As the applications of fintech providers continue to expand in scope, the definition of fintech has become less about what is done and more about who is doing it. Providers in the space are typically start-up groups, not initially backed with a significant amount of funding, who focus on a known or as-yet-undefined problem, most often in the customer value chain.
“With hundreds of vendors competing for same business, it’s tough to survive. There’s not enough revenue,” said Henry Watkins, Director of Processing Solutions of Profit Resources Inc. “The challenge for FIs in partnering with fintech providers remains knowing whether who you are dealing with today will still be around in 10 years.”
For large financial institutions, fintechs provide investment opportunities, partnership opportunities, and ideas for the FIs to create their own solutions. For smaller financial institutions, fintechs arguably create greater opportunities by presenting solutions that were once unavailable to smaller FIs.
“Creating this competition not only presents more options to FIs, but also encourages the incumbent technology providers to either partner or develop solutions of their own,” said Tom McGill, Profit Resources Relationship Manager.
Fintechs are not like the incumbent technology providers, however. Typical vendor management approaches often will eliminate many from consideration and smaller FIs need to ensure that they have an appropriate level of talent on hand to manage these types of partnerships.
“Make no mistake, the Fintech boom will have its own
versions of the dot.com sock
puppet which forces FIs of all sizes to be more sophisticated in their
decision-making processes,” McGill said.
In our next blog, we will focus on what smaller financial institutions need to do in order to properly play in the space as a consumer of services.
Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.