The idea of whether to engage in partnerships comes up frequently at Fintech conferences. On reflection I don’t think there is a right or wrong answer and here is why.
Large financial institutions frequently extol the virtues of partnering with Fintech firms whether they are new start-ups or established. I attended the ‘FutureScope’ conference in Dublin last week where both Bank of Ireland and Mastercard spoke about the need to partner, how an arrangement can be mutually beneficial and can create great alignment for both parties. They are convinced this is the right approach for them.
On the other side of the fence are the Fintechs who are taking on the industry leaders to bring change across infrastructure, money & payments and markets. They are the innovators and want to blaze their own trail across the marketplace. They are leading change across financial services, looking to disrupt and take market share from the large institutions. Their culture is to innovate and their ambition is to succeed.
The issue for the large institutions is twofold, prioritisation and culture. Naturally they are focused on their existing business lines, many have shareholders that they need to satisfy. Innovation hasn’t always been at their core and many are now in catch up mode. Just take a look at the bank sponsored accelerator hubs across the city to see this evidence.
A fintech company will want to determine its own future and on its own terms, that independent streak will typically continue through to the end. Partnerships exist to benefit two parties but such an approach clearly isn’t for everyone.
Technology is driving change almost faster than the industry can keep up. Add in regulation, PSD2 for example and there a lot of variables and hence much opportunity.
In summary and in my opinion I would say the following:
- Partnerships can work well for large institutions
- Partnerships are by no means essential for Fintechs
- Fintechs need to figure out what is best for their company
Stephen Sheehan is a graduate of MIT Future Commerce and Fintech and specializes in assisting Fintech companies through his company www.digitalstate.ie