Fintech evolution has significantly affected the financial services industry as fintech startups are disrupting the traditional finance sector with the innovative technologies and business models. In the modern era of banking, fintech players have helped banks digitize their processes and smoothen out customer journeys by offering SaaS (Software-as-a-Service) offering to Banks. Banks need to unleash the potential of fintech in their organizations for a technology landscape that is modular, interoperable, and simpler.
The retained organization augmented through external collaboration with fintech firms, market utilities, and managed service providers will be more efficient and effective. Building a better functioning financial ecosystem with efficient banks requires improving agility and reducing cost by using collaboration to bring various components together. Many Banks in India and on a global scale have opened incubation centers where they encourage budding fintech players to enroll and support them with the sample data sets to build upon. Hence, creating a platform for fintechs to accelerate their hypothesis testing and prototyping but also provides banks access to the cutting-edge technologies of budding fintech entrepreneurs.
Business partnerships have been the most beneficial form of engagement between fintechs and banks. Some banks and NBFCs have strategically identified specific loan product where they intend to primarily grow through partnerships with fintech companies as a channel while other banks and NBFCs become partners with fintech marketplaces for distribution of their loan products. Banks assist fintechs in serving more customers without having to worry about continuously raising equity and debt capital for lending, whereas fintechs help banks in creating profitable avenues to deploy their money as well as expanding their product offering.