Jul 17, 2017

How to Pick a Fintech Partner (Not Easier Said than Done)

Steven O'Hanlon, CEO, Numerix

Worldwide, we are seeing an explosion in fintech activity, and it is taking a real hold within the financial services industry. Technological innovation, financial innovation, complex regulatory demands, the trend towards digitalization and the general fintech “disruption” are all changing several areas of the sector forever.

In some ways, fintech represents a risk and a challenge, and in other ways, fintech offers tremendous opportunity. In one regard, we see technology players entering several traditional banking business lines, such as payments, loans, retirement planning, and even wealth management. On the other side, fintech is bringing transformative ideas and solutions that help banks create new sources of alpha, or help them build, access and advance IT infrastructure to meet changing regulatory and customer demands. Whether it’s about trading or any other investment or finance-related function, innovation—and thus fintech—is not going away. What matters is how an institution responds—to embrace it, compete against it, or isolate itself from it.

Ultimately, in my view, the capital markets c-suite that emerges as a leader and visionary in the years and decades to come is the one that chooses to quickly and strategically respond to changes in its external environment—and finds a way to overcome, profit or otherwise benefit from the challenges or opportunities it faces in a rapidly influencing fintech ecosystem.

There are several instances of how financial firms and fintechs have engaged in recent years, such as via collaboration, partnerships, acquisitions, or by just replicating another’s ideas. Within the capital markets space, we are seeing an increasing number of firms seeking partnership opportunities with fintech. One primary reason is that many face the same dilemma: they are aware of the benefits of disruptive technology and how it is a gateway to innovation, agility, speed, scalability, and more—they just simply can’t duplicate it within their own walls, or don’t want to take on the huge expenditure to do so in-house.

The big question then, is how does an institution identify the right fintech partner? And what factors should be taken into account?

We’ve worked a lot with peers across the industry, so I’ve had my share of the good, the bad and the ugly when it comes to prospective partners. For my money, if I were to advise a CEO or other c-suite leader on what to look for when choosing to collaborate with a fintech company, here is what I’d be looking for:

1.    A company that can help you succeed.

The fintech partner you choose should have an acute understanding of your business (your products, systems, and regulations), a strong empathy for the issues you face, and the ability to help you achieve your goals faster and more cost effectively. It should also have a market-leading ability to innovate and have the adeptness to help you bring maximum value to your marketplace and improve the experience of your customers.

2.    A company that offers innovative and comprehensive technological capabilities and services.

Critically examine the breadth of coverage and functionality of your partner candidate. Look for a track record of staying at the cutting edge of technology and having a strong and cohesive product platform and risk system. It should demonstrate having a powerful architectural vision and the ability to deliver high performance processing. Additionally, a suitable fintech partner would offer you a solid depth of services, particularly when it comes to implementation and post-deployment support.

3.    It hosts a strong brain trust.

You’ll want to look for a partner that has assembled a rock star brain trust. It should have critical mass when it comes to financial engineering, quantitative and software development expertise. The best and brightest deliver the greatest and most targeted solutions.

4.    It has proven success and focus.

Continuity of focus and success are equally vital. Your fintech partner must demonstrate a proven dedication to innovation and financial technology development. Has it been recognized by the fintech industry and financial services sector? How often? Does it have a strong client list? Does it have decent market share? Essentially, you want to partner with a firm that can “walk the talk.”

5.    It has a global footprint.

A fintech firm that is global offers the benefit of working across different countries and cultures. A firm that has a global perspective and international experience is more likely to be knowledgeable about and active in in the latest and emerging innovation trends in the rapidly evolving fintech sector—and how they may benefit you. Having a broader view can also help position a fintech as an ideal resource to provide more diverse solutions.

Partnerships with Fintech Have Proven to Pay Off

According to a recent Business Insider report (November 28, 2016), a survey of financial services institutions showed that 54% of respondents that have partnered with fintech companies have increased revenues. Additionally, the same study found that 87% of partnerships have resulted in effective cost management.

For me, personally, it’s been very exciting to witness the recent traction within the fintech sector. I see the future holding exciting new opportunities as fintech expertise and capabilities grow even more to drive effective transformation for financial institutions.

Over the last several years, we have already witnessed how technology advancements have become an important driver of profitability, cost savings, efficiency and competitiveness for financial institutions. A fintech partner can help to accelerate the adoption of new, brilliant technology. But some fintechs are stronger than others. So my last piece of advice is to conduct proper due diligence to find the right partner. The good news is that the right partner is out there.

Steve O'Hanlon is president and CEO of Numerix, a Fintech specializing in solutions for capital markets. O'Hanlon has spent his 25+ year career in leadership positions growing start-ups and SMBs across the financial services technology industry. He has a passion for entrepreneurship, leadership and innovation. Today O'Hanlon is focused on building businesses, promoting a digital mindset and driving success.

Follow more of Steve O'Hanlon's insights on Leadership, Technology, Innovation and Entrepreneurship on LinkedIn.

Need Assistance?

Want More From Numerix? Subscribe to our mailing list to stay current on what we're doing and thinking

Want More from Numerix?

Subscribe to our mailing list to stay current on what we're doing and thinking at Numerix

Subscribe Today!