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Banks dilemma: Make or Buy B2B FinTechs?

B2B FinTechs could not have had a sustainable foothold in corporate banking in 2018, reports ING Germany. Although FinTechs and banks have come closer together in the cooperation, the persistently difficult market environment still poses enormous challenges for both players: corporate customers are more likely to avoid risks, have extremely low fault tolerance and do not drive innovation forward. This is the conclusion of this year’s B2B FinTech report “Love at a Glance”, which the business law firm CMS Deutschland and ING have carried out together with FINANCE research in Germany.

For fintechs and banks, customer access remains the most valuable asset. The realization that a shared customer can be a valuable customer for both sides is becoming more and more prevalent. Cooperation models between FinTechs and banks do not yet follow a fixed pattern. So far, however, especially product partnerships, white labeling solutions or platform cooperations have prevailed. The flexibility of FinTechs to take on additional parts of the value chain also offers further cooperation potential.

The legal aspect of a cooperation is often not given enough attention: FinTechs, which act as service providers for banks, fall into the regulatory sphere of banks. FinTech owned by banks are also subject to the group policies. This can have serious consequences, for example in employee compensation.

FinTechs are very good at maintaining a close relationship with the regulator, especially when the regulatory or business model changes. The regulatory framework will continue to expand and more and more FinTech activities will fall into the supervisory area in the opinion of BaFin. ”

Andrea München, Partner CMS Germany

Looking beyond the box is critical to success

Banks learn from FinTechs and in parts even become such themselves: they create digital hubs to build their own development know-how, to prove their digital competence and to improve their own market and technical understanding. At the same time they analyze the potential of FinTechs. These often work in agile structures while working in banks is traditionally hierarchical.

A look beyond the horizon is also crucial in terms of agility. Agility is a way of thinking and a philosophy for us. It helps us to adapt the bank’s offer faster to changes in the market, thus serving our customers’ needs faster and more efficiently. ”

Andreas Becker, Corporate Business ING Germany

Make … or Buy B2B FinTechs?

Banks typically do not have their own FinTech strategy. Rather, dealing with them is embedded in the bank’s digitization strategy. As a result, the banks are facing the central question with regard to FinTechs: “Make or Buy?”. In the initiation of a cooperation FinTechs have to convince the observers in the banks. Once this hurdle has been overcome, the next task awaits – the corporate account manager will win over the offer to the customer. FinTech’s offerings often compete with the bank’s internal product units, which are all vying for the attention of the sales department.

Also published on Medium.

Published inFintech

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