The Balancing Act between Banks and FinTechs for SMBs

by Jeremy Cook 0

In March, we hosted a gameshow style panel at one of the biggest trade shows in the world. If you were at South by Southwest then you may’ve seen our Frenemy Feud, a gameshow style panel discussion on how banks and so-called fintech disrupters can work in concert to better service customers. Great concept, right? The audience loved it for a couple of reasons. Yeah, we had fun, but at the same time we tackled problems paramount to everything we do as financial services partners today. Let me explain.

The coming together of finance and technology is the most exciting ‘tip of the spear’ in a world of innovation that keeps on driving progress in how the world’s small-to-medium-sized businesses execute run-of-the-mill, or even menial tasks. The thinking of a fintech company pays no mind to legacy; in fact most are built and made popular by users tired of having to deal with legacy systems, creaking under the weight of imperfect architecture and hastily-added, ill thought out bolt-ons that are wholly inefficient.

If using banks as a means to service their financial demands are the way that an SMB has always operated, then a fintech company is there to ask seemingly benign and yet so obviously leading question: ‘why?’ While fintech start-ups traditionally may need more capital and customers as compared to their institutional and aged financial counterparts, the SMBs that are incumbent within a market need innovation to ensure their own customers aren’t distracted by a passing bandwagon or fad, as it were.

Of course, bandwagons and the fintech companies that start them off are quick to grow, but also quick to fail. Before they shutter, some would-be innovators will offer the world and under deliver, some will offer everything for free, even their value, and then, some won’t get the necessary scale quick enough.

Banks have typically lagged behind other industries in their adoption of new technology and while some may use this as a stick with which to beat financial institutions, some of it’s not their fault. Banks are subject to huge regulatory expense that differs by region and therefore international expansion must be organic. Fintech companies that pride themselves on innovation, adaptability and ‘easy scale’ are less restricted by this.

Certainly, at World First our ethos has always been to move money internationally brilliantly, to do what we do faster, cheaper and easier than anyone else. In a world of falling productivity, higher costs and competition at every turn driving this for our clients has always allowed us to drive it internally as well.

However, SMBs looking to partner with a bank or a Fintech company need to know that balance is essential. Both are suppliers of a service; in this case of a financial nature. You wouldn’t tie yourself to one logistics, staffing or office supplies vendor, so why do the same with the company’s finances, borrowing, credit and payments?

Capabilities of said vendors aside, the matter of trust is always a key consideration, too. In the same way that you develop trust by the way a customer engages you via its website, you as a business must have trust in the platform that holds your funds or helps make payments for you, or allows you access to cheap and bespoke credit.

What pleases us is that fintech companies and banks are working together, perhaps more than they ever have in history, to ensure SMBs get the manoeuvrability of a small, single-issue, problem-solving start-up and the support of a bank that can act as the backbone of a growing business and mollify any counterparty risk fears.

It’s an evolutionary caution tale for all of us who co-exist, and will continue to do so for some time to come, in the global payments world. This also is why we take the topic seriously, as much as we made a game of it. [Studio applause.]