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April 20, 2018

Why Banks Should Embrace Partnerships With FinTechs: The Real Story


Although banks have historically viewed FinTechs as upstart competitors, it’s increasingly clear that they need to partner with FinTechs instead. This is especially true as large technology firms like Amazon and Apple begin to offer financial services. Banks can provide risk and financial management services to FinTechs and use their deep customer data to customize services.


For many years, banks feared FinTechs as upstarts intent on taking banking customers away with streamlined online services and lower fees. Not only that, but the banking industry and the FinTech players were at odds regarding regulation. Banks accepted regulations and lived by them. FinTechs thought, for a while, that they needed to do neither. 

A partnership can be mutually beneficial.

But it’s increasingly clear that banks should be embracing partnerships with FinTechs for their mutual benefit. FinTechs are moving into financial services more and more. Banks face competition not just from long-time FinTechs like Ally or Lending Tree, but increasingly from tech giants like Amazon, Apple, and Facebook.

They face stiff competition among younger people especially. Nearly three-quarters of Millennials indicate that they would be more interested in a new financial offering from Amazon, Google, or Paypal than their bank, according to McKinsey.

Roughly one-third of this age group feel a bank is not necessary for their lifestyle.

Horsemen: Riding Hard and Coming Fast

Consulting firm McKinsey & Company recently characterized the potential FinTech dangers facing banks as “the four horsemen of the e-pocalypse”: disintermediation, invisibility, unbundling, and commoditization. 

But, as Forbes points out, each horseman carries competitive possibilities for banks as well. 


A host of new partnerships are arising from the large tech companies. Amazon, for example, recently initiated small business lending and formed a healthcare partnership with Berkshire Hathaway and JPMorgan. On the one hand, this carries some risk for the FinTech activities of Big Tech to take customers away from traditional banks.

On the other, though, new opportunities are created for banks to serve as risk managers, financial advisors, and regulatory experts. 

Joining together makes particular sense as big tech players like Amazon enter the financial services space.


Banks fear losing their brand recognition as customers increasingly shop on price and convenience rather than branch and brand name. But in many ways, banks may simply need to pursue profitable avenues in an open banking environment. Brands are no longer the guarantor of business they were several decades ago. But that doesn’t mean that a good strategy won’t bring in profits.


As consumers increasingly choose single-service providers, banks need to accept and enhance that move. Banks still have access to deep customer data. One strategy would be to use the data to offer customized products while still making single-service provider integration convenient and available.


In response to the growing commoditization of the financial services environment, banks can utilize their customer data and use artificial intelligence (AI) and deep learning to enhance their offerings.

Loan Sale Advisors Can Assist Banks in Partnering with FinTechs

Bank and FinTech partnerships are clearly the wave of the future. Experienced loan sale advisors can be the partner of banks as they navigate and flourish in the new innovative environment. 

Garnet can arrange these partnerships and has several exclusive relationships available. To learn more, sign up for our newsletter.