Banks are from Mars, Fintechs are from Venus: Bridging the Matchmaking Gap
Originally Published in BankThink: April 25, 2018
Traditionally, many fintechs have been founded with the goal of selling their product directly to consumers. Over time, however, this focus has shifted to partnering or even merging with financial institutions instead of trying to compete.
Both parties recognize the value of working together, but I’ve found that bankers and fintech executives alike are still expressing frustration throughout seemingly every step of the acquisition process. The answer may lie in a recent study by the Fintech Innovation Lab of New York which found that 60% of polled bankers cite regulatory, compliance or security issues as “major stumbling blocks” in purchasing technology. Fintech executives on the other hand, identified budgeting issues, competition with internal products and perceived risk of displacing internal teams or negating past expenditures as their top concerns.
It’s my belief that the friction stems from the fact that fintechs do not fully understand what risk management looks like from a bank’s perspective. Often established by a small team of IT professionals, former executives and investors, fintechs focus the majority of their time on creating a viable product, rather than on creating a due-diligence package that outlines the fintech’s stable business structure, continuity and/or security of their product. The absence of these features is a major red flag for bankers.