Aug 25, 2016

FinTechs: From Enemies to Frenemies?, by Prasad Chintamaneni

The FinTech phenomenon began with visions of disintermediating the centuries-old banking system.

As I’ve written in recent posts, FinTech companies are making enormous strides (and hitting some snags) in their efforts to capture customers and market share from banks and other incumbent financial services providers. But as FinTechs and financial institutions remain locked in commercial combat, instances of cooperation and collaboration between them are appearing:

Earlier this year, in an initiative aimed at speeding up approvals and disbursements,JPMorgan Chase began partnering with online lender OnDeck to provide loans to some of Chase’s four-million small-business customers. The collaboration is expected to reduce the loan cycle from days or weeks to a few hours or a day.

Santander Bank and Funding Circle now have a referral arrangement in which Santander proactively refers small business loan customers to the peer-to-peer lender via the bank’s website and letters to customers. BBVA Compass is employing the platform of digital investment manager FutureAdvisor in a move to better engage millennials as potential customers.
Citi has teamed up with LendingClub to provide funding to low-income families and underserved communities. Qualifying loans will be issued by WebBank, a Utah-chartered industrial bank and purchased by the management firm Varadero Capital L.P., which focuses on specialized credit investments.

It’s not just the big players. FinTech partnerships can provide a boost to smaller banks, too. Massachusetts-based Cambridge Savings Bank has launched robo-adviser investment services in partnership with SigFig Wealth Management of San Francisco. The bank’s Connect Invest management tool enables clients to setup, fund and manage goals-based investments alongside other accounts on their banking dashboard.

In fact, many Fintech startups assume that collaboration with traditional institutions is core to their business models. Fastacash offers help to banks in facilitating transactions through social media, while Letshego creates linkages between banks and microfinance, mobile transaction and FinTech service providers.

These developments reflect an environment in which both competition and cooperation can offer opportunities for new customers and market-share growth — a place for frenemies as well as enemies.

What’s your opinion, are FinTechs moving from Enemies to Frenemies?

I’m interested in incorporating your view in my next post that will explore a technology that could be a game changer for banks, FinTechs and the global finance fabric: blockchain.

Opinions expressed in this blog are of the author and may not represent Cognizant’s point of view.

Prasad Chintamaneni

Prasad Chintamaneni is President of Banking and Financial Services, leading Cognizant’s largest industry practice globally. Mr. Chintamaneni has led the global Practice…