Incumbents and fintechs: a match made in heaven?

By Matt High
Roisin Levine, Head of Banks at Flux, discusses the importance of collaboration between fintechs and incumbents in 2020 Legacy financial institutions a...

Roisin Levine, Head of Banks at Flux, discusses the importance of collaboration between fintechs and incumbents in 2020

Legacy financial institutions and fintechs are often pitted against one another, with the former represented as being slow and resistant to change, while newer upstarts are classified as disruptive, but struggling to find profitability or become mainstream.

Like almost all stereotypes, there are some truths in these assertions. But the scale offered by incumbent banks that can provide distribution to tens of millions of customers means that, for fintechs looking to reach mass market quickly these collaborations, when approached with the right outlook, collaboration between the two is undeniably a match made in heaven. 

Everyone benefits

Incumbent banks know that in order to stay ahead of the curve - and provide the best service to customers - they need to select the right vendors and partners. It is impossible for them to innovate on every front, and partnering with fintechs can provide a quick way of adding a new customer centric feature or service without building it from scratch.

This collaboration benefits everyone - fintechs are able to vastly increase their audience, banks can accelerate their own digital transformation, and (hopefully) customers get access to a new feature that’s both secure and useful.

It is fascinating to now also see the incumbent banks emulate their fintech rivals by launching their own standalone digital banks, with features clearly influenced by the successful mobile-first challengers. Imitation is the sincerest form of flattery, and ultimately the end users, consumers or SMEs, will benefit from the increased competition and relentless race to optimise our banking experiences. 

Incumbents turn challengers

Over the last year RBS and HSBC have both created their own challenger banks in Bo, Mettle and Kinetic. These new banks may soon introduce their own marketplaces or simply become easy integration platforms for third party services delivered by other fintechs.


Building these as greenfield projects creates an opportunity for incumbents to be more agile, deliver and test partnerships quickly and deploy new features at pace. Often the challenge for large banks is the sheer scale of their operations - multiple stakeholders, legacy systems and rigorous procurement processes can make partnerships difficult to implement, whilst newer banks have the benefits of being API driven and ready made for collaboration.

You only have to read some of Monzo’s early blogs outlining their vision of API enabled, intelligent interactions between bank accounts and other services to see how they looked at banking differently. Open Banking in the UK helped accelerate this concept and made this incredible foresight a reality for others. 

Meaningful engagement

Fintech and bank partnerships have been encouraged and celebrated over the last few years. But Fintechs have a duty to make these collaborations more frequent and appealing by listening to the incumbent banks that they wish to partner with to understand their medium and long term objectives.

It is easy for fintechs to often assume a bank should know why a partnership or technical innovation could be beneficial, but meaningful engagement requires an easy to understand product or service, with a very clear demonstrable benefit to customers. Fintechs that pitch broad and over complicated proposals create drawn out conversations with banks and projects that ultimately never find their key sponsor. 

When the right product, feature or service is available and articulated correctly the appetite for collaboration is clear. Incumbent banks have spent millions of pounds overhauling legacy systems, building vast digital teams, and giving freedom to their venture arms to identify fintechs worthy of strategic investments and long term partnership initiatives.

For this reason, banks and fintech collaborations are set to continue through 2020, but the real measure of success won’t be the PR announcements that excite just industry press and fintech advocates. It will be the partnerships that put true financial control and opportunities into the hands of millions of normal banking customers via seamless user experiences. 

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.

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