Page 30 - 630578_IBAT-Jan-Feb2018

ome of the same companies that just
among veterans of the feder- DID ANY FINTECHS
a few years ago were celebrated as the al government in Washing- RECOGNIZE FROM
future of banking are now struggling ton, D.C., who built an inno-
to withstand credit, business and eco- vative financial technology THE START THAT
S nomic cycles and to secure the funding company across the Potomac WORKING CLOSELY
they need to grow. And a few even face more se- in Arlington, Virginia.
rious problems, as well as management turnover. The year was 2002, well WITH BANKS—NOT
As a result, many fintech leaders are rethink- before the financial crisis SEEKING TO REPLACE
ing their strategies. Some forward-thinking fin- that gave rise to the recent
techs are now partnering with banks, instead of growth in the fintech move- THEM—WOULD
competing with them, or turning to time-honored ment. Former executives BE KEY TO THEIR
banking tools like deposit-based funding of loans. of the Office of the Comp- SUCCESS? IN FACT,
Still others are pursuing a once-unthinkable strat- troller of the Currency, the
egy: acquiring bank charters through ILC applica- Federal Reserve System, A MODEL OF TRUE
tions—in other words, becoming banks themselves. and the Federal Deposit COLLABORATION
The overall situation remains murky. Are fin- Insurance Corp. founded a
techs prepared to navigate the regulatory environ- company with a strength in EVOLVED MORE THAN
ment? Will doing so erode their cost advantages? innovation that is reflected 15 YEARS AGO.
Can traditional banks fully rely on new fintech in the 20 issued patents that
partners? When fintechs recover from their recent it holds to date. But from
stumbles, will they resume their competition with the beginning, working closely with banks was key,
the banking industry? and the company understood its future was con-
In hindsight, these developments would seem tingent on the success of its partner banks.
predictable. Did any fintechs recognize from the From its inception, Promontory Interfinancial
start that working closely with banks—not seek- Network has been steadfastly committed to serv-
ing to replace them—would be key to their success? ing banks, not competing with them, and to a me-
In fact, a model of true collaboration with banks ticulous attention to detail that belies the disrup-
evolved more than 15 years ago, not in a hotbed of tor stereotype, even when doing so leads to higher
innovation such as California or Manhattan, but costs for itself.
When to Partner with Fintechs
Partnering with fintechs may make sense in some cases for banks, ▸ ▸ How well does the
particularly if the fintech offers access to a market segment difficult organization know banks—in
to tap or a patented or differentiated product. But before entering particular, with respect to
into negotiations, banks may want to get answers to the following the regulations and security
questions at a minimum: issues that may apply? What
do the fintech’s bank clients
▸ ▸ Does the fintech have a track ▸ ▸ Is the potential partner an say about their experiences?
record and has it been tested existing market leader? ▸ ▸ Does the company compete
and survived credit, business ▸ ▸ Is the potential partner or directly with banks and, if not,
and/or economic cycles? its service endorsed by might it do so in the future?
▸ ▸ How reputable is the company well-known organizations, ▸ ▸ Is the organization regularly
and its management team? such as the American audited or examined, not
▸ ▸ Is the company well-funded? Bankers Association or the only by accountants, but also
Does funding depend heavily Independent Community by banks and/or regulatory
on sustained growth? Bankers of America? agencies?
▸ ▸ Is the fintech provider ▸ ▸ Does the organization make
recognized for customer Service Organization Controls
service? reports available?
30 | THE TEXAS INDEPENDENT BANKER