The New Wave of Banking

When it first started gaining traction, FinTech was seen as a revolution that would overturn the status quo. Startups were using the technology to create fantastic new products and services and the logic was that this would bring about a brand new financial market (and RIP big banks).

Now that FinTech’s importance is better understood and the initial flurry of excitement is subsiding, something more interesting is emerging. Rather than battling its newer (and improved) financial counterparts or choosing to simply fade into history, the big banks are reaching out and partnering with these FinTech startups in order to bring banking into the next generation.

Take Regions Bank and Avant, for example. In this case, Avant was brought on board to provide Regions Bank’s customers with a new consumer loan process. A true partnership, the new service carries both companies’ names (“Regions Powered By Avant”) and gives Regions customers an upgraded digital service while giving Avant more prominence in the marketplace.

It’s not just partnerships that are bringing the two sides together. The bigger financial institutions are also using investment and acquisition to bring FinTech startups and the new advancements into their fold. In fact, 30% of banks are considering the acquisition of FinTech startups.

Capital One, for example, has acquired several FinTech startups. Its most recent acquisition was Paribus—an app designed to alert users when a product they’d purchased had reduced in price—adding the money-saving feature to its list of offerings.

Who wins in this situation? Well, collaborating with FinTech startups allows the big banks to save money, increase their revenue and rebrand their image; meanwhile, startups are given needed capital and access to a much larger market.

The biggest winners in this new partnership may just be those previously labelled unbankable. By partnering with startups, big banks are increasing the prominence and availability of FinTech’s needed improvements like bitcoins and digital and mobile payments, which in turn is making it easier for billions to access these technologies.

The 2017 financial market will be full of interesting new developments as these partnerships and M&As continue the overhaul of the banking industry.