3 Things to Know Before Partnering With a Fintech

Banking today doesn’t look like it did a decade ago. Customers expect financial services to meet them wherever they are — on their favorite apps, websites and digital platforms. And whether customers manage their savings in a financial planning app or earn rewards with a branded credit card, bank-fintech partnerships help power these experiences. 

Consequently, fintechs are a vehicle for banks to reach new markets and grow their deposit base. But these partnerships also introduce risks that require strategic oversight. Without preparation, banks can face compliance issues and operational gaps that jeopardize consumer trust and safety. 

A collaborative, mutually beneficial fintech relationship begins with a clear plan of action. Read on to learn about three key factors your bank should consider before teaming up with a fintech.

Why should your bank partner with a fintech? 

The rise of digital-first financial services is pushing banks to embrace new strategies to stay competitive. Fintech-powered distribution channels allow banks to modernize their offerings without the need to rip and replace their core infrastructure. 

Here are a few ways fintech partnerships can help banks evolve their services: 

• ‍Expand into new markets: As foot traffic declines at physical branches, fintechs help banks grow strategically — allowing them to extend their geographic reach and meet customer expectations for seamless financial experiences. Banks can move beyond the traditional constraints of a location-based model to deliver tailored services that address the needs of specific markets and communities. 
• ‍Secure new deposits: Fintech partnerships give banks access to new channels for attracting steady, low-cost deposits. By embedding financial services into trusted, non-bank platforms, banks can reach niche customer bases and capture deposits more efficiently while reducing acquisition costs.
• ‍Drive innovation: Traditional banks are experts in regulatory compliance, but fintechs excel at delivering cutting-edge user experiences. With the right data infrastructure, banks can rely on fintechs to accelerate digital product delivery without sacrificing security or oversight.

‍Plan before you partner: 3 tips for banks to build successful fintech relationships

Fintech partnerships aren’t one-size-fits-all. If your bank is considering working with a fintech, be sure to evaluate your unique priorities and operational needs by assessing strategic fit, ensuring compliance readiness and laying a foundation for ongoing transparency.

1. Choose fintech partners aligned with your core capabilities.
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   ‍Not every fintech will be the right match for your bank. At the outset, it’s essential to vet potential fintech partners based on how their offerings complement or enhance the services you already excel at providing.
   
   A community bank that primarily serves small business owners, for instance, might partner with a fintech offering working capital solutions. Or a bank specializing in consumer banking might team up with a fintech focused on personal finance tools or virtual card solutions. 
   
   To find the best fit, take time to align internally on your priorities for the partnership. Are you aiming to grow deposits? Focus on product innovation? By clarifying these goals, you can more easily assess fintech partners based on their track record of serving specialized customer profiles and market segments.
   
    Remember that embedded finance partnerships are long-term investments. The fintech you partner with should be equipped to extend your bank’s addressable market while remaining value-aligned as the program scales. With that in mind, take time to explore vetted marketplaces to identify trusted fintech partners that can help execute your strategic vision. 

2. Lay a strong compliance foundation from day one.
   
   ‍Banks have unique obligations as the chartered institutions in bank-fintech relationships. To uphold these responsibilities from a regulatory perspective, it’s important to approach compliance as a multi-faceted priority.
   
   Start by assessing your internal controls to identify and address potential gaps. For instance, some banks may determine they need to increase headcount on their compliance teams to ensure critical oversight functions can keep pace as programs scale. 
   
   Likewise, review the fintech’s level of compliance knowledge and operational readiness. A fintech partner should demonstrate a commitment to meeting key standards, including KYC/AML checks and regulatory reporting, to support a seamless and compliant partnership.
   
   While the regulatory landscape will evolve, proactively establishing a robust compliance framework positions your bank to navigate these changes — and deliver consistent and secure services for your customers. 

3. Make transaction visibility a top priority.
   
   ‍Full visibility into transaction activity is essential for banks to maintain oversight of fintech partnerships. Regulators have indicated that banks are ultimately accountable for monitoring and reconciling funds, even when working with third-party fintech partners.
   
   The right technology partner can simplify this process by establishing a direct-to-bank connection. Features like separate payment rails and real-time reconciliation provide immediate and unwavering access to transaction data so you can quickly spot and resolve discrepancies. Also consider your ability to access other data, like ACH return ratios and virtual ledgers by account, to track key insights for your embedded finance program. 
   
   By working with an embedded finance technology provider that integrates directly with your bank’s core, you gain the transaction visibility needed to meet regulatory expectations and pursue fintech partnerships with confidence. 

A holistic approach puts your bank in control 

Bank-fintech partnerships offer a powerful path for growth, but long-term success requires strategic choices about both fintech and technology partners.

At Treasury Prime, we understand the unique challenges banks face. Our modern Bank OS offers seamless integrations and real-time transaction visibility, so banks can innovate their offerings without sacrificing control. And with our regulatory expertise and partner marketplace, you’ll have the support you need to scale partnerships securely and efficiently. 

Interested in building a successful fintech partnership? Reach out to learn how Treasury Prime can help you navigate every step.