Five revenue-generating ideas for fintech/bank partnerships
The fintech industry worldwide has grown very successfully over the past decade. But since the global pandemic, start-ups have suffered through a lack of investment from areas that previously have supported the new financial technology revolution. Suddenly, funds in many places have dried up, or are being more cautiously spent. Therefore, new market entrants are having a tough time.
More collaborations with banks would be beneficial because banks and fintechs make the perfect bedfellows. Fintechs assist banks by providing services that would take years of investment and development to carry out. Fintechs also help banks scale their distribution of products more swiftly and economically than they could manage alone.
Here are five revenue-generating strategies that will boost the fintech sector through bank collaborations:
1) Wealth Transfer Management
Banks focus far more on inheritances than the wealth transfer process, which is a complex matter that customers struggle with. There are fintechs that are already capitalizing on this opportunity to provide user-friendly, cost-effective digital services for estate planning, settlement and probate issues. These services would provide an opportunity for fintechs to engage with a wider customer base, and for banks to offer customers new services through their partnership option.
2) Subscription services
The average US household pays around 13 subscription services a year. Subscription management is another service fintechs and banks could manage together. Keeping track of all those subscriptions is tiresome for customers, but there are several mobile apps that can monitor them. This would give customers the option to; buy new subscriptions, track their spending, compare their deals with other subscribers and cancel subscriptions that are no longer wanted, all through their bank.
3) I.D. security and data protection
Now, more than ever before, security is big business. The more advanced cyber crime becomes, the more secure accounts must be. Fintechs can offer the perfect partnership with banks, to manage data breaching and security services for customers. Banks need to review data breaches and identity protection as a standard part of financial health. They can achieve this by bolstering their digital platforms with I.D. security tools to support free credit scores.
4) Bill payments
Bank customers rarely manage their bill payments through the bank’s own portals. Instead, the vast majority of people pay bills directly. If customers paid their bills through the banking portal, it would provide banks with the opportunity to expand their services and assist their customers to make better financial decisions. This would increase loyalty and secure long-term customer relationships.
5) Cryptocurrency Investing
Crypto currency trading has risen in popularity since 2020 – and one in 10 American adults now either own or use cryptocurrency for buying. PayPal will soon offer crypto purchasing via its portals and apps. However, banks in general don’t allow customers to buy cryptocurrencies via their cards because they only handle traditional currencies. The fact that cryptos are now going mainstream, means this must change soon. If banks partner with fintechs, the collaboration would enable to them to offer customers crypto services, thus generating revenue for both parties.
Zafin: Banking is now in the era of the tech ecosystem
The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?
John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.
Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:
Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?
It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started.
While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk.
Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand.
I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.
When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic.
Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?
I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.
Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.
The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC.
I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives.
Q. Are there any other bank tech trends you'd like to discuss?
Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement.
Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.