Working with fintechs can help drive digital transformation — but it’s important to enter any partnership with a clear goal in mind.
For community banks and credit unions, fintech companies represent a unique opportunity. Fintechs’ flair for rethinking long-standing processes makes them natural partners for community banks or credit unions that may lack the time or desire to build new processes in-house. Moreover, fintechs often bring various integrations, data, and best practices to the table, allowing their partner institutions to deploy solutions more quickly and with greater confidence than they would independently.
However, fintech vendor selection can pose a challenge for financial institutions of any type. Understanding the terms of an agreement, and negotiating to ensure predictable, concrete outcomes, is difficult when the partnership being proposed represents a major technological step forward for your institution.
Here are some steps your bank or credit union can take to ensure your fintech partnerships benefit all parties involved.
To find the right vendor, you first need to evaluate your current tech stack. Where are the pain points? Which processes do your customers seem to love, and which are holding you back from delivering a great customer experience?
If, for example, your institution is seeing low conversion rates for online account opening, it may be due to a clunky process. Or, if your compliance team seems to be chronically inundated with manual application reviews, your compliance and risk decisioning process may be in need of a refresh.
But no matter which process you decide to improve, any technology investment should drive clear and specific outcomes. Tech implementations that simply check the box of “digital transformation” with no planned, demonstrable return on investment are doomed to fail. To avoid this, obtain references from any potential vendor, and try to uncover pain points. Was a specific ROI promised prior to implementation? Did the vendor deliver? Other institutions’ experiences are your best resource to validate a vendor’s claims.
With the help of your potential vendor, look to build a business case with a range of outcomes. Your partner should be able to present relevant data to support your internal discussions, and if they cannot do so, it may be a sign that they don’t have the evidence to support their claims.
Your vendor should take ownership of the technology implementation process — meaning they should handle core integrations in-house, instead of relying on third-party consultants. Real-time integrations with your core accelerate customer onboarding, improve overall UX, and reduce the burden on your institution to make your process work; without this functionality, most solutions likely won’t work as intended.
This can be achieved via APIs and middleware. Because banks and credit unions typically rely on such solutions to integrate third-party software, it’s essential for your APIs and middleware to have access to your core — and for your fintech partner to have experience with such integrations.
The reason integrations matter is that without them, your financial institution will have to rely on batch processing. Running batch processes can cause bottlenecks and even breakdowns in your core, which disrupts the customer experience. It’s not uncommon, with batch processing in place, for customers to endure a 24-hour wait time before gaining access to their accounts — a surefire way to start new banking relationships off on the wrong foot.
Even if you think a particular vendor’s solution is a great fit for your institution, it’s also important to take into account their ability to project manage the implementation process. Ask their references: has the vendor failed to achieve a real-time integration? Have they ever had any “zombie implementations” — when the product has been purchased but fails to actually go live? The quality of a given solution doesn’t matter if the vendor can’t find a way to integrate it with your existing stack.
It’s also key to ensure that your financial institution has a favorable Service Level Agreement (SLA) in place with your fintech partner. First, you should make sure that the vendor has a true SLA and not simply Service Level Objectives (SLOs).
The difference between SLAs and SLOs is that SLAs are formal agreements between fintech companies and their customers, while SLOs are individual promises made to customers. SLAs include concrete consequences if the fintech fails to live up to their end of the agreement, while SLOs frequently do not.
Next, you’ll want to ensure that the solution you’re investing in is true Software as a Service (SaaS). This means that the technology should continue to evolve and improve over time, with frequent updates coming at no additional cost to your institution. You’ll want to check with references: how many updates did they receive during the previous year? How substantive were those updates, and how well did the fintech communicate the expected changes?
Finally, ensure that you’re aware of any potential red flags associated with the product category you’re procuring. For instance, when it comes to digital account opening, beware of solutions that lock your institution into using features like selfie IDs, micro-deposits, or knowledge-based authentication, as these features have been shown to underperform in the areas of user experience and fraud.
Well-designed technology should enable greater transparency and flexibility for your financial institution. In order to effectively leverage a digital solution, you’ll need real-time access to data and analytics that demonstrate how the product is performing over time. Without comprehensive data, you can’t accurately measure the product’s long-term success or failure — or adapt your strategy accordingly. It’s also essential to verify that you’re working with a data-literate vendor who can present concepts and outcomes qualitatively and in plain language.
In addition, as you continue to work with your fintech partner, you’ll want to make sure they can provide real-time configurability. Any digital platform should allow for the editing of rates, products, and copy in real-time, with little technical expertise required. You shouldn’t need to contact your vendor or pay additional fees in order to make simple changes to your institution’s digital tools.
Choosing the right fintech vendor to support digital transformation is key to meeting your institution’s digital objectives. For online account opening that empowers your community bank or credit union to grow customer relationships, MANTL offers a best-in-class user experience and integration with all core systems.
Schedule a demo now to learn how MANTL can help community institutions grow deposits 78 percent faster and 4x more cost-effectively than competitors.