While banks benefit from good long standing reputations and a high level of trust from their customers, generally, they lack the innovation and agility of others in the payments space. Rather than simply seeing FinTechs and other challengers as a threat, however, by working in partnership both parties can deliver better payments solutions to the end user.
In a recent webinar hosted by The Banking Scene, in association with Banking Circle, Jon Levine, Co-Head of Institutional Banking at Banking Circle was joined by Brigit Carroll, Chair of PayBelgium, and Wim Grosemans, Global Head of Product Management – Payments and Receivables – Cash Management at BNP Paribas, to discuss just how critical these partnerships are.
The session was moderated by The Banking Scene’s CEO and Founder, Rik Coeckelbergs.
Read on for our summary of the key takeaways from the event.
How key are bank and FinTech partnerships in efforts to improve payment solutions for customers?
An in-webinar poll suggested that these partnerships are very important, and Wim Grosemans of BNP Paribas agrees, but believes the answer is a little more nuanced. Other factors will influence how critical these partnerships are, such as individual situations or where an organisation is in the value chain, however one thing that remains steadfast is that it is absolutely necessary to “deliver superior customer value” now more than ever.
Wim places a large emphasis on the importance of time to market, a sentiment that was echoed by many of the webinar’s attendants. This was voted as a bank’s primary reason to work with FinTechs, followed by it enabling them to go beyond the limits of a bank.
In order to take advantage of this though, Brigit Carroll of PayBelgium, believes that FinTechs need to be aware of the legal certainty that banks desire, stressing that “it also requires the right regulatory framework to make that happen and for banks to feel comfortable to partner with FinTechs.”
How have customer expectations in corporate banking changed and what direction are we moving in?
Arguably the biggest challenge facing the industry is around instant payments, particularly for cross border payments, and this is exacerbated by the difference in speed between the consumer and B2B worlds, with the former naturally influencing expectations.
Jon Levine, at Banking Circle, explains that the difficulty of moving B2B payments is in direct contrast to the increasing ease and speed that consumers enjoy, but believes that “you should be able to send money around the word as easily as you send a WhatsApp message around the world.”
Both Jon and Wim believe that the customer shouldn’t need to think too much about the payment while they’re making it, and that in years to come this will cease to be a topic of discussion, as cross border instant payments become the norm. Jon elaborates: “If the penetration of instant transatlantic payments is very low today, it will be a lot higher in a year.”
What are the main challenges that present in partnerships between banks and FinTechs?
Banks and FinTechs naturally bring very different assets to the partnership, but the key differences between the two can also present a few obstacles that need to be smoothed along the way, and one of these is a clash of cultures.
Brigit Carroll of PayBelgium explained that FinTechs are used to “just being really nimble”, they enjoy a high degree of autonomy, and work very quickly, which is of course useful for decreasing time to market, but such different ways of working can also present challenges.
Are banks still required in the payments space?
“Everyone in the ecosystem has a role to play,” claims Brigit Carroll. On the suggestion that FinTechs and challenger banks could disrupt the industry by themselves, Brigit believes that certainly on the regulatory side of things, there are some blockers preventing this, not least the fact that FinTechs can’t access the payments infrastructure directly, as non banks. As a result she says “I don’t think that banks are out of the picture.”
Jon Levine feels that partnerships between banks and FinTechs “are going to be the name of the game” moving forward, as reflected in the changes seen in the build or buy debates in recent years, with large institutions now placing less emphasis on build, and more consideration going into other options such as purchasing or partnering.
For those that do choose to partner, there’s a preference towards a committed relationship between both parties. Brigit Carroll stresses that such an arrangement requires a lot of investment from both sides, and as a result there is both a need and an expectation that this partnership will be long lasting. Jon Levine elaborates further, explaining that “resources are finite in most institutions”, and that the investment made from both sides goes into aligning the partnership, as well as implementing those new plans.