Fintech - Bank Relationship Counselling
I know, relationships can be rough sometimes. It takes time and experience to find a good match and to keep them as a life partner in crime. Sometimes you may not be looking for a long-term relationship, but you want to keep your counterpart happy, ensuring you both have the same short-term expectations if that would be the case.
So we decided to set up a relationship counselling session, and we asked relationship expert Rita Martins, Head of Fintech Partnerships Finance and Risk at HSBC. Her job is to manage the relationships between internal and external partners and assist where and when needed, from finding new partners, keeping conversations going when it gets tough, and helping with onboarding and procurement.
She summarised it as: "It's almost like matchmaking between internal and external stakeholders".
Why are relationships so important and meaningful? I Googled it and found an article with 10 reasons, of which these are the first two:
"Remember that being in a relationship is good for you. Statistics show that married people live longer than their unmarried counterparts. They also have higher happiness levels. Those who continue to create more love in their lives also create more opportunity, money, and fun. When you have someone by your side who is striving for the same goals, they are attained much more easily."
True, it came from Psychology Today, but isn't this equally true for banks?
The future is out there
Rita saw finding fresh ideas, innovation and faster time-to-market as the primary reasons for banks and fintechs to partner up. "Especially if you're talking about big banks, it takes a while to create new products or new solutions, just because of how complexities and how big it is. By connecting with fintechs, it's faster to get to market. Also, because they have a very different mindset and culture, we gain a lot of that different mindset and cultural innovation."
So successful relationships are important, as it makes a bank richer in terms of ideas, and customer propositions, leading to a more open-minded culture, making them more resilient to external pressure from the market.
"The future is out there", someone said in the audience. You just need to find the right organisations to help you build that future instead of doing everything yourself. Now the question is: what are the right organisations?
Great minds think alike
Rita explained: "Fintechs can be very innovative and nimble, but yes, sometimes they do forget about all the controls and regulations that exist in financial services, and we need to make sure that our partners are also complying."
Many lack the knowledge to comply. They have bright ideas but cannot contextualise them in the bigger picture of a heavily regulated industry. Here is a tip from Rita for those companies: "It would be good for some of them to have someone from the financial services come and help them with that journey as they grow and start having partnerships with big banks".
Rita shared that HSBC partners predominantly with medium to big sized fintech companies because they went through that journey, and they can talk with a bank on the same level.
Great minds think alike, and that makes a relationship so much easier.
Luckily, banks can increasingly fall back on networks of fintechs and even marketplaces of fintech organisations. Being part of a network increases trust. As they are part of a marketplace or a network, these fintechs serve other clients already most of the time, making them less dependent on one bank.
Relationship management is a people business
The biggest challenge of partnerships between banks and fintech is people. People need to be aligned, and both sides of the equation need to be genuinely engaged in the project. If the people are committed to making it work, it will work.
Rita: "I see a lot, especially from business stakeholders, that the first thing they look at is questions like: can I work with this person? Does this person get me? Does this person listen to me? And it's much more than just the technology or the solution."
Of course, there is a difference in culture, but even that can be traced back to how people think, act and feel. With an open mind and good communication, different cultures can be overcome.
An honest banker in the audience added that good stakeholder management in a bank internally could be critical to avoid a breakup by wrong assumptions from the legal department or compliance.
Rita agreed by saying: "we still need to change the internal attitudes in many banks, create more openness. Show them that it's okay to try new things too. Because until recently, banks were very much on the trust, that was the main thing: we wanted to be trusted by the consumer. So we were very much risk-averse."
Although that is a powerful value, it is essential not to make it too important. Long term-viability comes with change, especially in a fast-evolving market like banking.
Technology often progresses one retirement at a time
I didn't invent the quote "technology often progresses one retirement at a time". I am the grateful listener of the one that shared it in the session. Although frequently it is very true, there are ways to overcome this challenge, and that is through communication and an internal culture of change. There needs to be what Rita called "cultural humility" on both sides of the relation: bank and fintech.
Since we talk about partnerships between organisations with people being the critical success factor, Rita shared the following tip: "There needs to be conscious communication, not just with one person, but with a few people because there's the thing that happens in big banks, or any bank really, people they move on. And what sometimes happens to fintechs is you have their key stakeholder or their key sponsor, and then he moves on. And then what happens is no one is taking care of that relationship."
Later in the discussion, she also raised awareness that communication is vital with key stakeholders. Still, fintechs must not neglect the SME (subject matter experts) in the dialogue, as they have an immense influence as well.
On the other end, banks need to create the right circumstances for change, not just an attitude change, but it also requires the right sandboxes and data to test different partners and models and a mature procurement and onboarding process.
My key takeaway from this session is that the more we digitise, the more critical people are. Whether you look at the way services are designed, or the way relationships with third parties are managed, it is the human in the loop that will make or break a project.
The key to that success is communication. When we asked the audience whether banks and fintech take enough time and effort in communication towards each other, 86% observed that it deserves more attention, whether that is before signing the deal or in the creation or maintenance phase. Of course, not every relationship is the same, but every relationship needs at least alignment about expectations at both ends to keep every involved part happy in the long run.