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Banks Are Seeking Digital Transformation Through Fintech Partnerships
Banks and credit unions are collaborating more frequently with fintech companies and third-party solution providers in an effort to enhance the digital banking services they offer. These partnerships save money in comparison to developing solutions internally while increasing the pace and scope of innovation. They frequently replace core providers.
The improvement of current and potential customers’ digital banking experiences remains the top strategic priority in banking transformation, so there is an increased emphasis on quickly establishing new relationships, implementing data-driven personalized communication, and developing new digital banking products and services. These third-party relationships can come in a variety of shapes, according to a recent Federal Reserve analysis, including:
Partnerships in operational technology:
To increase productivity and effectiveness, banking institutions integrate third-party technology into their current infrastructures or procedures. To convert procedures like creating new accounts or loan origination, these agreements may involve a number of third parties. New specialties of knowledge could be needed for the implementation of operational technology partnerships.
Customer-focused alliances.
While the banks or credit unions continue to deal directly with their consumers, financial institutions work with other companies to improve different customer-facing areas of their operations. Online account opening tools, goal-based savings programmes, P2P money transfer software, and upgrades to current mobile banking systems are a few examples. Partnerships focused on the needs of the client can help increase customer service agility.
Front-end banking collaborations
The technology created by a fintech or other third-party provider is coupled with the infrastructure of a bank, and the partner company interacts directly with the end user to supply banking goods and services. Although this kind of relationship is much less usual, it is becoming more prevalent as businesses test out additional banking-as-a-service (BaaS) choices on the market. Through these agreements, the bank may be able to reach new or larger consumer categories than it might be able to through current channels.
According to a recent study, 2023 Retail Banking Trends and Priorities, sponsored by Q2, 60% of financial institutions already work with fintech companies and other third-party solution providers to suit their clients’ expectations for digital banking. These partnerships are accelerating innovation’s pace and scope, redefining business paradigms, and enhancing the adaptability of established financial services companies. Depending on the asset size of the institutions, the progress gained over the past two years differs greatly, with the largest and smallest organizations demonstrating the most inclination to cooperate with outside enterprises.
The Goals of Third-Party Collaboration Can Vary
Customers seek financial institution partners who can make their lives easier in a smooth and customized way. The more quickly any goal can be accomplished, the better. Customers are increasingly establishing connections with businesses that can meet their specific needs better as they become more aware of what is possible with current technologies.
It is crucial that financial institutions all across the world seek to work with third-party solution providers in order to use data and analytics for better marketing communication and suggestions (31%). Consumers now more than ever desire proactive real-time financial improvement alerts, which can only be provided by current technology and AI solutions.
An organization’s commitment to innovation is a key component of growth and success, even though each partnership or cooperation has its own chances and difficulties. Banks and credit unions need top management and division leaders’ strong support, as well as an understanding of the potential collaboration’s goals. In the end, legacy financial organizations must make an effort to get rid of antiquated banking procedures and make sure that data can move between systems in real time.