Collaboration isn’t the new competition, it’s a necessity

By John Mitchell, CEO and Co-Founder, Episode Six

The relationship between fintechs and financial services institutions (FIs) has long been painted as complicated and evolving. Fintechs used to be out to actively disrupt FIs, shake up the market and grab a further share of the consumer’s wallet.

In some areas this is still the case, however, over time there has been a general shift towards working together and changing the narrative from competition to collaboration. What has prompted this evolution? Simply put, FIs need to become more innovative and fintechs need to scale. And this can be achieved by working together.

This is especially true for paytech partners who can help provide a path to modernization for FIs.

Adapt to consumer demands as they change

Part of the urgency behind the reason to collaborate is because of the disproportionate amount of time, money and resources spent when trying to independently meet fast changing and evolving consumer demands.

According to IDC, of the $1.3 trillion that was spent by banks on digital transformation in 2018, it was estimated that more than $900 billion went to maintaining legacy infrastructure. Many of the banks didn’t follow through on the projects that were set up with 70% of all digital transformation initiatives not reaching their goals. If banks were to have made different choices back then (and even now), the $900 billion could’ve been allocated more effectively to achieve positive returns for the company.

Markets are demanding new ways to pay. These require modern payment technology which can support, and even provide interoperability between, fiat, crypto, gaming currencies, loyalty points and value denominations that may not exist today. It is already predicted that 73% of FIs have payment infrastructures that are not well equipped to handle payments for 2023 and beyond. And with the number of debit and credit card transactions shrinking as other digital payment methods gain traction, traditional FIs need to ensure they can future-proof themselves.

Creating new digital payment journeys is a must to stay competitive in today’s world. And that’s where collaboration comes in.

Collaboration, not competition

Maintaining market share in many cases requires an ability to move fast to meet consumer demand. Often the immediate solution for this is collaboration between FIs and paytechs. This typically mean working with a paytech partner whose technology is fast to deploy, highly configurable, and future ready. As FIs and paytechs work together more closely, they will create superior customer experiences, taking innovation to new heights.

Collaboration can dramatically cut the time taken to deliver new products to market and realise cost efficiencies across the value chain. Both parties’ benefit, paytechs can expand their usage and turnover, and FIs can expand their capabilities and range of products on offer.

Succeeding together

The race to win in the financial services arena is more like a relay race than a winner takes all endeavour—it’s a team sport, with everyone building solutions and products on top of existing infrastructure.

Paytech providers and FIs can collaborate to solve some of the industry’s biggest pain points through progressive modernisation. As the market changes and consumer demands constantly shift, it’s important these two parties continue to work together to give customers the features they want, without disrupting an FIs core business and tech stack. Collaborating with paytechs can facilitate the mutual exchange of technical know-how and payments expertise that is key to modernising systems.

There is a responsibility within the financial services industry to adopt a collaborative mindset and leverage partnerships that will serve customers better. Collaborating with the right paytech partner can complement, and enhance an FIs offerings, ultimately providing customers with innovative payment solutions.