Time for fintech to break down the walls of cards businesses!

Historically, banks have had closed systems. Over the years we’ve seen that when a new and interesting services or functionalities hit the market, banks typically try to replicate them within their environments to safeguard the platform. Today, however, there are so many innovative ideas and opportunities that it’s no longer possible to do this and keep pace with competitors. Flexibility is key. Integrating a Fintech product bypasses the long and complicated development cycles that are necessary in a closed system. This obviously saves you both time and money.

Choosing a Fintech partner 

Of course, as you know, you can’t simply integrate any service into a bank’s offering. Products have to pass stringent testing and meet regulatory and security requirements. And the more third-party products that are integrated, the higher the demands are on the system and the team responsible for it. Therefore, processes have to be put in place to manage Fintech co-operations – both from a technical and relationship perspective.  

So how do you evaluate a potential partner? Based on our experience we believe these are the key factors to consider: 

• Make sure you establish clear evaluation criteria (financial, business models, functional, etc.) at the start of the process and convey your expectations to potential providers. 
• Have clear communication among all involved parties, including the bank and the Fintech.  

• Make sure relevant bank stakeholders are involved in key presentations, meetings and discussions. 

• Ensure evaluation is done together with multiple stakeholders in order to get a holistic overview of requirements and impact.  

• Keep the evaluation and decision-making process transparent for all parties involved.  

• Make sure you have access to technical tools for sandboxing and testing potential partner products. Likewise provide them with product APIs for testing.  

Once a partner has been chosen, we believe it’s important to align expectations regarding goals and the collaborative processes, as well as setting achievable KPIs. You should also set up a plan for communication, data exchange and storage. Involve project participants at an early stage so they understand the scope and delivery plans.  Establish clear process for monitoring and control. And lastly, set parameters for potential changes in delivery, after all technology will continue to advance even through the project is in progress.

The right model for your risk appetite 

In our view, the type of collaboration and deployment model that suits your structure will depend heavily on your risk appetite and the core system setup you have, e.g., if it’s inhouse, on-prem or cloud-based. The different models include: 

• Customer => Bank => Core vendor =>  Fintech :  whereby the bank’s core IT vendor is responsible for technical integrations and upkeep and therefore takes the majority of the partner risk  
• Custumer => Bank => Fintech :   whereby the bank is responsible for implementation/updates and takes the majority of the risk. If necessary required system integration is done by the bank itself or ordered from core vendor. 
• Customer => Fintech => Bank :    Fintech takes the majority of the risk whereby the bank only states that services is provided directly by Fintech. This way the bank  minimizes it’s risks and responsibility of service delivery, at least from legal perspective. It is also a simpler onboarding procedure for the bank. In this case the end-customer takes part of the risk by choosing to use the service or product provided by third party.  

As an established vendor of banking services, we have multiple collaborations with Fintechs, often on behalf of banks. Through this business model, banks can get access to the service or feature, while we handle the relationship (although banks often take an active role in the collaboration) and product integration to our core platform. Using our proven onboarding processes, we have simplified Fintech evaluation and selection and ensured smooth product implementations.  

Related blogs: 

A digital card experience for a more profitable future 

Tokenization: the secure way to support merchants, consumers and IoT payments

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