Strategic Partnerships in Fintech - Thematic Intelligence

The digitization of banking drives disaggregation. Ever smaller pieces of the banking value chain can be bitten off by highly specialized new entrants. This creates partnership opportunities with best-in-class, specialist players across front, middle, and back-office functions. We organize the analysis in this report around four main categories of partnership, and highlight illustrative partnerships within each area. The categories are ‘enabling technology,’ whether core banking or front-end channel technology; ‘banking products and services,’ which subsumes more product-specific, customer-facing tech capabilities; ‘banking ecosystem,’ which includes partnerships with, for example, account software providers and digital mortgage brokers; and ‘non-banking ecosystems,’ which is partnerships with other industries or verticals.

In 2024, rising rates, funding costs, and a stricter regulatory environment, will incline more otherwise D2C fintech providers to pivot to B2B monetization and other forms of partnership. Those firms that last raised at the top of the market, when long-term growth potential was valued more than near-term profit potential, will face difficult choices. Working with proven partners and business models, for distribution or as a tech partner, will become more attractive. Many fintech firms have come unstuck from regulatory issues, Rails Bank perhaps the biggest example, so partnership with banks can help beef up credentials in this area and steady the ship.

Scope

• “Partnership” has become a catch-all term for a wide variety of different collaborations, which could be as ‘light’ as a referral agreement with a non-traditional SME lender, to white labeling the underlying credit risk capabilities, to co-development of the overall platform, to outright acquisition.
• The budget category with the highest number of respondents planning a “high” investment in 2023 was fintech partnerships, selected by 51.6% of respondents (out of nine possible options). This underlines how absolutely foundational fintech partnerships are to broader transformation initiatives.
• Gen AI has eclipsed virtually every other technology, with a palpable fear of missing out if incumbent banks cannot identity the most proven early use cases, and deploy them widely across the enterprise to harvest maximum cost reduction.

Reasons to Buy

• Understand how technology and macroeconomic trends will impact how, why, and where firms will partner across the next 12-24 months.
• Understand the latest regulatory trends impacting fintech partnerships, and where opportunities may exist for new entrants versus incumbent banks.
• Review the latest bank spend data on how other key budget categories compare to fintech partnership spending on a time-series basis.
• Review firm-level insight on partnerships within each of the categories identified in our analysis.