PYMNTS.com Shines Light on the Importance of FinTech Partnerships for FI Digital Transformation
- Banks are partnering with FinTech companies to leverage their specialized solutions and enhance their existing offerings
- Bank-FinTech partnerships highlight the importance of interoperability and open banking principles in driving innovation in financial services
- Trends shaping digital banking include mobile banking apps, AI/ML for personalized insights, and focus on fraud/data security
PYMNTS.com explores how the digital transformation of banking continues to reshape how financial institutions (FIs) are meeting the evolving expectations of consumers. Central to this evolution are partnerships, which play a pivotal role in enhancing customer experiences and streamlining financial processes.
A recent collaboration between Bankjoy, a provider of digital banking solutions for banks and credit unions across the U.S., and Pinwheel, a FinTech company specializing in digital deposit switching (DDS), exemplifies this trend.
The partnership represents a significant step towards revolutionizing the process of setting up direct deposits, a process traditionally known for its paperwork-heavy nature and time-consuming procedures. Pinwheel’s digital deposit switching solution, Pinwheel Prime, now offers a seamless platform for users to manage their direct deposits efficiently, enabling them to switch, track, and manage their income streams effortlessly.
Partnerships are Key
While globalized financial corporations may consider "in-house" solutions, the vast majority of banks are benefiting from partnerships with established fintechs.
Indeed, Tom Priore, CEO of Priority Technology Holdings, highlighted the evolving dynamic between banks and FinTechs, noting a trend of “co-opetition” and collaboration. This trend sees banks partnering with FinTech startups to leverage their specialized solutions, thereby enhancing their existing offerings, which include lending, checking and deposit accounts, and cards.
There seems to be agreement across the board on that particular "recipe for success."
Dave Scola, CEO, U.S. at Form3, discussed this trend in a recent interview with PYMNTS, emphasizing how the transformation of banking and financial services is demanding greater collaboration between traditional banks and digital upstarts.
“The need to have banks work well with each other — and with FinTechs,” Scola said, “is driving a need for greater […] technical integration. So that’s why you’re seeing the rise of APIs.”
Mr. Scola goes on to note that “Banks are recognizing the need to be more technically flexible and bring in services from multiple sources and move assets and accounts — and data — between multiple sources.”
As we near the halfway point of 2024, there is consensus across the industry that financial institutions should be working with fintechs in order to meet the needs of their evolving consumer base. As we noted previously, those banks resistant to change could go to the way of Kodak and Blockbuster -- a slightly extreme scenario.
Nonetheless, legacy systems are holding banks back from achieving tangible goals, including real-time processing. For example, there are still banks out there relying on OCR technologies, developed decades ago, for check processing. However, AI and machine learning technologies are enabling banks to process checks in real-time -- with accuracy and read rates over 99%+ -- effectively automating the process.
As financial institutions continue their path towards the digital age, it's important to ensure that all payments channels -- even checks -- are optimized in order to meet their customers' needs.