APRIL 7, 2023
8 min read
So, you’ve entered the fintech ecosystem. Now, you might conclude that partnerships can contribute to an easy start for you in the industry. But the main question remains: how can you find companies and tech startups to partner with?
This question bugs not only the newly established businesses but enterprises with loads of experience face the same problem. Your partner should be reliable, dedicated, and share your culture and values in order for your cooperation to be fruitful.
What are Partnerships in Fintech Industry
Partnerships in fintech refer to successful collaborations between different companies within the financial technology sector. These partnerships can take many forms, from strategic alliances to joint ventures to co-development agreements.
The fintech industry is one of the most dynamic and rapidly evolving sectors of the global economy. Surprisingly, partnerships are becoming increasingly important for fintech firms to stay competitive and meet the needs of their customers.
Partnerships in fintech can take many forms, such as:
- Strategic Partnerships: This involves partnering with other companies to achieve specific goals such as increasing market share, expanding product offerings, or accessing new markets.
- Joint Ventures: Two or more businesses come together to form a new entity and work together towards a common goal.
- Co-Development Agreements: Two companies work together to jointly develop a new product or service.
- Distribution Partnerships: firms collaborate to distribute each other’s products and services through their respective channels.
- Investment Partnerships: A company invests in another one to help it grow and expand its operations.
Benefits of Fintech Partnerships
Fintech partnerships can be extremely helpful for many reasons, first of them all being the high-quality network.
Aside from this, there are several fintech collaboration benefits, which include:
- Access to new markets: By partnering with other fintech companies, businesses can expand their reach into new markets and demographics. This helps to increase their customer base and revenue streams.
- Improved product offerings: Fintech partnerships allow businesses to combine their expertise and resources to develop new products and services that are more innovative and competitive in the market. This helps to attract new customers and retain existing ones.
- Increased efficiency: By sharing resources, fintech companies can increase their operational efficiency, reduce costs, and streamline processes. This allows them to focus on their core competencies and deliver better products and services to their customers.
- Access to new technologies: Partnerships can provide access to new technologies and expertise that a firm may not have in-house. This can help them to improve their existing products or develop new ones that meet the changing needs of their customers.
- Brand enhancement: Fintech partnerships can enhance a company’s brand image by associating it with other successful and innovative firms in the industry. This helps to build trust and credibility with customers, which can lead to increased sales and revenue.
- Risk sharing: Fintech partnerships can help to share risks associated with developing new products and entering new markets. By sharing the costs and risks, businesses can minimize their exposure and increase their chances of success.
It is worth noting that a lot of companies perceive the perspective of reliable fintech partnership as a beneficial solution. On the graph below, you can see that what financial institutions are seeking to improve above all is the customer experience, with operating expenses reduced coming in second.
Types of partnerships
Various types of partnerships can help companies achieve their goal better if tailored to their unique needs. In this paragraph specifically, we’re going to talk about partnerships in finance and my hopes are it’ll help you figure out your needs better.
Fintech as a vendor
A form of partnership where fintechs and companies that partner with them share the responsibility over the customer experience and offerings. With this type of partnership, fintech firms can provide various services to other businesses, including banks and financial institutions. For example, a financial technology business might offer innovative fintech solutions that help banks automate their loan approval process or a payment processing system that merchants can integrate into their online store.
Benefits of this partnership include:
- Partnering with a fintech vendor can help businesses enhance their offerings and improve efficiency.
- Financial technology integrations can help businesses to access cutting-edge solutions without having to build everything in-house.
- Fintech companies often have specialized expertise in areas such as compliance or data analytics, which can be beneficial to businesses looking to expand their capabilities.
In terms of fintech, this type of partnership offers them more visibility and larger customer base as they too hold accountability for the provided services. This is a win-win situation.
Fintech as a referral partner
This partnership is characterized by banks referring fintechs to their customers. Referral partnership can be fruitful for banks and financial institutions as they get to fill up the gaps in their services, while fintechs get more attention via such programs.
In this type of partnership, the fintech company typically pays a commission or referral fee to the partner for each customer that is referred and converts into a paying customer. This arrangement can be mutually beneficial, as it allows the fintech business to acquire new customers without having to spend a lot on marketing and advertising. Meanwhile, the partner can generate additional revenue streams by earning referral fees.
Fintech as a technical partner
In this case, fintechs are mainly invisible for the end-user as they provide solely technological solutions for banks and financial institutions. They will be accountable for the seamless technical experience however most likely fintechs won’t be noticed by the large audience.
In spite of that, financial technology companies will earn enough income for provided services to consider this type of partnership more than beneficial.
