When you use your card on an app, very often the way that’s handled is through a powerful partnership between a financial technology company (fintech) and a bank. But how do these partnerships work? Are they beneficial? Read on to learn all you need to know about fintech partnerships with banks.
What Is a Fintech Startup?
Financial technology is a new and growing industry created to automate and improve the types and delivery of financial services. It is designed to help improve the financial industry for businesses, banks, and customers. A fintech startup is any startup that’s working to create financial technology and make it publicly available for customers to use.
How Does a Bank Partner with Fintech?
A bank and a fintech can partner together to bring both institutions the benefits of the other’s capabilities. But how does a partnership happen? These are the basic steps of beginning a partnership between a fintech company and a bank, from the perspective of the fintech:
- Create a business plan with clear goals and outcomes for the partnership
- Select a bank that will provide the experience, oversight, and stability a fintech could benefit from—and that is looking for the benefits of working with a fintech
- Structure the partnership to comply with all applicable laws and regulatory requirements
- Create a business contract and official agreements for partnering, working together on customer-facing products and messaging, and provider agreements
Difficulties of Partnerships
Creating a strong partnership isn’t necessarily easy, and some companies may face challenges along the way. A few difficulties fintechs might face include:
- Data and security risks. Sharing work and data could increase risk if proper security measures aren’t put in place between both partners.
- Finding the right banking partner. Not every bank is the right partner for a fintech.
- Finding the right fintech partner. Banks can have difficulty finding a partner that is reliable and will not cause a disruption to their typical operations.
- Finding a partner that will integrate smoothly. The last thing either partner needs is disruptions and challenges with integration. A smooth transition is key, but it can be difficult to find.
Examples of Successful Partnerships
Banks and fintech companies partner very often and with much success. Most people aren’t aware just how many services they use are the result of a fintech and bank partnership. These are some successful partnerships that have benefited both the bank and fintech business, and which can provide the inspiration for future partnerships:
- American Express and i2c. When you use your debit or credit card to make a payment on a website, it is sometimes the result of a great partnership. American Express and i2c are one example of that. Thanks to a smart partnership, apps for ride-sharing, food delivery, and more can issue cards on American Express’s network through i2c in a fraction of the time it might take otherwise. Both companies benefit: the bank gets more cards on its network, and the fintech company gets easier set up for its clients.
- Visa, Mastercard, and Fintechs. Fintech partnerships can help banks expand to new markets & regions. One example is how Visa and Mastercard succeeded in expanding their reach by partnering with fintechs to bring their services to new Latin American regions. This allowed the companies to connect with an audience they couldn’t have reached without the fintech partnership.
- Amazon and JPMorgan Chase. Amazon is an eCommerce giant with its own branded rewards credit card. It partners with JPMorgan Chase to provide customers with card options that increase loyalty, expedite and simplify payment, and build the Amazon brand.
Why Partnerships Between Banks and Fintech Are Positive
Overall—despite occasional challenges to find the right fits—partnerships can be beneficial for both banks and fintech companies. Fintech companies give banks the opportunity to scale their customer and asset base quickly, with minimal added customer service responsibility. And banks provide fintech companies with access to needed and secure banking systems. Both partners and customers benefit from this partnership.
How TAB Bank Offers the Best Partner Experience
For fintech companies looking to partner with a bank, TAB Bank offers a smooth and supportive partner experience. Founded in 1998, TAB Bank has been consistently committed to empowering businesses through a variety of financial solutions. Learn more about how TAB Bank can provide the ideal partnership for a fintech company.
