Six Tips for Choosing a Fintech Partner

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Securing a Competitive Advantage

Ah, compliance officers, the unsung heroes of the financial world, navigating the treacherous waters of fintech partnerships. Fintechs are a powerful tool for banks, they can give small and mid-sized banks massive advantages by leveraging talent resources, technology expertise, and digital infrastructure -  and with so many options in the marketplace, picking the right partner is essential to keeping a competitive advantage.  Here are six tips to guide you as you choose the perfect fintech sidekick - and sharpen your competitive edge.

Due Diligence is Your Best Friend:

Do not be swayed by pitches and potential. Fintechs are vying for your business, but your priority is keeping your institution in compliance. Do your due diligence.  Investigate the fintech's background, reputation, and regulatory compliance history. Make sure they're as clean as a freshly laundered suit.  A lack of due diligence may cost your organization millions in fines so go slowly and dig deep into potential partners' financials, security measures, and past partnerships. 

Questions to consider: 

• What is the fintech’s history with compliance?

• Are they financially sound (will they be around next year?) 

• Who is backing the fintech? What is the investors' angle?

• Do they have testimonials and case studies? Are their current partners renewing? 

• What is their reputation in the industry? 

Goal Alignment Over Shiny Objects:

Fintechs often dazzle with their cutting-edge technology and flashy apps. But don't be seduced by the glittering facade alone. Ask yourself, "Does this fintech actually solve our needs?" Substance over style, my dear compliance officer. Consider your overall goals for the fintech partnership. The success of your fintech partnership relies on how well your strategic goals are achieved, whether it’s customer acquisition, product expansion, or consumer experience. If the tech product looks great but doesn’t do what you need it to, it isn’t the right partner for you - no matter what the sales team promises. 

Questions to consider: 

• What are your organization’s long-term goals? 

• Does the potential fintech partner have proven ROI against your given goals? 

• How will you define a successful partnership? 

• What is your organization’s “timeline for success”? IE: how long can you wait before you see results? 

Scalability, Scalability, Scalability:

Ensure that the fintech can grow with you. Your financial institution might start small but the hope in partnering with a fintech is that your organization will scale, and when you scale, questions of security, privacy, and customer disruption are front and center. Make sure your fintech partner can adapt and scale their services to match your ambitions.

Questions to consider: 

• Does the fintech partner have the manpower to scale with your company with limited disruptions for the consumer? 

• Are security and data privacy top of mind? (The answer should be YES). 

Transparency is non-negotiable:

Transparency isn't just a buzzword; it's your guiding light. You need to know how they handle data, where it's stored, and who can access it. If they're not forthcoming with these details, not only are they not the right partner for your organization, they are a liability to the industry as a whole.   Transparency also extends to product development, marketing capabilities, and customer acquisition strategies. Alignment on timeline expectations and go-to-market strategies is key to the success of any fintech-bank partnership. 

Questions to consider: 

• How is data stored and security? 

• What type of security breaches has the potential partner experienced in the past? 

• Is the partner clear about the process of product development and go-to-market execution? 

• What are the marketing and customer acquisition expectations for the fintech partner? 

Compliance is non-negotiable:

Fintechs that shy away from compliance are like a chef who refuses to wash their hands—it's a recipe for disaster. A disaster that can cost your organization millions in fines and a damaged reputation. Ensure your potential partner is committed to regulatory compliance, and that they have the necessary licenses and certifications. In the words of Rafael DeLeon, Ncontracts’ SVP of Industry Engagement and a former bank examiner with the Office of the Comptroller of the Currency (OCC) “If a fintech can’t demonstrate a strong compliance management program, no bank or credit union should want to touch it…The risk is too high for potential consumer harm, and operational issues could lead to even more compliance costs and regulatory trouble. Who needs it?” 

Questions to consider: 

• Does the fintech under evaluation have a solid understanding of regulatory requirements, third-party vendor management, security, etc?

• Are the organization and the potential fintech partner aligned on compliance goals? 

• Where is the fintech partner weakest in their risk/compliance strategy? 

Evaluate for Longevity

The fintech landscape is constantly evolving. Your perfect partner today might be outdated tomorrow. Through each stage of the relationship: product development, launch, and maintenance; both partners should have strong communication to maintain best practices and create innovative solutions to customer feedback.  Look for a fintech that's adaptable and willing to embrace change. You don't want to be stuck with a partner who's still using dial-up internet when everyone else is on fiber-optic.

Questions to consider: 

• Again, what are your organization's long-term goals? Do they align with the goals of the potential fintech? 

• Who are the stakeholders, both from the bank and the fintech? How involved will they be in product development and delivery? 

• In what part of the product life-cycle will feedback be taken and incorporated? How often will you adjust and “innovate” your product? 

• Do you have an articulated plan for dissolving the partnership? Are those expectations written down and communicated? 

In conclusion, the industry is full of potential partners vying for your contract - but don’t be swayed by the latest and greatest app or platform. Remember, dear compliance officers, when selecting a fintech partner, remember due diligence, alignment, scalability, transparency, compliance, and longevity. 

Happy Partnering!