Fintech disruption, particularly as it pertains to online lending, has been a talking point among traditional financial institutions for years. In the early days, the discussion was wondering how much fintech startups could actually disrupt the market and if regulation would end up holding them back. Over time, however, advances in risk analytics software and strong innovation helped fintech startups gain a strong hold on the lending world and even begin to mature.
In 2018, that maturation came to a head in a year that was marked by a single clear trend – partnerships.
The growing prevalence of fintech partnerships with banks
Heading into 2018, many pundits were intrigued by how the online lending and fintech sectors would shift in the coming year. At the time, many banks and credit unions had expressed interest in adopting functionality similar to what marketplace and alternative lenders can offer.
At the same time, fintechs were facing growing challenges standing out on their own, especially as larger banks set up their own risk analytics software systems and online lending platforms. Apparently, the uncertainty heading into the year has come to a clear conclusion.
A survey from McKinsey Panorama found that approximately 80 percent of financial institutions have now established partnerships with fintech companies. At the same time, venture capitalists the world over are investing heavily in fintechs, with total investment climbing to $30.8 billion.
“Bolstering a fintech partnership with strategic technology investments can drive value creation.”
As more partnerships have occurred, the idea of what a fintech actually is has begun to shift. Instead of considering fintech firms to be almost exclusively startups who are using financial technology to disrupt markets, the study found that more traditional financial services providers are becoming fintechs in their own right as their partnerships and strategic investments in technology allow them to use a technological advantage to gain an edge in the marketplace.
There has also been a corresponding rise in large tech companies entering the financial space and technology infrastructure providers who are working closely with financial institutions to drive innovation.
Partnerships aren’t just for the big institutions
A report from Investing News further emphasized the growing trend of partnerships as a major part of the fintech sector in 2018. Beyond pointing to a variety of news events that highlight the growing trend toward partnerships, the news source also explained that many community banks have started to explore fintech relationships to help them gain an edge in their operations.
This move toward technology-driven innovation isn’t just for the major banks and credit unions that lead the industry. Regional and community institutions also have an opportunity to gain from the fintech disruption taking place.
Gaining an edge in online lending
As banks and credit unions use fintech partnerships to compete in the online lending space, risk analytics software can hold the key to unlocking a partnership’s full potential. Analytics solutions can drive process innovation and allow for stronger decisions within online lending operations. Bolstering a fintech partnership with strategic technology investments can drive value creation.
Contact GDS Link today to learn more about how.