Alone is not always strong. Especially not when it comes to scaling a business in a highly regulated industry. But if a collaboration between banks and FinTechs are done correctly, both parties will walk away as winners.
FinTechs have the culture of innovation, technological expertise and work with agility and speed whilst Financial Institutions have high brand recognition, a large customer base, access to capital and are licensed to provide regulated financial services. It goes without saying that both parties can benefit from a successful relationship.
"Building a fruitful relationship with banks is never easy and you need to be prepared to spend a considerable amount of time and patience doing this. You need to respect that they may not see the value for themselves and that far from everybody will understand your point of view.
To be able to build a successful relationship you need to find a sponsor who clearly understands your intentions. It must be someone who sees the value of spending time and resources even if it will take some time to get profitable. You need to convince them that the long-term value will eventually be there even if not visible at first sight. You need to be completely transparent with your business and what you’re trying to accomplish." - Jonas Sundvall, Founder and CEO Entercash
The implementation of PSD2 in the EU is going to be a game changer when it comes to collaboration between banks and FinTech companies. Breaking with the traditional card scheme model, PIS (Payment Initiation Services) are expected to offer customers a more affordable and secure way to make payments online directly through their online banking. This is subject to strong customer authentication much like other aspects of an EMI (Electronic Money Institution) or PI (Payment Institution) service under PSD2. While consumers will still have the burden of entering identifying information, they will have the comfort that, unlike today, this will be subject to strict security authentication measures. This process will improve customer experience as the requirements for 3DS and AVS checks are removed.
FinTechs, which often are EMIs and PIs, are well-placed when it comes to offering a PIS solution. They are already looking at ways to move away from traditional banking and payments models while considering customer experience in a secure and cost-effective way. The firms that manage to connect most efficiently to banks and other financial institutions will be the ones who are in the best position to utilise this payment method, making FinTechs particularly suited to lead in the world of PIS.
Would you like to learn more about how PSD2 will affect the industry and what companies can do to prepare?
Would you like to read more about what we believe payment companies should have as their key focus points? The Entercash Future of Payments Whitepaper 2018 is now available for download.
If you are interested in reading about how banks can prevent loosing business to FinTech companies you can read our article HERE.