We live in a “now” society where consumers expect processes to happen at the click of a button, and payments are no exception. For example, FinTech applications like e-wallets and mobile payments allow consumers to make payments easily and quickly. Growing e-commerce has also led to an increasing number of non-bank FinTech payment applications.
Instead of seeing FinTechs as competition, banks can work closely with FinTech companies and leverage each other’s strengths. According to a Business Insider report, 87 percent of financial services providers in the U.K. that have partnered with third-party FinTech providers have been able to cut costs. And the same study found that 54 percent of these partnerships increased their revenue.
Through the use of Application Programming Interfaces (APIs), FinTech firms and banks can work together to offer consumers quick digital payment options. For example, a business may have a mobile app that allows consumers to make payments and a bank will process the transactions behind the scenes.
FinTechs offer advanced technology and an agile environment, but banks bring their fair share of strengths to the value chain. By partnering with a bank, FinTech firms can access the capital they need and build consumer trust. When multiple firms are interacting directly with customers’ banking information, data privacy and security are paramount, according to the 2017 World Payments Report. Working with a well-established financial institution can ease consumer fears when using FinTech applications. FinTech firms can also benefit from customer loyalty and brand awareness when they partner with a bank that has a long-standing, positive reputation in the community.
Another benefit banks can offer FinTech companies is experience with navigating the myriad of rules and regulations associated with the payments industry. Interpreting these rules and then establishing and maintaining compliant payment activities can be time consuming and complicated. This is where having a bank partner with years of experience in payment regulation to lean on can come in handy.
Technology advancements in how we make payments allow for speed and flexibility, but it can also increase risk. FinTechs that handle a large number of transactions are especially susceptible. By working with a bank to process payments, FinTechs can leverage the bank’s expertise to mitigate this risk.
When you compare banks and FinTechs, it’s easy to see that their strengths complement each other. It’s truly exciting to see companies come together to offer innovative solutions to customers. At First National Bank of Omaha, we have a long history of working closely with our customers to understand their changing needs. Collaborating with FinTech companies allows us to evolve and grow with the changing market. By sharing resources and knowledge, banks and FinTechs can create winning solutions for all parties involved.
About the Author
Barry has been representing First National Bank of Omaha and its payment processing business for nearly 25 years while developing a niche expertise in FinTech ACH payment processing. He is a Certified Treasury Professional (CTP), Accredited ACH Professional (AAP) and has served on NACHA’s Risk Management Advisory Group and its Communications & Marketing Advisory Group.Explore Treasury Solutions