According to the recent reports, for the growth of the FinTech industry, the collaboration between FinTech startups and traditional financial institutions is necessary. In fact, 75% of FinTech companies believe that their major objective is to collaborate with traditional firms. Now, this makes it important for both FinTech and traditional firms to transform to let innovation thrive.
Reports further reveal that collaboration in place of competition can help both banks and FinTech startups to grow. The report further states, “Unless banks and FinTech firms get better at working together, neither will reap the full benefits of innovation.”
Fintech startups in India have the opportunity to transform and develop the whole banking ecosystem. It is not just about one bank, but the whole industry. On the other hand, the banks will be able to reduce costs, utilize new technology and innovation, and enhance user experience.
So, when it is feasible and even beneficial for both FinTech startups and banks to collaborate, what is blocking the way?
The FinTech companies in India struggle to traverse the procurement cycle of leading banks. Conversely, banks are using traditional technology and these financial providers hesitate in adopting new, innovative technology. If both the financial institutions and FinTech startups cross these barriers, they will be able to unleash the power of FinTech in the financial industry.
Here are some more reasons why collaboration can become a stepping-stone for FinTech industry and banking institutions.
1. Enhanced Digital Transformation
Today, financial institutions and banks are trying to adapt to the ever-transforming industry. With the increased number of tech-savvy customers, it is essential to utilize technology to one’s advantage and leave behind conventional and traditional methods. Collaborating with FinTech startups can reduce the hassle, streamline the process, and make this task easier for financial institutions. The banks will be able to keep pace with technology, incorporate enhanced work structure, and deliver services faster.
For instance, by partnering with a FinTech company in India, banks will be able to leverage the power of smart data. This will enable quick information processing and speedy loan approval.
2. Increased Benefits of Innovation
Currently, collaboration with FinTech startups is only used to enhance payments. However, FinTech can be actually used all along the value chain. It can enable efficient compliance training and streamline surveillance software, which will let banks identify people who can become a risk to the structure.
Additionally, artificial intelligence can be used to improve user experience and increase workforce productivity. By finding a potential way to engage with FinTech companies, banks can utilize technology and innovation to their advantage.
3. Utilization of P2P Lending
P2P or peer-to-peer lending is a debt financing model in which people lend or borrow money without any supervision from an intermediary or authorized financial institution. This P2P lending is an important aspect of the FinTech model.
Let’s see how this can help banking institutions – financial institutions or banks have several units, each of which has started implementing their own governance process. Though this may be convenient for an individual unit, on a whole, this structure is merely doubling the energy spent on consistency.
Even after this added effort, consistency in the complete system remains vague. Fintech companies maintain consistency more easily than banks. However, implementing a P2P model directly can raise the problem of direction and support and many people may find it difficult to adjust to this model. A hybrid model can be implemented to carry out smooth functioning with leadership support.
4. High Customer Service Quality
As technology has evolved so has customer interaction. Now, people prefer chatbots rather than human interaction as chatbots can offer a better experience.
For instance, MetLife has come up with an initiative where they offer a virtual and unique journey to insurance policyholders. Users can interact with digital agents to resolve queries and for other insurance processes. Where MetLife is providing a virtual experience, Bajaj insurance has collaborated with Alexa to get all insurance related queries resolved just with your voice.
Virtual, chatbot and technology-driven solutions like these are more preferred by consumers nowadays due to high feasibility and convenience.
5. A Way to Future Growth and Development
This collaboration is not beneficial for only startups or only banks, as both the sides can profit from this partnership.
Fintech startups can look for more future growth with funds from financial institutions. This will enable them to develop robust, sustainable, and scalable solutions in the future.
Banks can adopt a more data-driven approach with this partnership. It will help banks in reducing costs, encouraging employees towards value-added tasks, and maintaining compliance at every level.
In fact, the partnership will promote both FinTech companies and banks to meet customer requirements rapidly and efficiently.
6. Faster and Enhanced Decisions
Fintech partnership will bring forth another opportunity for banks in the form of machine learning. As machine learning will enable organizations to make better, accurate, and faster decisions, various processes will be precisely carried out.
For example, when customers want to acquire a loan from the bank, they may experience bias. This is natural as human decisions are biased because of various personal and non-personal factors. However, with advanced algorithms and capabilities of machines to make decisions without human interference, we can eliminate biased decisions.
7. Solution to Many Other Problems
There are numerous other problems specific to the banking industry that can be solved by collaborating with FinTech.
Issues like online banking, secure credit card payment processing, single-click loan approval, and secure money transfer – all these tasks can be carried out with greater speed and efficiency.
Although banks already realize the need for real-time banking and effective services, collaboration with FinTech will create numerous new possibilities. Banks will be able to offer whatever the customer wants while still maintaining strong regulatory compliance.
Fintech Collaboration: Better Future Opportunities
If you look at it, then banks and FinTech startups are a perfect match. Both the institutions can aptly complement and enhance each other’s capabilities to perform better. Fintech startups can gain more opportunities for innovation and thrive ahead. Banks can regulate their overall processing while still maintaining compliance and offering customers real-time access to banking.