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Banks and fintechs: Neither friends nor foes

Both bring valuable assets to the table that the other doesn’t have, so both stand to be better off by uniting their various strengths.


The financial services industry’s foundation was laid by large traditional banks, but agile, well-funded fintechs have since entered the space and disrupted the way consumers and institutions think about and manage their assets.

Banks and fintechs have different strengths and they compete for the same users, but together they have the potential to create significant, positive change in the financial services industry. The only way to realize that full potential will be to partner strategically and rely on each other’s strengths.

The talent and agility of fintechs often means they bring meaningful advancements and innovation, particularly with emerging-tech use cases like artificial intelligence and blockchain. But they can also create fragmentation in the marketplace, as their pure-play technology tends to focus on specific asset classes or functions.

For example, asset managers or asset owners typically use fintech products in tandem with a full stack of other tools to manage their sprawling and complex portfolios, leading to limited interoperability and siloed data that hinders cross-asset views and analysis. Asset managers have long spelled out their need for integrated solutions. A 2020 survey by Northern Trust and WBR found that 42% of asset managers planned to address front office challenges by consolidating platforms across the whole office, and an equal percentage intended to control costs through system consolidation.

Additionally, as emerging companies with venture capital and private equity funding, fintechs are also likely to be acquired or merged into another company. Clients who rely on their products and services could have their operations affected by such an event.

As for large banks, they are typically established in their brand and in their business strategy. They tend to bring deep expertise and a well-established service culture to support an integrated web of offerings. However, their size and complexity often means they can’t move to develop their own cutting-edge tech offerings as efficiently as a smaller fintech can.

Each has what the other needs

For each to have a cohesive impact, banks and fintechs must unite their strengths. Fintechs want to solve for specific needs, amplify their message, improve utilization and increase their penetration. They drive innovation. What banks bring to the table is access, a longer-term perspective and an ever-evolving focus on client relationships and solutions. In short, banks own the one thing all fintechs need – distribution.

To achieve real industry change, the ultimate goal of both banks and fintechs should be to curate a killer stack of best-in-class solutions and package these together in a more cost-effective manner. Banks bring the access to relationships with clients who require complex, integrated solutions. In turn, the fintechs get access to a large, captive base, and trust and credibility transcends with membership.

When a bank partners with a fintech, embeds that technology into a larger solutions ecosystem and anchors it down, asset managers and asset owners can benefit from both the power of the technology and the power of the integration with other interoperable tools.

Solutions developed through the partnership of banks and fintechs should provide choice, control and convenience all in one place, making real change for the industry by enabling decision-making and enhancing transparency, which is of growing importance to every stakeholder within the value chain.


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For fintechs looking to amplify their distribution and gain greater market penetration, it provides a route to market and credibility. For banks, it creates potential to generate additional transaction flow, further entrench their current client base, increase their appeal to new clients and position themselves for new revenues via licensing or subscription services.

The future of the relationship

As emerging technologies advance closer to changing the financial services industry as we know it, banks may view fintechs as an existential threat. However, while the future of the industry may lie in emerging technology, it also lies in integration. Fintechs and banks together can combine the best of both worlds with technology and service.

Asset managers and asset owner investment portfolios are only growing in complexity, and even the best technology can’t help them if the tech is not combined with a holistic view and the industry expertise to help them understand what makes up their portfolios.

As we move forward into tech-powered banking, fintechs need banks just as much as banks need fintechs.

Gary Paulin is head of global strategic solutions at Northern Trust.