No man is an island when it comes to fintech, and in the pursuit of a better world driven by better financial services, it’s clear that standing together means progressing together. This September at The Fintech Times, we’ll be delving into every corner of what it means to be a fintech ecosystem. We’ve dedicated the entire month to investigating what makes a successful fintech ecosystem, how fintechs can work together more effectively, as well as providing a regional view of some of the industry’s best examples of community collaboration.
In our second instalment of fintech partnerships, the debut topic of our monthly coverage of fintech ecosystems, we’ll be investigating one of the fintech industry’s most compelling talking points: is it better to compete or collaborate?
Naturally, this is a topic of which industry players will be highly aware. Fintech, with its teaming communities and ever-amazing innovations, has created a healthy environment for competition, but as any company that wants to get ahead will know, the path to a successful business venture is never a path you walk alone.
Indeed, our own narrative has done well to document these cases of community cross-collaboration. Over the summer, we saw:
- ACI Worldwide announce its collaboration with CARDNET to bring modern payments to Japan.
- Bybit adopting open banking payments through its collaboration with TrueLayer.
- Bank Indonesia enabling cross-border QR payments between Indonesia and Singapore through its collaboration with the Monetary Authority of Singapore (MAS).
Just to name a few!
So clearly, it is within the interest of those operating within the industry to adhere to the benefits of collaboration, but does everyone view the benefits of collaboration in such a united light?
Here, we’ve welcomed a diverse range of industry experts to find out, once and for all, whether is it better to compete or collaborate.
Standing your ground
“It is always better to collaborate first, then compete,” says Jovi Overo, managing director of banking as a service (BaaS) at the payments company Unlimint.
“However, it would be wrong to deny the fact that today’s fintech industry is more of a battlefield, where the best offering on the market wins. In reality, to stand your ground against your competition, you still need collaboration.
“Aligning and collaborating with the right partners allows companies to essentially bring a higher level of service to their customers and deliver much more value to them.”
Overo continues: “Our industry is constantly moving forward and the companies that are more forward-thinking understand the benefits of cultivating relationships with other players and playing on each other’s strengths and core competencies.
“There is no point in trying to fight each other for a place in the room when you can be working together on actually making the room bigger, to fit you all, while in parallel opening more and more doors of opportunities for your end customers.
“To innovate and move mountains, we need to learn to work together and utilise the instruments that each of us holds.”
The definition of winning
“The fintech industry is a ripe environment for healthy competition, especially when competition leads to greater outcomes for the end user of financial innovation,” explains Nicole Valentine, fintech director at think tank Milken Institute.
“In any competitive space, we should ask ourselves a few questions: ‘How do we define who is winning?’ and ‘What are we competing for?’”
Valentine continues: “The definition of winning in fintech is currently being defined by technological, technical and financial performance benchmarks such as speed, access, accuracy and cost.
“Fintech companies who are competing to deliver products and services that have never been designed to people who have been left out of the financial system design have an opportunity to simultaneously grow the market and gain market share.
“When it comes to making sizable dents in the financial divide, competition is also a catalyst for unearthing the best ideas, services, and products. In a world with approximately eight billion people, fintech should continue to compete to create the most value in our digital, interconnected world.”
Always going to serve you
“It’s important to do a little of both!” comments Richa Singh, senior director of product at business payment firm Corpay.
“We’ve built a lot of our strategy around powerful collaboration, but we’re definitely not afraid to compete. Our most obvious competitors are big banks. It’s truly fun for me to get to lay out how our fintech allows businesses to pivot from big banks into something new.”
Singh continues: “In this case, the competition is worth it. On the other hand, rather than compete with them, we partner with ERPs to provide fully-realised payment solutions for specific industries.
“I think it all comes down to being strategic with your choices of competition versus collaboration. There’s not one ‘right way’ to navigate the fintech industry, but being intentional in how you work with other fintechs is always going to serve you.”
Value in collaboration
“The very nature of being a fintech is that you are filling the gap in the market with a specialist product and/or service that you are offering,” thinks Reena Raichura, director, head of product solutions at desktop integration platform Glue42.
“These gaps are usually a missing part of a workflow, business process or value chain and therefore a fintech cannot survive alone – collaboration is the only way for fintechs to build compelling value propositions and deliver solutions that meet the overarching needs of the business.”