How to Find the Right Partners for Your Business
If you’re looking for a fintech or financial institutions partner, first try to consider the factors I mention in the paragraph below.
Know what you search in the partner
When thinking about fintech partnership, you have to define what you’re looking for in a partner. Several factors can influence the partnership case, and turn it wrong or right depending on their correspondence with your business needs.
- Type of services provided. Define your audience’s essential needs and compare the services your partner provides to what your audience needs. The partnership won’t be sufficient if your potential partner provides services or products unrequired by your audience. For example, if your audience is B2C business owners they most likely won’t be interested in acquisition of B2C services themselves.
- Cultural differences. This works both ways. If you’re looking for a fintech partner, expect them to be agile but interview the stakeholders about the stability and establishment of their business. If you’re a fintech owner and you want to partner with financial institutions, expect them to be rigid in methodologies as they work with established and secured patterns.
- Legislation. Established financial institutions acknowledge the legislation patterns and laws, while fintechs in some cases will need to engage a third-party expert to help with these issues.
- Be mindful of the relevant experience. While banks can have more experience in terms of legislation and regulations, fintech will more than likely have better technical experiences. Define what you’re looking for in your partner and divide the responsibilities accordingly.
Look for these red flags
Before you choose your fintech partner, try to answer the questions below.
- Check if your potential partners’ audience and partnership cases correspond with your needs.
- How is your partner’s track record looking? Are they a trusted business? If not, consider looking for someone else.
- Were this partner referred to you and if so, was this reference sufficient for evaluation of their effectiveness and productivity?
If the answers leave you satisfied with your choice, don’t rush ahead and check the fintech partner strategy you’re building for the red flags that might falter your fintech alliance.
- The cases of your partner aren’t transparent. If you don’t really understand what your partner did in their previous engagements, they aren’t trustable.
- Rigid partnership conditions. You should be able to adjust to each other.
- No customer support. This can make the financial technology collaboration falter as your customers won’t actually be satisfied with the outcome.
- Bad reviews. Don’t help them multiply the customers’ bad experiences.
Steps for Building Successful Fintech Partnerships
So, if you’ve chosen a company you’re ready to establish a partnership with, you’re most likely curious about how to start your cooperation. The following steps I’ve highlighted can help you with this matter.
- Define project scope. Defining project scope and values is important for synergy in fintech partnership as it helps to ensure that both parties are on the same page. First, start with identifying the objectives of your partnership. Then identify the scope of work for you both and set milestones to manage the corporation’s effectiveness.
- Ensure that your values match. Be committed to innovation within your cooperation and make sure that your partner feels the same about the process. You both should have the customers’ best interests in mind and be transparent about the partnership.
- Ensure that you know what you will bring to the table. When working in partnership, you have to know how you can help from your end. If you’re looking to establish effective cooperation, make sure you know what you offer. For example, if you’re a fintech expert, you can offer technical solutions for streamlining your partners’ workflow or helping their customers in return for a referral.
- Be ready to test and change. There will be a lot of stumble stones on your way and you should be ready to make hypotheses and change the flow of your work if they prove to be untrue. Agility is the pillar of any good partnership, so bear it in mind.
- Ensure the tight integration with your business core needs and services. Use your partnership to its full potential. If you don’t connect to your business needs what your partner has to offer, the cooperation might end up rather cumbersome.
Our Case Studies
DashDevs already has some effective partnership cases, so if you’re interested in how it works in practice, I’m ready to spill some details.
Pi-1 & DashDevs
Pi-1 is a cloud-based BaaS platform that provides solutions for banks and back offices of fintechs. The platform is also focused on progressive built-in analytics to integrate fintech solutions into a single API for end-to-end digital banking services.
Our partnership resulted in a combination of operational data with over 30 data sources, enabling both analytical solutions and machine learning.
Inablr & Tezos
Inablr enables investors to come into the sovereign bond market with a lower starting investor’s portfolio. The platform partnered up with Tezos, an open code smart contracts platform, which allows to split large bonds into smaller units, making investments more accessible for everyone. This way, a large bond would be split into several and a few people can share the ownership over this.
The partnership resulted in a flexible, agile product ready for market challenges and ever-changing conditions.
Fintech partnerships can be immensely profitable and result in numerous benefits from risk sharing to widening market accesses. To get the most out of it, you have to ensure that the company you perceive as a potential partner has aligned values and flexible business processes.
So, while the process seems easy overall it can be a challenge for newly established businesses. My best advice is to build and expand your fintech network unrelated to whether you are an established or newly founded firm. And if you’re looking for a reliable fintech company to have your back, you also might check out FintechCore by DashDevs.