ICBA LEAD FWD Summit 2022 was an incredible gathering of professionals dedicated to shaping the future of banking. BrightFi’s Chief Revenue Officer, Allison Murray, and Head of Product, Eva Kühnert invited our “Whiteboarding with Experts” participants to share the difficulties they have faced as bankers partnering with FinTechs. In small forums, attendees discussed common digital transformation pitfalls they’ve navigated, and despite serving unique and differing communities we heard some problems echoing repeatedly.
We quickly learned that many of our attendees are trying to stay ahead of their community’s emerging expectations in an increasingly digital world while simultaneously acting as the translator between technology from the past, present, and future. They are balancing the limits of their legacy core software against the risks involved with emerging solutions that might not work seamlessly enough to meet the bank’s evolving needs.
Traditionally, banks have hosted all of their products and services in one place. But when their core providers started lagging in offering the most innovative, forward-thinking technology, they started to associate danger with having all their products and services supported by a single vendor. Several shared that a one-stop-shop option won’t work or integrate the way they need it to, resulting in them seeking out a different best-in-class solution for each one of their needs. Working with one FinTech instead of several will only help unify operations if it can offer sufficient adaptability. As a result of these early experiences, many banks are shifting away from vendor consolidation and moving towards modular banking which creates a lot of extra work in finding and vetting possible partnerships.
Based on group feedback, legacy cores feel too outdated and inflexible and FinTechs feel too new and untested. No one wants to be the first bank to partner with a FinTech for fear of becoming their involuntary quality testing team. However, finding the right startup without a lot of previously existing partnerships can sometimes equate to special attention and customization. Bankers are caught between the risk of trying something new and the risk of inaction. They can also find themselves trapped by contract or circumstance, forcing them to continue to use their limiting legacy cores. In many cases, banks that are in the middle of their digital transformations have redundant processes and capabilities in place because they still depend on their legacy cores for some products and third-party APIs for others. These processes running side by side may duplicate customer accounts in separate systems and can create sloppy data.
What will be the tipping point for banks to make the move out of this in-between state and make a bigger, more meaningful bet on FinTech effectiveness? Based on our conversations at the ICBA LEAD FWD Summit and across many other banks evaluating FinTechs we’ve come across a consistent set of five questions that banks are asking of FinTechs and questions that FinTechs must meet in order to take the next step as a trusted partner.
Risk, Fraud, and Compliance standards and processes should be something your potential FinTech partners are very comfortable speaking about. Find out how they test and stay up to date on security measures. Ask them how they mitigate and deal with risk. These conversations will help to make sure you’re aligned in the places that matter the most and will help you find answers to the regulatory questions you might face during your digital banking transformation. It’s also important to examine the values of the FinTech and find one that matches well with your organization’s mission and values for the best fit. Once you’re sure that your bank can feel safe with a FinTech, it’s a good idea to ask them how they would describe these security measures to your customers as well. If they can speak your language and your customer’s language, the potential increases for a successful long-term partnership.
If you’re not sure where you are in your bank’s digital transformation, you may not be certain about your partnership needs. Identify where you are and where you want to be to start seeking out the best partnerships. Then find out what implementation requires and how long it will take. You’ll need to know how much training and education will be needed for your employees and customers. This conversation should cover what the FinTech does to help with customer service, education, and marketing. If they won’t meet your needs, are they cost-efficient enough to add more specialists to your team?
Some careful complexity will always be a part of banking, but there are areas that can be simplified without taking on too much risk. There is no need for banks to compromise their security methods and required processes while updating and streamlining their procedures.
Find out how much required extra bulk comes with what you really want to use. If you’re going to have to add more people or duplicate your offline processes in an online space, you may not be looking at a great fit. If anything sounds overwhelming to you, there’s a good chance it will be unmanageable for your employees or customers as well. The right FinTech will lift your burdens rather than add to your responsibilities.
It can be difficult to calculate the ROI when a lot of the value is intangible, gradual, or preventative. Even with the cost-effectiveness of digital banking platforms, it can be hard to quantify what kind of returns to expect. The best way to clearly understand what you’re really getting is to uncover any hidden costs that you or FinTech may predicting. FinTechs need a good understanding of your desired customer journey and existing processes to be able to accurately project the wins you’ll notice right away and over time.
What banks truly need is a FinTech that is fluent in banking. Ideally, Fintechs need their own internal expertise in community banking to draw from while they work to solve banking problems. They should have people on their teams that come from banking or have regular access to other qualified up-to-date resources. Not only do these options exist, but they can also be extremely profitable once you’re able to find the right fit for your digital banking transformation.
This conversation will continue to evolve as more community banks find more FinTech partners but asking the right questions can always go a long way to making successful partnerships.
BrightFi’s solution is a digital banking platform that offers composable options to best suit the unique needs of your legacy core while serving the expectations of your banking community. To learn more or continue this conversation with one of our experts visit: Digital banking platform for banks | BrightFi or request a meeting.