How Banks Can Build Partnerships to Win the Payments Race
Fueled by innovation and rising customer expectations, the payments ecosystem is rapidly evolving. Over the past decade, digital payments have surged, particularly in the fintech space, with an estimated 3 billion global users in 2024. In response, banks and credit unions are accelerating their efforts to stay competitive with fintechs and non-traditional financial institutions, with 94% of banks planning investments in modern payment technologies.
While most experts agree that every financial institution needs a payments strategy, what if outspending or out-teching the competition is not the answer? Partnerships can provide a strategic advantage allowing traditional financial institutions to grow market share and influence.
Traditional financial institutions should consider partnerships along two channels: fintechs/tech providers or businesses/services delivering to end users. No matter the channel, the partnership should focus on offering a differentiated and competitive product that solves a client need.
Partnerships thrive in the payments space when traditional institutions and fintech companies combine their strengths. Fintechs can bring a new, differentiated experience that can lead to better customer satisfaction and retention. Partnering with fintechs can also provide an opportunity for data sharing, giving banks real-time access to market and payment trends. In addition, traditional financial institutions can tap into new customer segments and reduce operational costs, while enhancing the overall customer experience. Banks bring scale, infrastructure and credibility that fintechs often need to grow.
Similarly, partnership opportunities exist with the endless businesses delivering goods and services to customers. Financial firms that partner with those businesses, especially at the regional and local level, will establish new buying patterns and habits with their customers. By aligning with brands that resonate on a community level, financial institutions can influence purchasing behavior in subtle but meaningful ways and build loyalty. For example, a regional bank or credit union that partners with a local business can offer a convenient service and build a niche for themselves that reflects customer preferences.
Across both partnership channels, the ultimate goal is to create a cross-channel strategy driven by payments. While payments build brand awareness and can introduce customers to additional products, the strength of the payments strategy will be measured on the partners and their shared values. Those that champion change, are skilled at navigating complex market ecosystems and are passionate about solving their customers’ problems will succeed.
Chris McGee leads AArete’s Global Financial Services (FS) Consulting Practice. AArete partners with FS firms to drive growth and boost competitiveness by optimizing digital and technology capabilities, risk management and cybersecurity solutions, strategic profitability initiatives, regulatory compliance, and M&A strategies.
Chris brings nearly 20 years of experience across the FS sector (e.g., retail, commercial, corporate, and investment banking, capital markets, securities, investment and wealth management, insurance, and fintech).