The power of partnership: how fintech collaboration accelerates digital transformation

Banking across the globe is changing fast, with digital tools, evolving account holder needs and enhanced regulation affecting every financial institution from the international giants to community banks and credit unions. These trends have only been accelerated by the global pandemic which has  increased first-time digital transactions, grown digital engagement and boosted contactless spending.

With these changes comes the need for new workflows and processes that can deliver the experiences that modern account holders expect. When it comes to technical upgrades, larger institutions have a first-mover advantage, able to invest significant capital into infrastructure. For that reason, recent years have seen big banks delivering significant improvements in customer satisfaction; traditionally the specialty of smaller institutions. This is because they have put more resources into digital transformation that can drive personalized interactions for their account holders.

However, community banks and credit unions can regain competitive advantage by leveling the digital playing field. A 2019 customer satisfaction study found that overall satisfaction increased more notably among digital users of smaller financial institutions than among customers of Big 6 banks.  

In the race to deliver digital experiences, collaboration is key. More community banks and credit unions are partnering with fintech businesses to accelerate their digital transformation, balancing the need for change with the reduced risk and cost that comes with working with established solutions. By implementing specific apps within their service models, smaller financial institutions can provide the digital, connected experience users expect and regain competitive advantage.

From competitors to partners

Fintech businesses have been key drivers in innovation in recent years by using the latest technology and workflows to re-imagine the provision of financial services from a user-first perspective. By capitalizing on tools such as cloud hosting and mobile integration, fintechs have succeeded in winning users away from large banks by prioritizing ease-of-use and personalization. With more flexible tech-stacks, they have also managed to tailor services to groups that big banks had traditionally underserved.

In this personalized approach, fintechs mirror the historical approach of community banks and credit unions. There is significant alignment between the vision and goals of fintechs and smaller financial institutions, as well their mutual competitors.

There is also a clear mutual benefit for both parties. Fintech organizations can bring innovation and advanced technology capabilities to community banks and credit unions, but they also benefit greatly from association with these established, highly-regarded institutions and their pre-existing client relationships.

App-based transformation

Upgrading banking systems used to be slow, expensive and complex, but modern interfaces offer an alternative model for technical collaboration which can help you move faster. An API, or Application Programming Interface, is a digital connection that enables instant transfer of data between systems without the need for new infrastructure. This enables community banks and credit unions to connect their existing systems directly to fintechs.

This simplified connection model has created an ecosystem of innovative apps from which institutions can pick and choose the services they need to upgrade their user experiences.

Not only are these apps a fast, low-risk way to approach digital transformation, but the range of partnerships on offer enables institutions to create personalized services that suit their audience’s expectations, driving improved retention and user acquisition.

Change in practice
In a fast evolving financial ecosystem, apps provide a flexible way to respond to the needs of the moment, be they big or small, without lengthy development and new infrastructure.

• Gig work in the US has risen by 15% in the last decade, driven by the explosion of part-time work opportunities from businesses like Lyft and Etsy. For those workers suddenly facing a more complex financial situation, a solution like RoamHR enables you to not only own the financial relationship, but also create added value by helping them prepare for the dreaded tax season.
• On the smaller end of the scale, consider the number one reason couples fight - money. HoneyFi creates financial transparency between couples, while helping them save for their futures.
• In times of uncertainty, like now, saving for the future is essential. Fingoal, gives your account holders personalized advice on how to spend smarter and go farther, while also boosting your deposits.

Through Finastra’s Fusion Digital Banking platform, institutions are able to instantly integrate apps like these into their systems and give their users the support they needed.

Maximizing value in transformation

App partnerships can be approached individually or at a platform level. Creating individual APIs – between one financial institution and one fintech – can be expensive and time consuming. The alternative for community institutions is working on a platform level – connecting to a central digital hub that is linked to a range of fintech partners.

This delivers three key advantages:

• Faster ROI: By connecting via a platform, implementation times are drastically reduced, meaning institutions can realize value faster while reducing upfront costs.
• Reduced risk: Working with an integration partner provides extra accountability, with fintech partners being vetted at a technology and utility level to ensure value for financial institutions.
• Expert support: For community banks and credit unions at the start of their digital journey, or those seeking to accelerate their current path, working with a platform can provide valuable expertise in building a partnership strategy and prioritizing projects by value to users.

Finastra’s Fusion Digital Banking is connected to the FusionFabric.cloud platform and is designed to unlock innovation in financial services at scale. The platform includes pre-built APIs that connect your business to fully vetted and approved fintech apps that can transform your service and help you build long term value.

Building a digital future

Despite rising competition in the banking sector, community banks and credit unions still retain substantial advantage in their unique approach to user relationships, culture and community connections. In order to keep up with the major, national banks, it’s essential to augment these capabilities with the best technology to deliver the experience that modern account holders require.

Partnerships will be essential to enable this shift within the time and resources constraints faced by America’s community institutions, with fintechs moving from competitors to collaborators. Institutions can accelerate their progress by working with reliable integration partners like Finastra’s Fusion Digital Banking solution and the FusionFabric.cloud platform.

Discover how you can partner with fintechs on Finastra’s FusionStore.