November 7, 2018

How to Find the Right FinTech Partnership

Excerpt

Banks and FinTechs are increasingly finding synergies in partnerships, rather than competing head to head. The latest is a new subsidiary, ODX, intended to provide online services to small businesses, created by FinTech OnDeck. Given the number of FinTechs searching for partners, though, banks should be careful that they are choosing the right fit from among the available possibilities.

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For the past decade and more, FinTechs – financial technology companies – and banks have increasingly been joining hands in partnership rather than viewing each other as rivals or enemies. 

FinTechs partner with banks more and more.

Partnerships are Mutually Beneficial

It’s more and more apparent than FinTechs, with their streamlined operations and potentially seamless online customer outreach, can have a lot to offer traditional banks. Banks can find developing their own FinTech operations slow, expensive, and cumbersome. They also run the risk of not interfacing optimally with existing information technology (IT) systems. 

Banks and other financial institutions, for their part, can provide regulatory expertise, customer expertise, and stability to FinTechs. 

Banks need the right fit with FinTechs to optimize returns and stay within regulatory guidelines.

OnDeck Rolls Out a New Subsidiary

The latest FinTech to seek a partnership with banks is OnDeck Capital Inc., which recently rolled out a subsidiary designed to offer tech and other services to a specific subset of banks: those in the business of lending online to small businesses.

OnDeck already has a partnership with a major bank, JPMorgan Chase & Co. The company has supplied OnDeck technology in its lending to small businesses since 2015. OnDeck also businesses in providing small businesses credit through its own website, and then selling those loans to multiple financial institutions, banks among them.

But the new subsidiary, ODX, is intended as an expansion to the company’s current business, according to Reuters.

The announcement noted that a new partnership with a bank would be forthcoming soon, and that there were multiple other potential global partners. OnDeck's chief executive officer, Noah Breslow, noted that ODX’s creation was spurred by strong demand from the biggest banks.

ODX is intended to make digital lending to small businesses both faster and more convenient.

How a Loan Sale Adviser Like Garnet Can Help You Partner with a FinTech

This is one piece in a long string of news about FinTechs partnering with banks and other financial institutions. It’s important to note, though, that there are many factors involved in finding the most advantageous FinTech partner. Given that there are a plethora of FinTechs, analyzing those factors to get the best fit is harder, not easier.

Banks looking for a FinTech partner should work with a seasoned advisor, like Garnet, to ensure they get the right fit in compliance, risk, and income. We can do for your financial institution what we’ve done for others. 

For more information on our view of the banking climate and the outlook for partnerships, browse white papers today.