For years, we’ve witnessed a wave of digital disruption crash over entire industries, sending traditional products and services tumbling into the undertow of obsolescence. Unsurprisingly, many have forecasted a similar doom for traditional financial solutions. Only it hasn’t happened. Customers have been slow to adopt exclusively digital financial services. Many may prefer the safety of familiarity over unknown risk, especially when it comes to managing something as vital as personal finances.
But even the most successful of traditional finance companies can’t deny the ultimate convenience that fintech offers. As such, old-school organizations are increasingly looking to collaborate — rather than compete — with fintech interests. A 2017 report by PwC notes that 82% of banks, insurers, and asset managers plan to build new partnerships with fintech companies in the next 3 to 5 years. To make sure these collaborations bear fruit, fintech firms forming partnerships should consider the cultural and structural differences between digital and traditional finance.
Address Differences In Organizational Culture
The cultural chasm between developers of a successful fintech startup and Wall Street wolves can be vast. To prevent attempts at negotiation from falling into the void, it’s important that both fintech and traditional interests bring to the table a willingness to work together, share data, and even restructure internally if necessary. Above all, transparency is key: a project’s scope, deadlines, and metrics for success should be laid bare at the start.
Work to Minimize Macro Issues
Old-school financial groups face the many-headed hydra of a quickly expanding, endlessly diversifying industrial ecosystem. Fintech innovators are ideally equipped to help. Comprehensive products are being boiled down into isolated, specific services, and providing those services is what earned the success of thriving fintech solutions. Noticing this, Lloyds Banking Group has begun a series of strategic acquisitions of specifically targeted fintech services devoted to solving a single problem. For instance, Lloyds recently acquired Swave, an app that evaluates users’ spending habits and offers money-saving advice.
Use Data to Create a Customer-Oriented Product
Financial institutions possess one of the industry’s most valuable assets: large data sets. Fintech services that incorporate AI and location-based tools can gather data regarding customer habits and preferences, which is useful toward fine-tuning products to serve individual needs. Technologies like VR and biometrics provide new avenues for interaction, and deepen a data pool that, in tandem with sophisticated analytics, can aid financial institutions in the development and testing of novel models in risk management and underwriting. Such strategies can produce cost savings and widen potential customer bases. Specifications as to who owns the data and how it will be shared should be laid out at the onset of a partnership; failure to do so can cause misunderstandings at best, and in the worst case may lead to data breaches.