Banks + FinTechs = Powerful new customer journeys
The talk of disruption of banking by fintech companies has quelled a little recently as realisation sets in as to just how difficult that actually is. The talk now is of partnerships between the two that mutually benefit both parties. We have not really seen many partnerships in the true sense between fintech and the old banks yet, they are still using fintechs in traditional vendor relationships.
Fintech companies and challenger banks however are starting to partner with each other and leave both brands on show, in a form of marketplace banking, or platform banking, as it is becoming known. It is allowing for a rich, functional experience for customers, a clear delineation of services for each brand, and a chance for customers to benefit from the strengths of each company.
Before we have a further look at the partnerships and how they play out for the customer, it’s worth discussing the importance of expanding products and services for challenger banks in the short and long term. In the short term, new challenger banks have and will struggle to not only acquire new customers, but to become their customers’ main bank account and this is largely driven by customers’ lack of trust, the banks’ lack of services and also poor customer service. Partnering with other fintech companies can provide a greater sense of trust (depending of course on the reputation and prominence of the fintech), quickly enhance the products and services and partnering with the right fintech companies can lead to smart ways to service customers. In the longer term, as financial services transitions to the Bank as a Service (BaaS) and Bank as a Platform (BaaP) models, banks that have partnered and integrated will be poised to succeed.
The first, investments, is via a partnership with German fintech Vaamo. The N26 Invest service is a diversified fund product. To set up the product, customers select their risk profile (3 options), are presented with a visual representation of their plan based on their initial and monthly investments amounts and, provided they have enough funds in their account, they can open the account immediately.
The second, savings accounts via Raisin. Another German fintech which has built a great series of products around being able to automatically invest and save your money around Europe. They do the hard work to get you the best rates. This again has been built directly into the N26 product. Why try and build new capability when others have already done it? This is good for N26 but also their customers as they can find the best rates for their savings with ease and in one location.
Lastly, looking into servicing, N26 allows customers to easily (and cheaply!) send money abroad from their Euro accounts into 19 currencies. This is powered by Transferwise. The service, launched in 2016 immediately far surpasses the international payment journey of most banks, allowing customers to add a new payee and initiate a payment over a few screens.
New partnerships. Brand ecosystems vs hidden white label.
We take a look at a few examples of this partnerships between banks and fintechs, coming together to form something stronger. Unfortunately the examples mostly involve smaller or challenger banks, there are very few examples of incumbents partnering with fintechs yet. Are larger banks willing to work in this way or do they just want under the covers changes and white labelled solutions? Will this ecosystem of fintech companies deliver better product services that the banks cannot match, or will banks adapt to work in this way too?N26
N26 is the go-to example of a bank utilizing fintech partnerships in a truly impactful way. These partnerships cover the products (savings, investment) and services (international transfers) spaces and are a vital part in the bank gaining customers and truly scaling to become a legitimate player in Germany and across Europe. Within the past year, N26 has launched three new products and services via partnerships: investments, savings, and international payments.The first, investments, is via a partnership with German fintech Vaamo. The N26 Invest service is a diversified fund product. To set up the product, customers select their risk profile (3 options), are presented with a visual representation of their plan based on their initial and monthly investments amounts and, provided they have enough funds in their account, they can open the account immediately.
The second, savings accounts via Raisin. Another German fintech which has built a great series of products around being able to automatically invest and save your money around Europe. They do the hard work to get you the best rates. This again has been built directly into the N26 product. Why try and build new capability when others have already done it? This is good for N26 but also their customers as they can find the best rates for their savings with ease and in one location.
Lastly, looking into servicing, N26 allows customers to easily (and cheaply!) send money abroad from their Euro accounts into 19 currencies. This is powered by Transferwise. The service, launched in 2016 immediately far surpasses the international payment journey of most banks, allowing customers to add a new payee and initiate a payment over a few screens.
‘N26 and TransferWise share a common vision: to revolutionize finance through innovative technology that puts the consumer first. And now TransferWise is built right into the N26 app.’ - N26 product pageAllowing brands to exist within a bank’s own ecosystem is a relatively new invention. The challenger banks understand both the speed to market but also the benefits of being associated with other successful brands in their space.
Fidor
Fidor, the original bank as a platform (BaaP) provider in Germany, have also built a wealth of partners into their services. For lending you can use P2P lenders Giromatch and Smava direct from the banking interface. They also have a very nice integration with Optiopay allowing customers to make savings on purchases via vouchers and merchant deals. You can follow traders using Ayondo and match their investment strategy or you can play a bit more of a trading game using Brokertain. In the UK you can also access your Nutmeg Investment Portfolio directly from Fidor.Revolut & Lending Works
Although currently without a UK banking license , Revolut has managed to build an impressive suite of functionality that makes their product look and operate a lot like a bank e.g. account numbers, ability to pay salary into the account etc. and they are growing that offering still. They recently partnered with Lending Works to provide in app credit available from anywhere in the world and paid into their account within minutes. Revolut pass the data they have on their customers into a decision model built with Lending Works. Customers are then shown the total cost and how much they will pay back on the loan. Once the customer accepts the terms then the money is paid directly onto their Revolut card to be spent anywhere in the world with their existing exchange rates and fee structures. Revolut say the process can be completed in as little as three minutes, this is fantastically speedy for customers to easily gain access to a short term loan.Starling & Moneybox
Blossoming British Marketplace Bank Starling has been rolling out lots of functionality this year as they push their products live. They have a partnership with Transferwise in the same way as N26 do. They have also partnered with Moneybox to provide savings and investments. Moneybox have made rounding up transactions into a service. When you spend, the amount to make the cost up to the next whole pound is hived off and put into either savings or an investment product, and you can even buy shares with it via tracker funds. This is a perfect example of a service designed to integrate and partner with banks for an excellent and unique service for customers to easily help them put a little bit extra into savings.Conclusion
Newer entrants cannot build everything themselves, nor should they have to. Banks of old had no option yesterday but now they do. The way these newer companies are partnering to build better services for customers needs to be well understood by bigger banks and embraced.