The key to a symbiotic bank-fintech partnership is more than just what one can do for the other.

Banks should adapt their practices to cater to evolving consumer and commercial fintech end-users or risk losing key fintech relationships, Chris Dean, co-founder and chief executive at banking-as-a-service (BaaS) company Treasury Prime, said last week during a panel at the Fintech Nexus 2022 conference in New York City.

“End clients, whether that’s small business or consumer, are changing,” Dean said. “Banks can get on board with that and be part of it or they can watch someone else do it. The last thing you want is to spend all this time and effort growing a gigantic fintech, then have them walk across the street to somebody else.”

Executives from Silicon Valley Bank, Grasshopper Bank, Treasury Prime and Capchase exchanged advice on how banks and fintechs should develop joint business relationships during the panel discussion.

Banks should treat fintechs and technology partners as standard clients, Dean said. Treasury Prime, a BaaS provider that launched an embedded finance tool with core provider FIS in May, banks with Silicon Valley Bank.

“Fintechs are regular clients. Their end-users aren’t, but they [fintechs] are,” he said.

Fintechs as automation partners

Fintechs have an opportunity to be the automated customer service provider of choice for banks, Dan Allred, senior market manager for the national fintech team at $220 billion Silicon Valley Bank, said during the panel.

“There’s a real opportunity for fintechs to do the mass digitalization of customer service, which is a nut that is not going to crack yet,” Allred said. “There are all kinds of communication tools, chatbots and that type of thing, that help you do more at scale, but not do it really well. And I think it’s a huge opportunity for fintechs as they continue to take share.

“It would make fintechs even better partners for banks, because banks value that so highly,” he added.

Fintechs should keep three points in mind when working with a bank, Chris Tremont, chief digital officer at $299 million Grasshopper Bank, said during the panel:

• Select banks for culture fit and keep communication with executives close during the early stages of building and scaling the relationship;
• Focus on compliance, AML and KYC requirements at the bank level; and
• Drive a “win-win” from the financial side and make sure that deals and relationships make sense economically.

“When you’re striking these deals, it’s got to be a win-win for both sides. There’s a cost to running a bank and to doing this, right, so you can’t just give it away,” Tremont said. “I think we’re going to see some interesting times coming up with rising rates and net interest margins. There’s going to be some interesting negotiations.”

Tremont is the former executive vice president of virtual banking at Boston-based Radius Bank, which was acquired in 2021 by Lending Club for $185 million.

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