How Bank/FinTech partnerships enable payments transformation

In the first of a two-part series, PCM finds out from Discover Global Network why creative partnerships between FinTech start-ups and established financial institutions are the future.

The rapid integration of the financial and tech sectors shows no signs of slowing down. According to CB Insights[1], there were 2,745 FinTech companies of scale around the world in 2020 – a number that’s risen by almost two-thirds in the past five years.

Not only is the FinTech market growing, it’s increasingly focusing on payments as part of wider remits in financial services, from insurance to mortgages – or as part of a digital “platform” approach that combines several services into a single digital offering.

For all the positive stories about growth in investment and applications, though, FinTechs face challenges – not least in accessing customers, and getting those customers to trust them.

As Tribh Grewal, Director, Business Development, EMEA at Discover, notes: “Many young FinTechs are struggling to get hold of customer relationships. Once they’ve established a viable proposition, a lot of start-ups then seek opportunities to expand their business further.

We provide the elements these companies need to grow – network security, regulatory and payments know-how, technical excellence and relationships with banks. Most of all, though, we’re a trusted brand with a track record of success – and that’s attractive to FinTechs.”

Win/Win for FinTechs and banks

“Partnership means more than sharing technology,” Grewal explains. “By creating partnerships between innovative tech firms and established brands, we can dramatically cut the time taken to deliver a new product to market and realize cost efficiencies across the value chain.”

If establishing bank partnerships works for FinTechs, then it’s just as effective for banks themselves. “The reason why we’re seeing continued growth in bank/FinTech partnerships is that there are positives for both parties,” says Grewal. “FinTechs get to expand their usage and turnover, while banks can expand their capabilities and the range of products on offer.”

As the graphic from Cornerstone Advisers demonstrates, payments account for more than half of the partnerships created between banks and FinTechs, with new-product introduction cited as the reason behind more than one in five link-ups between FinTechs and established financial institutions.

“By creating partnerships between innovative tech firms and established brands, we can dramatically cut the time taken to deliver a new product to market and realise cost efficiencies across the value chain.” – Tribh Grewal, Director of Business Development, EMEA – Discover

Another factor emerging across the modern economy is a shift from the ownership of concepts to accessing those concepts or products as needed. When it comes to payments, this means working together for the benefit of all parties: creative FinTechs that own the concept; banks with their strong trust and brand awareness; and, of course, the customers themselves.

As Grewal explains, “Discover has always had partnership as one of its core values. We’re willing to share our extensive knowledge and technological capacity with our partners, and we’re flexible. That makes us an attractive organisation to work with.”

From gig workers to SMEs: partnerships for all

At present, Discover Global Network is working with FinTech partners to enable a wide range of new capabilities for banks, including rapid access to earned wages for gig economy workers, faster and cheaper ways to pay for small and medium enterprises (SMEs), and instalment payments for consumers.

One of the latest FinTechs to partner with Discover Global Network is Aleta Planet. The firm’s flagship product is AP-1 Business—a digital account that enables SMEs with a secure and cost-efficient way to pay into China.

Aleta Planet’s payment solutions assist companies to manage their cash flow. As an example, the AP-1 Business Account enables firms to collect sales settlements and transfer funds directly into their Chinese suppliers’ commercial accounts.

This functionality is vital for SMEs that are unable to develop into the Chinese market owing to payment concerns. Unlike governments and larger organisations, SMEs typically struggle to make payments in China owing to capital regulations.

“Nearly half of payments to China are delayed or rejected,” Peter Lim, Regional Head for North Asia, adds. “Aleta Planet’s proprietary technology focuses on giving SMEs with a safe and cost-effective means to pay into China. Suppliers are paid on time, goods are delivered on schedule and company processes run smoothly.”

Aleta Planet’s proprietary technology facilitates merchant acquisition, remittances, and business-to-business financial transactions globally. Founder and Group Chairman Ryan Gwee describes Aleta Planet as a “natural partner for global merchants and Chinese enterprises expanding overseas.”

Beyond the commercial and technological benefits of partnership, working together creates other positive effects, according to Grewal: “Modern payment services based on digital platforms create rich streams of data from customer interactions.

That means both banks and FinTechs can process this data to learn more about how customers use their services and, by extension, identify new opportunities to serve those customers better and create improved products.”

With 82% of leading financial services executives intending to partner with a fintech in the next 3-5 years, according to MSYS[2], partnerships look set to be the future of finance and payments.

But making these partnerships work is harder than it looks, with regulatory know-how, relationships and integration support being as important as the right product and technological expertise. As ever, a blend of experience and trust will be essential to making sure customers get access to the latest innovations in a cost-effective and timely manner.

To learn more about how Discover enables dynamic partnerships between FinTechs and banks across the value chain, please visit: Discover Global Networks

[1] See Fortunly, “Fintechs: An Industry on the Rise”, 7 October 2020

[2] See: https://mfsys.com.pk/are-banks-an-endangered-species/

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