FinTech companies have developed a reputation for innovation and disruption. It’s spurring change in a long-established and — at times — stagnant financial industry.
But being a cocky upstart only takes you so far. As the best in business are sure to tell you, sourcing wisdom from the old school is essential for getting ahead. While FinTech has the capacity to help big banks stay current, there’s a lot they can learn from established financial institutions.
The true value of financial technologywill only be realized through robust collaboration with big banks. But here’s a few lessons FinTechs can learn in the meantime:
Understand the Complete Picture of Risk Management
When we were at Empire Startups FinTech Week in New York, the keynote speaker made an excellent point about why banks are so fastidious when it comes to risk management. In essence, she said “banks are dealing with their customers most precious assets — their wealth.”
And it’s true. Barring loved ones, a person’s finances are likely their most important thing. And given that banks manage your money, it’s a pretty reassuring thought knowing their adverse to risking it.
Of course, to FinTechs looking to move the needle, adhering to strict risk management policies can be a headache. They want the massive growth and returns of traditional tech companies who don’t have to abide by as strict regulations.
If FinTech companies are truly going to succeed, it’s going to require patience and respect for the risk management process that big banks are already applying.
Maintain a Laser-like Focus
The thing really successful banks are doing now is consolidating their efforts and focusing on the thing they do really, really well — banking.
Even though they have the resources to develop in-house technology, it requires time and money that would be better spent elsewhere. The most successful banks are looking for FinTech companies to partner with that will focus on innovation, while the banks take care of the banking.
FinTech companies should take heed of this, especially when developing products and software. It’s much more effective to be a master of one trade, than a jack of all of them. Not only will this help focus energy and resources to creating the best possible product, it will also give banks a more clear picture of what your company does and help regulators move more quickly.
Not every bank is remaining super focused, but the successful ones are. And it’s one of the important lessons FinTechs can learn.
Prosper Through Partnership
As I mentioned in the preceding section, the successful banks are learning the value of partnering with FinTechs to maintain their focus on banking. But some FinTechs are resistant to this collaboration, wanting to be viewed as disruptors instead.
The thing is, banks still have all the customers, and probably will for sometime. While many customers are open to FinTechs managing their finances, many more opt for the longstanding security and reputations of the big banks.
While undoubtedly there is value in financial technology making waves, it’s true value is partnering with banks to provide the best possible customer experience with a blend of innovation and thorough regulation.
Of all the lessons FinTechs can learn from big banks this might be the most important. It’s not just good for the FinTech, and it’s not just good for the bank. It’s also good for their present and future customers, and a more vibrant financial ecosystem.
At Zafin, we’ve been around for long enough to see what makes a successful FinTech company. And it’s not just figuring out what the banks aren’t doing. A lot of the time, it’s about sourcing the strategies that big banks are doing well, and learning from them.
We continue to learn from our partners, with the ultimate goal of offering the best possible financial technology. Want to learn more about how we’re doing that? Don’t hesitate — get in touch with us today!
Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.
Cam is the Digital Communications and Marketing Coordinator at Zafin. With a background in journalism and a passion for blogging, Cam strives to tell compelling digital stories. At Zafin he will share the latest trends and news in the FinTech world, and share Zafin’s role as leader in the industry. Follow him on Twitter @CamSmoth