Technology has disrupted the financial industry, and banks are no longer in a position to resist these changes. As new Financial Technology (FinTech) services revolutionize our methods for banking, investing, paying bills, and doing business, banks will have to innovate their services to keep customers from defecting. FinTechs aren’t safe in this evolving market either and lack the strong infrastructures and large customer bases that banks often take for granted. Instead of fueling the competition, these institutions are partnering up to offer customer-focused initiatives that profit all parties involved.
According to a three-year study that included a survey of 10,000 millennials, one in three people in this age group is open to switching banks in the next 90 days, 53 percent don’t think their bank offers any unique services, and one-third think that banks will become irrelevant in the future. After losing customer trust following the financial crisis of 2008, banks need the accessible services that FinTechs are offering in order to remain both relevant and competitive.
In a Business Insider report, more than half of the respondents (54 percent) said that bank and FinTech partnerships increased revenue. 87 percent said these collaborations allowed them to cut costs, and 83 percent said that their brands benefited.
One example of a successful partnership is the Financial Solutions Lab (Opens Overlay), co-managed by the Center for Financial Services Innovation (Opens Overlay) and JPMorgan Chase. The $5 million, five-year project tests, identifies, and scales innovations that support savings, improve credit, and build assets. This allows finance giant JPMorgan Chase to influence FinTech and take risks outside of their usual scope.
Another unique partnership is Chase Business Banking and OnDeck (Opens Overlay), an online small business lender. The two companies partnered to build a new Chase lending product that will provide small-dollar loans to Chase customers. By combining Chase’s relationships and lending experience with OnDeck’s technology, they’re able to offer an inventive product with an easy application process that provides almost instant approvals and same-day or next-day funding.
The financial sector is changing rapidly and banks are struggling to adapt. By partnering with FinTechs, they help secure their future and demonstrate to other industries how technology and tradition can work together.