Banks seek digital transformation via fintech collaborations
Banks and credit unions are working to modernize digital banking experiences by partnering to an increasing degree with fintech firms and third-party solution providers. These collaborations are improving the speed and scale of innovation, often replacing core providers and saving money compared to creating solutions internally.
With the top strategic priority in banking transformation continuing to be to improve the digital banking experience of current and prospective customers, there is an increased focus on efficiently opening and onboarding new relationships, deploying data-driven personalized communication, and creating new digital banking products and services. According to a recent report from the Federal Reserve, these third-party partnerships can take on several forms, including:
- Operational technology partnerships. Banking organizations deploy third-party technology to existing processes or infrastructures to improve efficiency and effectiveness. These arrangements can involve several third-party partners to transform processes such as new account opening or loan origination. The adoption of operational technology partnerships may also require new types of expertise.
- Customer-oriented partnerships. Financial institutions collaborate with third-party firms to enhance various customer-facing aspects of their business, with the banks or credit unions continuing to interact directly with their customers. Examples include online account opening tools, goal-based savings applications, applications to simplify person-to-person (P2P) money movement and enhancements to existing mobile banking platforms. Customer-oriented partnerships can also improve agility in serving customers.
- Front-end banking partnerships. A bank’s infrastructure is combined with technology developed by a fintech or other third-party provider, with the partner organization interacting directly with the end customer in the delivery of banking products and services. This form of partnership is far less common, but occurring more frequently as organizations increasingly test banking-as-a-service (BaaS) options in the marketplace. These partnerships offer the opportunity to reach new or broader customer segments than the bank may be able to reach through established channels.
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