Lisa Shields, founder and CEO of FI.SPAN, a cloud-based API services management platform, says banks don’t necessarily need to cede ground to fintechs to stay ahead of the curve, particularly in business banking.

“Certainly, we’re way beyond banks versus fintechs, but we’re now about when and how banks should leverage fintechs,” Shields told Bank Innovation. “I think that there’s a great opportunity for banks to augment their suite of services with selective partnerships where they don’t want to invest in a core capability.”

Shields, who sold her previous company, Hyperwallet, to PayPal in 2018, found her latest opportunity in the fact that businesses were circumventing banks in favor of fintechs and replacing them with app ecosystems within their accounting departments. However, she said while fintechs were able to capitalize on being earlier adopters of APIs and open banking concepts, banks are still best positioned to be the dominant providers of financial services to the enterprise.

“Banks have, fundamentally, really superior products and services, but they often struggle in ease of use and creating and delivering these quote-unquote delightful user experiences,” she said. “I saw an opportunity to enter the market with a business model that is purely around empowering the bank to leverage its assets by adding on connectivity and these end-user experience interfaces.”

Shields said FI.SPAN’s focus is on delivering banks’ existing business-facing products and services through ERP and accounting systems. Four of the top 10 North American banks, including JPMorgan Chase, are among the startup’s clients, she said.

“It’s not so much partnering with fintechs and bringing additional fintech services to the bank as arming the bank with new service delivery channels so that its customers can maximize its use of the bank’s products and services,” she said.

The bottom line, she said, is that brand trust, deep relationships, and lower servicing costs are all advantages banks can leverage to maintain their market share and be the bridge between banking and accounting experiences. She acknowledged the larger banks are better positioned to leverage those strengths than the super-regionals, regionals and other banks below $30 billion in assets.

“The top 20 or so banks in the United States have really fulsome product capabilities and can invest in bespoke, one-off partnerships in select scenarios where it makes sense for the bank,” Shields said. “Those are our customers today, quite frankly, and they’re the most advanced in terms of thinking about the future of treasury delivery.”

She said they’re also the least threatened because they have the highest volume of business and totality of relationship with their business clients. “They’re able, through FI.SPAN and companies like us, to actually extend their brand presence into ERP and accounting systems,” she added.

Tier-one banks, she said, are leading the market in terms of the “platformification” of banking, but the super-regionals have a “fantastic opportunity” as well, regardless of whether they want to invest in a branded experience.

“They can still benefit from extending their products and services, through API and open banking initiatives, and complementing that with very selective fintech partnerships to augment their capabilities where they might not want to invest in a specific product,” she said.

For banks below $30 billion in assets, she said the path is a little less clear.

“Those institutions are really focused on improving their online experiences for businesses and their own treasury and business banking portal solutions,” Shields said. “They’re not quite there yet, in terms of opening up and thinking about open banking, and thinking about how they’ll play and the opportunity that an API-driven business banking environment might present to them.”

All of this is not to say bank-fintech partnerships are dead, in business banking or elsewhere.

Mike Sha, CEO of robo-advisor software firm SigFig, which also provides white label solutions for banks, said partnering with a fintech allows a bank to bring solutions to market more quickly and more cost-effectively than if it tried to do it alone.

“If a traditionally less tech-forward bank takes on the challenge of creating a similar product, it could take them several years to complete it, and by the time it’s done, it’s significantly out of date already,” he told Bank Innovation. “Meanwhile, our product is constantly being updated.”

Sha said pressure to create a better experience for customers with increasingly high expectations for the industry is driving competition, especially between megabanks and mid-size banks. He said he expects there will be a proliferation over the next few years of banks working with next-gen software providers like SigFig rather than legacy providers as this competition intensifies.

“It’s a little bit of an arms race, getting to better software, and the megabanks are kind of hybrid in their approach,” he said. “They build some stuff, they outsource some stuff to Accenture, they partner with fintechs. They’re kind of doing a little bit of everything.”

The regional banks have a tougher road with less capital and capabilities, Sha said.

“If you’re a mid-size bank, the idea of building out a massive engineering team and trying to go and do it yourself is really just financially infeasible,” he said. “And so I think that’s leading to huge amounts of enterprise demand for companies like us.”

Join us at Bank Innovation Ignite 2019, March 11-12 at the Hyatt Olive 8 in Seattle. Register here.