If you had ten people in a room and asked them all – “define fintech partnerships for me?” we guarantee you’d get twelve different answers.
Having worked as the Global Partner Manager for a successful Fintech start-up for three years, I (Linkon Axon) can answer that.
They are where technology and the financial services industry intersect.
Or, in short, Fintech’s are an economic vertical composed of organizations using technology to render financial system efficiency.
At the forefront of this economic industry sits the banks.
They utilize Fintech solutions to allow them to operate –
- Faster
- Cheaper
- Safer
- Simpler
This then enables them to grow revenue, improve their UX, mitigate the risk of fraud, and lower operating costs.
Mobile banking would be the most obvious of those examples.
But let’s face it.
If you know anything about fintech-based partnerships, you’d know they are some of the most transactional on the planet.
This is how it usually goes –
Opportunity is identified, integrations are completed, rev share is agreed, and you very rarely hear from them again.
Unless something goes wrong, or they don’t receive their residual payment on time.
That, for us, is not a partnership.
That said, creating tangible and genuine value in Fintech partnerships can be a challenge for partner teams at the best of times. In addition, partnerships team needs to consider the intricacies of various forms of fintech partnership that exists within the industry and the pitfalls of each of these partnerships as follows:
Strategic Partnerships:
These partnerships involve collaborating with other companies to achieve mutual business objectives. Some real-life examples include partnership between Stripe and Shopify, Square and Cash App, and Revolut and Visa. But the pitfalls may include:
- Misalignment of objectives: Ensure that the strategic goals of both parties are aligned to avoid conflicts or misunderstandings. Some of the disparities could be misalignment in the rev share model, joint value proposition, or internal processes for running co-marketing activities.
- Lack of commitment: Ensure that both parties are equally committed to the partnership to ensure its success.
Technology Partnerships:
These partnerships involve integrating technologies or platforms to enhance product offerings. Technology integration is an integral part of fintech partnership as customers look for a solution that often requires an integration of multiple products. Any e-commerce platform is a good example of that, requiring an interactive user platform, payment gateway, and AI chatbot for customer service. However, the pitfalls may include:
- Integration challenges: Ensure compatibility between different technologies to avoid technical issues and delays.
- Intellectual property disputes: Clarify ownership and usage rights of technology to prevent legal conflicts.
Distribution and Referral Partnership:
Distribution partnerships involve leveraging distribution channels of other companies to reach a broader audience. Many banks act as distributors of many products from financial technology companies. Whereas referral partnership helps fintech companies to attract new customers with word of mouth. American Express, for example, has a successful referral program that encourages its existing customers to invite their network to Amex. If you are looking to grow with referral partnership, please refer to this article. However, the pitfalls may include:
- Channel conflict: Address potential conflicts with existing distribution channels to maintain positive relationships.
- Performance issues: Ensure that partners meet performance standards to avoid reputational damage.
Marketing Partnerships:
These partnerships involve collaborating on marketing initiatives to promote products or services and generate demand through marketing campaigns. If you are wondering how can you generate demand with and through your partners, this article might be a great resource. Pitfalls may include:
- Brand dilution: Ensure that marketing efforts align with brand values to maintain brand integrity. In such cases, a partnership between two companies fails to provide customers the clear value prop for brand equity.
- Unequal contribution: Ensure that both parties contribute equally to marketing efforts to maximize results.
Regulatory Partnerships:
These partnerships involve collaborating with regulatory bodies or compliance experts to ensure adherence to regulations. Pitfalls may include:
- Compliance risks: Ensure that partners are knowledgeable about relevant regulations and continuously do due diligence to avoid compliance issues.
- Regulatory changes: Stay updated on regulatory changes that may affect the partnership and adapt accordingly to avoid any regulatory actions.
Financial Partnerships:
These partnerships involve collaborating with financial institutions or investors to access capital or financial services. Pitfalls may include:
- Funding constraints: Ensure that both parties have sufficient financial resources to support the partnership.
- Conflicting interests: Clarify financial terms and expectations to prevent conflicts over investment returns or ownership.
Moreover, transforming a Fintech program from a transaction led model into a value led model requires bandwidth, runway and a skill set based in lifecycle touchpoint enablement.
Sure, it involves the usual leveraging of complementary strengths, expertise, and resources to increase the value proposition of products, PX/CX and service offers.
But to facilitate tangible value in this vertical requires a deep-dive into the primary levers and value-bridges required on a foundational level.
And at the heart of successful FinTech partnerships lie six key values that drive mutual success and unlock new opportunities for growth.
They are –
- Culture
- Mutual Buy-In
- Transparency
- Corporate Alignment
- A Defined Strategy
- Effective End-To-End Processes
Culture
The best partnerships build culture with intention. Great Fintech partner program leaders understand that strong cultural alignment is good for business and plays a pivotal role in the long-term viability of a relationship.
Fintech partnerships thrive when there is synergy in core values, beliefs, work ethics, and organizational ethos – the byproduct being a shared commitment to customer satisfaction, vision and outcomes, integrity, and excellence. Driving this cultural element forward together as one will only ever result in an increase in programmatic confidence.
Mutual Buy-in
You must qualify to quantify. If there is an obvious gap between yourself and a potential partner in said vision, benefits and objectives when forming the alliance, then it’s time to review. Partnerships are a top-down, bottom-up initiative, so both internal and external stakeholders must be fully committed to the success of the initiative.
You need to generate a sense of self-motivation in areas such as time management, resources, shared objectives and, most importantly, overcoming the inevitable obstacles while capitalizing on opportunities together. Partners are part of your team after all.
