Financial technology, or fintech, is rapidly transforming financial services—and more change lies ahead in 2017.
Fintech startups in markets such as online lending, digital currency, and mobile payments, as well as niche areas such as robo-advising and regulatory compliance, continue to shake up the industry. These new firms aren’t doing it alone. Partnerships and collaboration among startups and well-established companies, including global banks and financial-market vendors such as Thomson Reuters, are helping fuel fintech’s rapid growth.
Accelerating Fintech startup technologies to move financial services forward
At the inaugural Thomson Reuters & IHS Markit Partner Impact Roundtable in New York City (Nov. 2016), a common theme emerged: Partnerships are increasingly becoming an essential element of any fintech startup’s strategy. The logic is simple. Startups may possess creative and innovative technology, but they require support with technical and business expertise, data, and go-to-market access necessary to scale their operations. They also need platforms and ecosystems in which to thrive, such that partnering is almost compulsory for fintechs hoping to scale their businesses.
For established companies, partnering with fintechs and incubators offers access to technology and innovation they might find difficult, if not impossible, to develop on their own, as well as to new tools that benefit customers. Companies such as Thomson Reuters can serve as accelerators for fintech partners, providing data content, sales teams, solutions expertise, and seed funding.
There are good reasons for fintechs to embrace the partnership model. Partners with deep experience in financial markets can help startups navigate the layers of bureaucracy in a bank or avoid pitfalls that could thwart their development.
“Regulation is the gift that keeps on giving in terms of opportunities to solve very specific problems for institutions.”
Fintechs in turn can help banks manage challenges such as compliance. “Regulation is the gift that keeps on giving in terms of opportunities to solve very specific problems for institutions,” says Alexander Ross of Illuminate Financial Management, a participant at the fintech roundtable. So-called reg-tech startups use algorithms, predictive analytics, and other technologies to help firms deal with risk management, know-your-customer, and countering fraud. Fintechs are also embracing artificial intelligence and machine learning, two of the most cutting-edge areas of technology.
As the fintech sector evolves, two things are certain: Startups will continue to find ways to solve a myriad of financial services problems. And they will seek partnerships and collaboration—sometimes even with rivals—to ensure the ongoing success of their businesses, and those of their clients.
Gain additional insights on the importance of the Fintech partnership model on Inside Financial & Risk.