As financial services evolve to meet the challenges posed by a digital-first marketplace, banks need to bring technology out of the shadows of operational support functions and into the forefront of innovation, digital services and customer experience. To navigate change and accelerate their digital transformation journeys banks must embrace this paradigm shift and reconstruct current business models around technology to remain relevant.
Amir Yazdanpanah is the Managing Director, MEA of Flybits, a global fintech that helps banks contextualize data to deliver highly personalized customer experiences. Here he shares his thoughts on how banks need to embrace fintech partnerships to accelerate digital transformation.
The disruptive nature of the COVID-19 pandemic meant that these digital transformation plans, which would have typically taken months or years to implement, needed to be in place within weeks or days. Failure to react with agility and purpose to this global disruption widened the technology gap among financial institutions. Those that embraced fintech came out ahead and continue to outpace the competition particularly when it comes to innovation in customer experience.
Fintech is no longer viewed as a competitor
Financial institutions had previously taken a cautious or even suspicious approach to fintech, often considering it a competitor that is rapidly disrupting the industry. There is now growing recognition within the sector that banks cannot go it alone when it comes to digitalization. The costs and timelines associated with banks tackling their digital transformation plans in-house are prohibitive. Adoption of fintech as a valuable, trusted partner, which is critical to advancing relevant digital customer engagement, is the future of banking.
More than just increased revenue
While there is growing recognition that fintech partnerships can help financial institutions grow revenue, there are also other advantages that must be acknowledged. These include expanded personalized digital product offerings, increased customer ease-of-use and reduced cost of innovation. In a partnership ecosystem, banks gain access to the most advanced applications and platforms. Another key advantage to fintech partnership is the ability to scale quickly. Successful partnerships between banks and fintechs can be scaled up rapidly, adding more features and services to new market segments, particularly younger, digitally advanced customers. Such a partnership also broadens the customer base by tapping into each other’s customers and increasing market share for both entities.
Partnership is a win-win formula
These partnerships are winning formulas for fintechs as well as for banks. As startups, many fintechs do not carry the same level of consumer trust and brand recognition that established financial institutions do. Partnering with incumbent banks gives fintechs access to significantly bigger market segments, enabling them to generate revenue, expand their service offering and to scale up rapidly.
A collaborative approach to building customer-centric solutions
The right partnership with the best-of-breed fintech will combine talent, platforms and solutions to co-create and launch new services and products. Banks become more agile in responding to shifting customer needs by embedding partner solutions into their own programmes while lowering their capital investment requirements and software development risk.
Benefit to consumers in the Middle East and Africa
As banks become deft at launching new cost-effective services, and increasing the depth and breadth of their offering, consumers will have more choices to select from, at more competitive prices. User experience and trust will remain the cornerstone of the consumer/bank relationship. As banks continue to grow their partnerships with regional and global fintechs and adopt embedded cloud solutions, consumers in the Middle East and Africa will gain access to innovative solutions that would not have been possible without these partnerships.
We have come a long way
Fintech ecosystems have evolved significantly in MEA over the past four years. I have personally observed how the fintech startup community initially struggled to gain recognition and momentum. Broader adoption came when traditional financial institutions emerged as co-sponsors of banking innovation incubation programs in the region. Governmental support and a focus on regulatory matters this past year has ushered in further alignment between banks and fintechs. These partnerships have gained even more traction and are generating healthy investable start-ups as a result. Together banks and fintechs can do great things.