Transparency
Because Fintech organizations work in a high regulatory/high volume environment, transparency is one of the cornerstones of a successful partnership. Collaboration and accountability aren’t just buzzwords, they are key to building long-term trust, and transparency helps to hold both parties accountable for their actions and agreed commitments.
Fintech’s who prioritize this all-important value-bridge, nurture their business relationships and become more resilient and better able to withstand challenges before they occur.
Corporate Alignment
Prioritizing Fintech partner alignment results in quicker decisions and reduced time to execution – simple. The key drivers here are aligned processes, procedures, priorities, and strategic objectives. When there is clear alignment at the corporate level, it becomes easier to synchronize efforts, and ensures that both parties are working toward a common version of success.
Fintech partnerships alignment becomes most apparent –
- when pursuing new market opportunities, operational efficiencies, or enhancing product or service offerings. Process becomes second nature, and ease of enablement remains a top priority.
- when it allows the team to focus on performing the work rather than trying to figure out which team member is responsible for what, and who needs to be consulted when making decisions.
A Defined Strategy
Structure follows strategy. Especially in the fast-paced world of Fintech B2B partnerships, a refined and agreed upon strategic approach is essential to navigating the complexities of the alliances. From an articulated value proposition that benefits both sets of end-client shared outcomes, to a creating clear governance structures and operational procedures, an agreed partner strategy is paramount.
Customer experience (CX) also plays a big part of a Fintech strategy and remains incumbent for these organizations to keep the value-overlap at the center of their offers. Achievable KPIs and OKRs, co-developed with partners, also help to optimize said outcomes.
Effective End-To-End Processes
Many important value-drivers go into creating cohesion in Fintech partnerships, but none so more important than effective and efficient end-to-end processes. Almost all mutual success and growth opportunities depend on them.
By focusing on such areas as efficiencies, collaborative motions, customer-centricity, risk-management, data-driven insights, scalability, cost optimisation, and competitive advantage, partners can really maximize the value they create together, reach business objectives, and find new customers faster and with greater effect.
The financial services industry is a rapidly evolving vertical that demands superior value delivery to remain relevant.
Creating that all important environment in which Fintech partners can thrive, are well supported, and encounter minimal friction, while delivering effective and contextual value, is of keystone importance.
Because of the transactional nature of typical Fintech partnerships, even a small increase in shared and created value is enough to differentiate amongst the competition and add value for new customers.
Taking this path will not only lead to increases in innovation and strategic growth opportunities but facilitate stronger joint initiatives and product/service offerings; the benefits of which can then be passed back to the end-clients.
An increase in value = an increase in results.
Leading to a win/win/win.
Megatrends in Fintech partnerships
While creating in your fintech partnership, consider the following megatrends that are reshaping the redefining the partnership. However, amid these megatrends, fintech firms need to understand customers’ pain points and pay attention to create more services through a robust partnership strategy.
Embedded Finance:
Fintech companies are increasingly embedding financial services into non-financial products and platforms. This trend has led to partnerships between fintech firms and companies in various industries, such as e-commerce, ride-sharing, and healthcare, to offer seamless financial solutions to customers.
Open Banking and APIs:
Open banking initiatives and the use of Application Programming Interfaces (APIs) have facilitated collaboration between fintech firms, traditional banks, and other financial institutions. Partnerships leveraging open APIs allow for data sharing, product integration, and the creation of new financial products and services.
Cross-border Partnerships:
Fintech partnerships are expanding globally, with companies seeking to capitalize on opportunities in different markets. Cross-border partnerships enable fintech firms to access new customer segments, regulatory environments, and growth opportunities.
Regulatory Technology (Regtech) Partnerships:
As regulatory requirements become increasingly complex, fintech companies are partnering with Regtech firms specializing in new technologies to streamline compliance processes, mitigate regulatory risks, and ensure adherence to evolving regulations.
Collaboration with Big Tech:
Fintech firms are forming partnerships with large technology companies, such as Google, Amazon, and Apple, to leverage their customer reach, technological capabilities, and data analytics expertise. These partnerships often focus on offering financial products and services through technology platforms or integrating fintech solutions into existing ecosystems.
Sustainability and ESG Partnerships:
With growing emphasis on environmental, social, and governance (ESG) factors, fintech companies are partnering with sustainability-focused organizations and integrating ESG considerations into their products and services. Partnerships in this area aim to promote responsible investing, carbon footprint tracking, and other sustainable financial practices.
Fintech Ecosystem Collaboration:
Fintech companies are increasingly collaborating within the broader fintech ecosystem, including with startups, accelerators, incubators, and industry associations. These partnerships foster innovation, knowledge sharing, and ecosystem growth.
Financial Inclusion Partnerships:
Fintech firms are partnering with governments, NGOs, and financial institutions to promote financial inclusion and address the needs of underserved populations. These partnerships focus on expanding access to banking services, affordable credit, and financial education.
Overall, the fintech industry is characterized by a dynamic and collaborative ecosystem, where partnerships play a crucial role in driving innovation, expanding market reach, and addressing emerging challenges.
In the end, creating value in fintech partnerships requires firms to facilitate and manage a complex ecosystem of partners, alliances, regulators, customers, and investors, thereby necessitating to regularly assess the partner maturity program, invest in internal skill development, and invest in a partner ecosystem management platform like Mindmatrix to realize the benefits.
Book a call with us today to understand how we can help fintech firms scale up their partner program and manage the complexity of the fintech partnership ecosystem.
This article is co-authored by Linkon Axon, Founder of Arys Consultants.
