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New Report on Bank Partnerships with Fintech Companies

The new report, commissioned by Manatt, shows that collaboration is the likely way forward for banks and fintech companies

October 24, 2016 By Peter Renton Leave a Comment

Views: 61

manatt-report-on-bank-partnerships

A new report released today by the law of firm of Manatt, Phelps & Phillips, LLP shows that community and regional banks are very open to partnering with Fintech companies. The report is based on information gathered in a survey of 75 executives from banks, Fintech companies and private equity investors. While the survey size is very small the findings are still quite interesting.

The main thrust of the survey is that banks are far more open to partnering with Fintech companies than ever before. This is a trend that began many years ago and seems to be accelerating today according to this report. Here are some of the key findings of the report:

  • Banks are on board with fintech. At 81%, the overwhelming majority of regional and community banks are currently collaborating with fintechs. In addition, 86% of regional and community bank respondents said that working with fintechs is “absolutely essential” or “very important” for their institution’s success.
  • Lower costs + a better brand = a win-win. For regional and community banks, enhanced mobile capabilities and lower capital and operating costs were highlighted as the benefits of collaborating with fintechs. Fintechs named market credibility and access to customers in regional markets as the main benefits to partnering with banks.
  • Data security remains a challenge. Both banks and fintech companies are highly sensitive to the ways in which data is shared and secured. This means extra attention must be paid to cybersecurity when the two sides collaborate—especially given the cultural mismatch that can exist between them. Despite the optimism among banks for collaboration, preparedness is a large concern. Almost half of regional and community bank respondents said they are just “somewhat prepared” or even “somewhat unprepared” for this kind of partnership.
  • Regulatory concerns remain paramount. For banks and fintech firms, structuring relationships that are regulatory compliant, including, if required, prior regulatory approval, is critical to ensuring success and the opportunity to change the way financial services are ultimately delivered.

So, assuming this report is representative of the attitudes of all of banking we can expect far more collaboration in the future. I think this is good news.

Lending is moving online, that is an unstoppable trend. The reality is that the cost to setup an efficient online lending operation is high and smaller banks will find this a difficult cost to justify on their own. Even larger banks are seeing the advantages of partnering, maybe not so much from a cost perspective, but certainly from a speed and user experience perspective.

The one data point that I thought was fascinating was this: 88% of bank respondents thought that in ten years time the banking industry will see banks partnering with Fintech companies in a largely collaborative environment. This is where the industry is moving.

You can sign up to download the survey at the Manatt website.

Filed Under: Peer to Peer Lending Tagged With: Banks, fintech, Partnership, survey

Views: 61

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LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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