Traditional financial services companies should partner with FinTechs to expand their offerings in the marketplace
A collaboration between Metro Bank and peer-to-peer (P2P) lending platform Zopa – the first partnership of its kind in the UK – marks the beginning of a new chapter for FinTechs and more traditional financial institutions. By working together to expand their offering, Metro Bank and Zopa have the potential to revolutionise the UK’s loans marketplace: other financial sectors should take heed.
Many traditional financial institutions were left reeling from the 2008 financial crisis, and yet did nothing to improve the way in which they operated – be that through decreasing the time taken to process transactions; looking for ways to reduce fees; becoming more transparent; or making steps to increase efficiency through better digital experiences – all of which opened up opportunities in the market.
However, despite this, many financial organisations are still nervous about forging relationships with FinTechs, with some seeing them as a threat to the financial services market. It seems disruptive innovation and technology do not sit comfortably with more conservative institutions. However, by building a community that embraces new digital technology, incumbent businesses in the sector can provide additional value and create new and innovative products and services – which are becoming a crucial piece of the puzzle to meet increasing customer demands.
All of the more conventional operators in the financial services sector but especially the high street banks, need to accept that they should become less insular and evolve their value chain by partnering with smaller or new challenger financial institutions, rather than remaining as one large bank that attempts to innovate in areas that they have little or no prior knowledge of. The future opportunities for FinTechs lies in being one of the links in this evolving value chain.
Banking Circle encapsulates this collaborative ethos. PSPs, APMs, card acquirers, FX payment providers, and their merchants, are able to expand their business globally through a secure and regulated platform capable of performing instant transfers across borders at a low FX rate.
For the foreseeable future, FinTechs will challenge any financial institution that relies on the ‘business as usual’ mantra and the winners and losers will be to a greater or lesser extent those early adopters who embrace change.