Note from the Publisher: With all the hoopla around fintech and the banking sector, it’s easy to forget about smaller banks and how they are dealing with the technology curve. Many of the larger banks have fintech innovation centers or accelerators – BofA, Wells Fargo, Citi and Santander are just a few that come to mind – and they can create their own new fintech platforms. How does the small community or regional bank compete? According to a new survey, the answer is collaboration. If you can’t beat ’em, join ’em!
Thousands of regional and community banks are turning to fintech in order to meet the needs of customers who demand services on their computers, tablets and phones, according to a new report by Manatt, Phelps & Phillips, LLP. Conducted in conjunction with Mergermarket, the report, “Growing Together: Collaboration Between Regional and Community Banks and Fintech,” is based on survey responses of senior executives from regional and community banks (50%), fintech companies (25%), and private equity firms, venture capital firms and investment banks (25%).
The survey reveals that executives are optimistic about future collaboration between the two industries, with 54% of bank respondents calling fintechs a potential partner and 89% believing that partnerships between the two will reign in the next decade. The benefits are clear to both sides. As banks seek to gain a competitive advantage, they see fintech as a way to offer online services to customers while decreasing technology costs and offering lower lending rates. Fintech firms also see the potential in working together (58%) as an advantage to gain access to the clients of midsized and smaller banks.
‘Rather than compete or acquire one another, we’re seeing these institutions begin to form partnerships, and we predict that collaboration will be the primary way that they continue to interact,’ said Brian Korn, chair of Manatt’s digital finance and marketplace lending practice. ‘In September, Radius Bank announced it would team up with online lender Prosper in an innovative deal to help make small business loans, a model that continues the collaboration theme demonstrated by other banks and lending platforms, such as JPMorgan Chase and OnDeck and Regions Bank and Avant. This is the beginning of a new trend that points specifically to an increasingly symbiotic environment.'”