Four top tips for finding a tip-top FinTech partner

Recent headlines about the practices of some online platforms in financial technology (FinTech) have caused some banks to question whether the partnership benefits are worth the risk. Certainly, it’s always wise to weigh the pros and cons in any business arrangement. But it’s also important to recognize that not all FinTech companies operate the same way—any more than all banks do.

Many FinTechs can help banks and credit unions build a thriving B2B business the right way, bolster processing efficiency, and reduce costs, all while delivering outstanding customer service. Online marketplaces and bank-enabling software providers, for example, have become—and remain—valuable partners for many banks that aim to grow their B2B lending. The key is choosing the right partner: one that aligns with your risk tolerance, compliance and customer service standards. What’s more, they should also operate under the same high standards to which you hold your own business.

Consider the following when evaluating potential FinTech partners:    

  • Maximize positive impact, minimize risk. Start by identifying what’s missing from your current offering. Most likely, your customers don’t need some exotic new solution or service they’ve never heard of—they just need faster, more efficient access to the products they already need, such as microloans and SBA loans. Focus on finding partners that can help you significantly improve existing products, streamline processes and accelerate application, underwriting and approval time. This gives your customers exactly what they want, keeping rewards high and risks lower on your end.
  • Demand built-in compliance. With compliance costs escalating, it’s wise to seek FinTech partners with built-in compliance technology that can help you achieve significant savings and further minimize risk. Partners that operate under the same banking standards as you do, with uniform processes and regulated protocol, are in the business for the long haul. They value their status as legitimate providers and prioritize helping small businesses to grow. By assisting with the compliance burden, FinTech companies can give smaller banks a chance to compete with larger institutions by driving down overhead costs.  
  • Insist on transparency to the end customer. If your bank will refer existing customers to a FinTech lending partner for a loan versus originating it yourself, make sure the partner you choose is fully transparent in their offering. Advertising “rates as low as” may be misleading when very few loans actually qualify at that rate. Instead, require your lending platform partners to show the actual APR range of their loans—much like the “Schumer box” for credit card rates and fees. Also beware of lenders that don’t use APR; the APR of any money borrowed can be calculated. There is no secret formula. Remember that your customers expect you to be responsible for the service the partner provides. Insist on transparency to ensure that your choice is one you’re willing to stake your reputation on.
  • Go where the growth is—but don’t compromise on underwriting standards. Significant growth potential lies in the smaller business loan market for banks that deliver speed, efficiency and low-cost loans. In today’s B2B lending environment, businesses want it all: quick service, online options and well-priced loans: the same service and options they’ve become accustomed to as consumers. Yet many banks have not invested in technology that can deliver on these needs. Traditional lending options for low-cost loans, such as SBA offerings, can take anywhere from three to six months, and smaller loans that take that long likely aren’t profitable for any bank. FinTech partners can enable banks to serve the smaller end of the B2B market faster and reduce overhead costs, all without compromising on underwriting standards.  In fact, some banks can now fully underwrite credits and reduce their SBA funding times from several months to seven days after the application is completed—processing SBA loans 70 percent more efficiently than before.   

Over the last several years, technology advancements have become an important driver of cost savings, efficiency and competitive advantage for banks. FinTech partners are positioned to help banks accelerate the adoption of new technology. But certainly not all FinTech companies are created equal, nor will they all share the same goals, standards and principles as you.

So: Do your homework. Picking the right partner can help you win in the market and deliver on customer needs in a compliant, low-risk manner. The good news is this: Potential FinTech partners stand ready to fit the bill and build your business.

Evan Singer is president and CEO of SmartBiz Loans, A San Francisco-based FinTech platform that specializes in loans to small businesses and business owners.