LONDON – Banks continue to grapple with idea of buy vs. build, but partnerships with fintechs allow the entities teach each other about innovation and customer experience. 

“Banks can learn from fintechs how to be agile, innovative and customer-focused, while we offer them a big installed base and learnings on how banking [and regulation] works,” Simon Boonen, fintech partnership lead at Amsterdam-based ING Bank, said Wednesday at FinovateEurope in London.

“Bringing together the two different worlds isn’t easy,” Boonen said. “Banks need to evaluate if we will develop a product ourselves or partner on co-creation. Then consider the development strategy, regulatory compliance and so on. Our license to operate is critical as a bank so we have to validate and check products or services to maintain it. The end goal is always to improve customer service.”  

Regulation, Culture, Support

These three factors make for a successful fintech-bank collaboration, Boonen said: 

1. Regulation: The European Union’s Markets in Financial Instruments and the second Payment Services Directive include of European bank compliance standards, Boonen said. The latter encourages more new entrants and the use of open APIs for easier data access and exchange-based competition, more efficient aggregation end uses in payments and more co-creation of apps and services. There also is the upcoming EU Markets in Crypto-Assets regulation governing this emerging space. All impact the marketplace and a fintech would need help from a bank in understanding and complying with them.

2. Culture: “Approaches differ,” said Katharina Lueth, chief client officer and managing director at Raisin, a savings and investment marketplace that works with 400 financial institutions and is a white-label provider to some incumbents.  “Timelines at incumbents tend to be longer than at nimbler fintechs. Six months might be considered fast at a bank,” she said. However, banks have got to consider procurement issues, compliance, high-level approval, alignment with existing technology and so on.  

3. Support: “You need to find the right person in a large organization to support your tech development project as well [and a back-up in case they move],” said Jurgen Vandenbroucke, managing director at EveryoneInvested, an asset management servicing, control and data unit spun off from KBC Group four years ago.  

Don’t sweat the small stuff

In addition, ING’s Boonen said, “Don’t dwell on stuff that doesn’t work.” After talking to stakeholders, scope out a project and its target audience plus key benefits, any potential implementation timeline and so on, he said. And if it’s still not progressing, move on.  

“The project might be greenlit later on, but in the meantime the fintech needs to earn revenue or the bank needs to prioritize something else,” he added. “Collaboration is an on-going, not never-ending process, and the partners can circle back later on and explore other opportunities in the meantime.”