operations of the banking and financial sector.

The opportunities appear to be never-ending.

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