By Marilyn Kennedy Melia
Fintech companies have proliferated at a breakneck pace, grabbing rapt attention from bankers. But the typical bank customer, even those using a fintech service provided by their bank, may not even be aware of the term “fintech.”
That might be because its definition is ambiguous, says Ron Shevlin of Cornerstone Advisors. “I think of it as a ‘fill-in-the-blank’ [financial] service,” he says. Shevlin does see distinct models of fintech-bank partnerships. One is like a vendor relationship, with the fintech company providing a platform, like one for quick loan approval, that the bank offers on its site. Another is “distributive,” whereby the bank is selling product through the fintech.
Then there are service and consulting relationships, with the bank providing the banking infrastructure the fintech requires, and advice on compliance and regulatory issues.
Finally, some banks wholly own fintech companies.
The marketing messages differ, based on the bank’s own objectives, and on the structure of the partnership model.
In a survey earlier this year, Cornerstone found that 65 percent of banks reported that partnerships with fintech companies will be important to their business strategies.
Now that early 2020 plans are upended by the virus crisis, some banks already involved with fintech firms may accelerate their efforts, especially if the collaboration contributes to the bank’s strategic plans. On the flip side, some banks will “slam the brakes” on partnership efforts in progress, Shevlin says.
Indeed, some fintech firms are now altering their own strategies in the wake of the crisis. For instance, a recent article in the Wall Street Journal outlines how some fintech companies focused on small business lending are tightening credit standards, in response to concerns over their borrowers’ viability.
Here are a few bank strategies for marketing various types of fintech collaborations:
Fintech as the public face
Sunrise Banks was established in 1986 to serve the urban core of Minneapolis-St. Paul, by the father of the current CEO, David Reiling, who has deepened the community bank’s social-minded focus, with it becoming a CDFI in 2001.
A partnership with Self Financial, an Austin, Texas based fintech firm offering credit–challenged consumers short–term loans, with paybacks deposited in a bank-insured account, building both their credit and savings, allows Sunrise to “expand its mission” outside of its market, explains Reiling.
Largely, it’s the role of these distributive fintech companies to handle their own sales and marketing, Reiling says.
Self is its own marketing expert, but occasionally Sunrise publicizes the partnership on its site, social media, or in a press release. The latter often garners local coverage, says Reiling, because Sunrise is well-known locally for its efforts filling unmet banking needs.
Atlantic Capital, a $2.9 billion Atlanta-based bank with a largely commercial focus, is also a self–partner. “Many of our fintech clients have products and services to support financial wellness,” says Nathan Ottinger, Atlantic’s SVP for payments and fintech industry banking. “The fintechs we work with are very astute marketing engines. We don’t want to mix messages with them.”
Fintech as the vendor
Especially in consumer-focused marketing, banks don’t typically tout their core processing vendors. But for fintech companies providing platforms to banks in a vendor-like fashion, the bank messaging is not always mute.
For instance, Blend, a fintech firm that works with 225 lending companies, including large and small banks, to speed consumer loan applications and new account openings, reports that it periodically issues joint press releases with some of its bank clients.
U.S..Bank is one of those joint issuers, with a recent release reading:“At U.S. Bank, our goal is to simplify the homebuying process and enhance a customer’s experience throughout the homebuying journey.” The purpose is clear: U.S. Bank wants customers—and potential customers—to know of its new capability. “Every collaboration is different, so we look at what our customers need to understand, and how best to explain the product or feature,” explains Antoine LaFromboise, spokesperson for U.S. Bank.
Omaha-based FNBO offers retail and commercial customers a variety of fintech services. One vendor-like partnership geared to commercial clients, Paymaker, offers FNBO business clients of various sizes capabilities such as accepting payments via ACH which can be automatically reconciled with open invoices.
The bank communicates this and other fintech services via the commercial client’s relationship managers when it could be of benefit, says Marc Butterfield, SVP for enterprise digital solutions and emerging business at FNBO. “We also highlight these collaborations during community events, podcasts and other channels.”
When commercial clients know that “we are constantly innovating in ways that will save them money and improve their operations,” he adds, it deepens their trust and loyalty.
Banks as the fintech experts
An academic white paper isn’t a typical bank marketing medium. But for banks that provide the infrastructure for the money transfers a fintech enables or that serve as an adviser to fintech firms on regulatory and compliance issues, “It’s imperative to be recognized as a thought leader,” says Atlantic Capital’s Ottinger.
“We are the 44th-largest ACH bank in the country,” he adds, citing 2018 rankings. “We are moving the money or doing the compliance or managing the infrastructure.”
Authoring white papers, as well as participation in trade shows and membership in organizations like the Electronic Funds Transfer Association, raises the bank’s profile in this fintech niche.
Establishing its expertise isn’t simply an academic exercise, however.
Atlantic Capital itself has participated in multiple fintech partnership models. It even purchased a firm it had a previously worked with in a vendor arrangement, then later resold it, reverting again to a vendor relationship.
Established in 2007 by a group of executives, many with corporate treasury experience, Atlantic Capital built strong technology capabilities geared to commercial clients.
A fintech focus is “a natural extension” of that early tech orientation, says Ottinger. Indeed, no exact blueprint points the way to future fintech involvement, rather, “we go where the opportunity is,” he concludes.
Marilyn Kennedy Melia is a banking and personal finance writer based in Chicago.