Raichura continues: “In the past, the emphasis was on building huge monolithic products that tried to be everything to everyone. Thankfully, this type of design thinking has now been flipped on its head.
“In today’s digital world, a product’s value increases by the other products/services it can integrate with or connect to, and this is what makes the whole greater than the sum of all its parts. It’s the ecosystem that matters over the island.
“The more ecosystems and platforms a fintech can be part of, the stickier its offering becomes. It’s about flows over features, ecosystems over islands and collaboration over competition.”
Collaboration as an industry guide
“My very strong view is that collaboration is key. Most of the areas that are now undergoing their fintech-driven renaissance are those that have been late to the fintech party,” says Phillip McGriskin, CEO at cross-border payment firm Vitesse.
“And those areas are typically legacy verticals that have been around for a long time and that have a lot of deeply embedded tech and processes.”
McGriskin cited the insurance industry as an example of this: “Insurance companies have been in existence for multiple decades and the industry has been around for hundreds of years. The technology in use is not modern and flexible.
“There are very few common standards and there are lots of different solution providers for the hundreds of varying aspects of the insurance flow. It’s a complicated ecosystem and partnerships and collaboration are required to navigate it.
“There are, of course, the neo-insurers that we’ve seen rise to prominence but even these ‘tech only’ businesses have had to deal in some way with those legacy insurers, their legacy tech and legacy processes. It is simply not possible to enter the market without some form of collaboration with existing processes and incumbent providers.”
A change of heart, a change of mind
“Initially fintechs were seen as disruptive competitors to the traditional banking industry because of their approach to providing banking services through the use of innovative technologies. Over time that view has evolved due to the recognition that they create more value by collaborating,” comments David Schwartz, president and CEO of the Financial and International Business Association.
“The partnership provides the bank with better and more efficient products and services while the banks provide access to their loyal and established customer bases.
“Banks have been quick to embrace this collaboration as they recognise that it is necessary if they want to stay competitive.”
A time to compete and a time to collaborate
Colin Hayward, CEO of contract optimisation platform for commodity and freight companies Chinsay, recognises that collaboration is “extremely important” when complementing vendors are seeking to achieve savings and operational efficiency, however, he explains that “for the industry to progress and keep innovating companies do need to compete with each other, but keeping the clients’ best interests at heart is very important.”
Hayward continues: “There is no need to choose between ‘compete or collaborate’, as both are as important as each other, and in the freight and commodity markets, you see the competition happening between vendors on the same vertical.
“Collaboration, however, is reserved between best-of-breed technology that can work together to dramatically reduce risks and errors for the user.”
Pick your moment
“Compete. Every single day and twice on Sunday,” affirms John Mackowiak, chief business development officer at Advyzon, a tech platform for financial advisory firms.
“Build anything you can build, because you’ll be in control of the client experience. If you need to tweak something or rebuild entirely, you’re able to do so without external hurdles or delays.”
Mackowiak continues: “At Advyzon, for example, it’s a huge advantage to be able to take information that would traditionally live in a CRM system and include it in a portfolio performance report. No collaboration is needed. For the end user, whether a financial advisor or investor, it means fewer logins, fewer applications to learn, and ease of use that can’t be matched when multiple applications are in play.
“This doesn’t mean you should never collaborate. Collaborate with partners who have a similar mindset of providing an exceptional user experience and who have a unique product. What really allows integrations to shine are collaborations where vendors go above and beyond.
“The real answer for whether to compete or collaborate is ‘both’, which, when done right, may be more challenging than picking a lane and staying in it.”
The best of both
When asked whether it’s better to compete or collaborate, Mike Tuchen, CEO of ID verification platform Onfido, analyses how in fact, “This is a false choice.”
“All fintechs have direct competitors and strong partners, as well as a few mixed relationships that have some of each,” he explains. “All can help drive long-term success.”
“As the market grows significantly, traditional industry borders dissolve, and regulations increase, competition drives innovation and partnering can create new opportunities,” Tuchen continues. “Instead of building from the ground up, collaboration helps companies move quicker, improve the user experience or comply with new regulations.
“Doing so has its benefits such as increasing access to new markets and growth opportunities that otherwise might not exist.
“Ultimately, fintechs are focused on developing solutions to solve evolving customer problems in a rapidly changing market, which sometimes requires collaborating with a partial competitor or competing with an occasional collaborator.
“And of course out-competing competitors and partnering deeply with close collaborators.”