Collaborations between traditional financial institutions and fintechs have helped foster financial inclusion and innovation while expanding customer reach and market share
The Indian fintech market presents significant opportunities for fintech startups to collaborate with established firms to expand their customer base and access expertise and resources
However, successful partnerships require clear and open communication, flexibility, mutual respect, trust, and alignment towards common goals
Collaborations have long proven the mutual benefits they bring to partnering businesses. This is exactly what happened when HSBC partnered with Tradeshift, one of the world’s biggest platforms for business commerce, way back in 2017.
The collaboration helped create a single digital platform through which businesses could manage their global supply chains seamlessly from any device. More recently, in 2021, Niyo, an Indian fintech offering innovative solutions for finance and travel, partnered with Equitas Small Finance Bank to launch NiyoX, a wealth management suite. The partnership was expanded in 2023 for Niyo Global debit and credit cards.
Closer to home, the partnership between legacy banks and fintechs has allowed traditional financial institutions to offer disruptive solutions to their customers. It has also fostered financial inclusion with fintech’s low-cost, cutting-edge technology solutions, allowing larger institutions to make inroads into the underserved segments of the Indian population. Partnering with fintech can also help organisations access sustainable avenues for profitability and growth.
Benefits Of Collaboration For Fintech Startups
The Indian fintech market is the third largest in the world, with a projected value of $1.3 Tn by 2025. To capture a good slice of this pie, fintechs will need to collaborate with large, well-established firms across the spectrum, from merchants wanting to provide checkout finance to banks needing state-of-the-art yet low-cost technology solutions.
Through collaboration with accelerators and incubators, platforms, and third-party apps among others, fintech startups can gain access to expertise and resources while also being able to expand their customer base.
Collaboration opens the doors to several other benefits, such as:
- Improving the ability to reach a broader customer base by capitalising on the customer networks of partners
- Scaling the business and increasing market share
- Lowering costs and offering a competitive edge
- Driving growth and innovation for fintech startups. According to a PwC report, 82% of fintech startups believe that collaboration leads to faster and more effective innovation.
In fact, partnerships enable the two collaborating businesses to grab customer attention and drive retention and loyalty. It allows these businesses to quickly respond to the dynamic nature of customer needs and reduce time-to-market, which can be a huge differentiator in today’s fiercely competitive landscape. This also contributes to ensuring customer satisfaction by giving customers easy access to financial services across multiple channels.
How To Build Successful Collaborations
When the complementary strengths of two organisations are combined to create potent synergies, the customer gains access to convenient finance solutions that meet existing and emerging needs. The immediate access to fintech APIs for seamless operations is a sure-shot way to garner loyal customers, who will not just drive repeat sales but will also become brand advocates, spreading positive word-of-mouth about the experience. The key to reaping all these benefits is a successful partnership.
Large traditional banks are setting the standard by collaborating with young startups in the crypto, neobanking, digital lending and mutual fund investment segments to ease financial management for customers. Two such notable collaborations occurred in the first quarter of 2023 when Visa partnered with Fintech District and Santander joined hands with Salesforce. The aim was for the financial giants to use the tech agility of the fintech ecosystem to expand customer reach.
Here’s a look at the most important aspects to take care of while forging collaborative relationships.
Clear & Open Communication
Expectations should be set right at the outset. Without a clear understanding of each other’s ideologies and vision, frustration and conflict are likely to occur sooner rather than later.
This also makes it important to keep each other informed through regular reports or meetings. Remaining transparent also prevents misunderstandings and confusion. Simultaneously, it is crucial to take commitments seriously to build trust.
Things don’t always go as planned. So, while focusing on a goal is vital, being flexible and prepared for curveballs is the key to success in a partnership.
Both parties can discuss beforehand various obstacles that might arise going forward and how unexpected situations will be handled. If contingency plans are agreed upon, it is easier to pivot strategies to achieve desired results.
Mutual Respect & Trust
Inviting feedback, welcoming questions, admitting mistakes and taking responsibility are excellent ways to gain respect and trust. Every company will have its own ways to deal with situations and communicate.
This is where the old saying of treating others the way you want to be treated works well. Making a conscious effort to be respectful of the other’s modes of working can diffuse differences before they become concerns. It also helps both parties feel confident about the collaboration.
It’s a no-brainer that working towards a common goal is the primary ingredient for mutual success. In partnerships, it helps to regularly touch base on these common goals together. This not only keeps both businesses on the same page, but it also offers a clear understanding of the final objective the two parties are working towards.
Focusing on common goals can also help identify complementary strengths right at the beginning, which can be best leveraged to achieve preset objectives. This also means understanding a potential partner’s goals, strengths and market before formalising a relationship.
Making Fintech Partnerships Work
For a collaboration to be mutually beneficial, both parties need to work towards balanced investment and commitment, not just in monetary terms. Each partner should drive innovation, impact and, therefore, the sustainability of overall returns. The best way to ensure all this is through strategic and measurable KPIs.
Fintech startups know the value of data in driving strategic decisions. Fintech partnerships not only offer traditional finance organisations access to vast quantities of data, but they also enable simple and secure data exchange.
For example, in early January 2023, Finsure, an Australian mortgage aggregator, entered into a partnership with Open Banking provider Frollo and NextGen, a lending technology provider, that enabled Finsure to integrate comprehensive data insight models into its CRM platform to allow clients to make better-informed decisions.
Collaborating with fintechs can allow partnering companies to address a larger market by augmenting their services and driving a differentiated experience for their customers.