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By Olivia Jensik, PMP, and Jeff Dunnahoo

When somebody says “fintech,” most people think of technology companies that provide financial (“fin”) services enabled with mobile or digital technology (“tech”). In banking, there have been traditional banking system vendors that met this definition long before the term was coined. For this discussion, we include “emerging disruptors” as a criterion when we consider fintechs in the market.

A relationship with a fintech can offer a huge opportunity to bring financial services innovation to consumers. If your organization does the appropriate due diligence, supports the rollout, and monitors the partnership effectively, you can have a successful relationship.

When selecting a fintech to work with, the same due diligence processes are required that you would consider with any third party. The fintech should be financially stable, have verified controls for software development and operations, adequate insurance, and documented service levels. While these may be common for any vendor selection, there are attributes within these fintechs that require special attention.

The end goal for most fintechs is to have enough client successes to attract buyers. Knowing this changes how you must approach the relationship. What would happen if a direct competitor acquired the system that you implemented and suddenly has access to your customer data, pricing, and product information? How would it impact you if a large vendor takes over the fintech and begins to adjust pricing or forces integration to their own systems? These scenarios (and more) should be addressed in the contracting process, allowing your organization to terminate the relationship with no penalty and provide financial considerations if you are forced to implement a different solution under these circumstances.

After considering the contractual relationship between your institution and a fintech partner, make sure you have a comprehensive plan to socialize the fintech solutions within your organization. One of the benefits of a fintech is that you can leverage its infrastructure to support the solution, so you might not need a large internal project to launch the technology. The danger in this is that other aspects of the product launch are not addressed. There still needs to be a plan to educate and train your staff on the solution. Customer-facing resources should understand and promote the service. Marketing campaigns need to promote the solution both externally and internally. Internal promotion, in particular, is important to drive staff buy-in.

Success criteria and monitoring requirements need to be established up front. A fintech’s focus is usually on customer experience, so these solutions can sometimes lack the reporting and analysis tools needed to measure success. Make sure you address these requirements as you consider a fintech partnership. Determine how and where you will be able to obtain data on the product and how to integrate it into your management reporting processes.

Assign ownership and responsibility in your organization at the appropriate level. Some organizations have chief digital officer positions outside of information technology to bring focus from a customer experience and digital channel perspective. Other companies align fintech relationships to business line owners to bring focus to the underlying business function. Either model can be effective as long as there is assigned responsibility for managing the relationship and reporting on the solution to executive management.

The types of fintechs most heavily engaged by community banks have been focused in either payments or origination. The ability of customers to pay whomever they want, whenever they want, however they want has become the norm, and fintechs that strive to make that easier have found no shortage of institutions willing to work with them. Origination (lending), though, is the key revenue driver in banking, and not just any origination platform has had success. The greatest number of partnerships here build customized platforms for making the origination experience for specific types of specialized loans (such as niche small business loans or various types of construction loans) smoother and more convenient. We have seen more success with those partnerships. A more narrowed focus and scope more closely aligns the institution’s and the fintech’s end goals so that all are working to serve a specific group of customers.

Fintech startups continue to explode, and there is no slowdown in sight within this space. However, enter these relationships with an eye on the unique challenges and opportunities of fintechs. By doing so you can help your organization improve your customer experience and differentiate yourself from competitors.

Olivia Jensik, PMP, is a manager with RSM US LLP in Kansas City, Mo. She can be reached at olivia.jensik@rsmus.com.
Jeff Dunnahoo is a director for RSM US LLP in Houston. He can be reached at jeff.dunnahoo@rsmus.com.

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