Community banks and credit unions have been finding it difficult to keep their platforms updated with the latest innovations because of limited capacity, lack of industry skills and expertise, and relatively small budgets.
Due to these limitations, small lenders have been working with Fintech firms, in order to meet changing customer requirements.
According to a recent whitepaper from Finastra, customers, particularly the younger generations, and the more digital-savvy ones, are looking for improved and seamless digital experiences.
Younger consumers also prefer more personalized services and user-friendly applications.
An ABA/Morning Consult survey from November 2019 found that almost 75% of US residents are now accessing their bank accounts through online or mobile devices, with mobile being the most widely-used method for younger users.
However, regional and community banks have really been struggling to innovate and keep up with the latest financial technologies. Smaller lenders normally don’t have the resources and funding that larger financial institutions have to support innovative projects, internally.
A growing number of small lenders are working cooperatively with Fintech companies on various digital transformation projects, in order to provide better customer service at competitive costs.
A 2017 Manatt and Mergermarket report noted that over 80% of regional and community bank executives claim they have teamed up with Fintech service providers to update their platforms.
Around 86% of senior management professionals responding to a survey said that partnering with Fintech firms is “absolutely essential” or “very important” for their company’s long-term growth and development.
These incumbents have even introduced their own Fintech initiatives. Kansas City-headquartered nbkc bank launched its Fountain City Fintech accelerator back in 2018, in order to foster partnerships with local Fintechs.
Finastra’s whitepaper identifies several challenges for Fintech service providers. The study claims that Fintechs’ market reach is still fairly limited and that their ability to scale operations remains poor, because there’s a lot of effort involved in onboarding new customers.
Many Fintech-focused initiatives tend to be quite unique and customer-centric, meaning they need a lot of special resources that can drive up costs and make it hard to scale.
Finastra has introduced a platform called FusionFabric.cloud to address these challenges.
FusionFabric.cloud allows Fintechs to build, deploy and manage cloud software via open APIs linked to Finastra’s core banking infrastructure.
The platform aims to offer a “go to market” process that aims to reduce friction at each stage and allow for easy collaboration with financial service providers.