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Over the course of the past several years, the banking industry has been profoundly disrupted by innovative fintech (financial technology) companies, with the majority of them being recent Silicon Valley startups.

Banks have historically been perceived as very “safe” financial institutions – after all, everyone needs their money securely stored and readily accessible, and banks still carry the connotation that “it’s the place where you keep your money”. The concept of banking has been around since time immemorial, and while there have been technological advances during the industry’s lifetime that revolutionized banking to a significant degree (ATMs, mobile banking apps, etc.), there has been little outside industry disruption.

Until now.


With new approaches to financial management from established technology giants such as Google Wallet, Apple Pay, PayPal, writing a check or swiping a credit card for payment is quickly going the way of the dodo bird as we speak. However, that is not all that is disrupting banking, as the younger fintech startups are now a force to be reckoned with, with global investments in fintech now in the tens of billions of dollars.


What is it that makes fintech products so attractive for customers in place of traditional banking methods? Why are there so many robustly funded companies threatening the traditional financial institutions? Well, one could say that mobile devices are responsible for the rise of fintech. With the current ubiquity of smartphones and tablets, customer expectations for almost every mode of communication and transactions have strikingly shifted. Consumers now want to be able to do anything they desire with their smartphones (and many of them do).

Fintech understands this, they “get it” whereas the larger financial institutions are plainly too big to adjust to customer expectations as quickly as the younger, nimbler fintech startups can.

There is still quite a healthy debate happening in the technology industry as to whether or not fintech is truly going to disruptively transform the financial services industry as we know it, or if it is just a noisy flash in the pan; disruption vs. distraction. Time, of course, will have to tell. Regardless of the debate, the fintech revolution is undeniably causing commotion for banking customers and financial institutions.

So, what does this mean for the relationship between fintech and banking institutions? Are they friends, enemies, ‘frenemies’? Today we are going to get into why banks, if they do not want to experience fintechs chipping away at their revenue, need to form effective and mutually beneficial partnerships with one another.

Banks still need to recover lost trust and rebrand themselves

The financial crisis of 2008 dealt a heavy blow to the market attitude toward larger banks. According to a recent Gallup poll, only a quarter of Americans trust larger banking institutions these days.


Fintechs have the advantage of youth on their side with respect to Wall Street. While much of the public perceives larger banks as old-fashioned, predatory lenders, fintech is perceived more as Uber and Instagram – it is newer, smarter, convenient and fun. Banks can benefit from partnering with fintech companies to attract younger, hipper customers. Millennials, the digital-natives, need banking institutions for money management just like their parents (and grandparents) do. This generation already accounts for some 80 million Americans, and of course their number is only growing.

Another fact of this demographic is that 37% of Millennials are willing to spend more for a product that is aligned with their philosophy or supports their personal values. Fintech companies have the advantage of greater flexibility with regards to financial regulation. Banks can use this to their advantage when partnering with a fintech company, which may have the opportunity to support causes that some Millennial customers are passionate about.

Further, with 3 billion smartphones now in circulation, mobile banking applications are not just valued by customers, they are practically a necessity for banking institutions to stay relevant. A fantastic example of how a bank has partnered with a fintech startup to success is how TD Bank recently partnered with Moven, a real-time mobile banking and budgeting app.


According to Baiju Bhatt, the founder of fintech startup Robinhood, “People could not be fleeing Wall Street faster at this point.” He is right, and by partnering with the fresher face of fintech, the banking industry can do much to repair and rebrand its public image, while fintech startups can benefit from the hefty financial girth of larger institutions to sponsor their development.

Leaving legacy behind, sort of

Getting back to how we mentioned that fintech startups are nimble, the legacy technology in banking institutions and the continual use of paper for record keeping has plagued the industry. In a recent study, 72% of senior banking executives feel that their institutions are not sufficiently equipped to participate in the digital revolution.

There are basically two options for banks to compete with the newer fintech companies:

  1. If you can’t beat them, join them – partnering with a fintech company
  2. Invest in developing their own fintech solutions to compete with startups

If you couldn’t guess, we believe that the wiser, savvier choice for Wall Street is the first option – to partner with a fintech startup. There are a couple reasons why we believe this would be a beneficial partnership for banks. On one hand, tremendous banking institutions should already have their hands full with managing accounts, trading, and abiding by industry regulations. While they may have been able to develop their own mobile banking app, technological innovation is not their forte. It may very well be financially advantageous to share profits with a fintech provider rather than building their own platform from the ground up.

On the other hand, SaaS fintech startups not only have education and experience with the latest technologies, but they are famous for ‘thinking outside the box’, and developing innovative solutions for customer pain points that financial executives likely do not.

Wrapping up

The future is now for fintech – there is no denying it. We hope to see more mutually beneficial partnerships between banks and fintech, like the case of TD and Moven.
For a great video that dives even deeper into the promise of relationships between fintech and banks, watch this video from the recent Banking Disrupted summit. The clip features commentary from industry insiders that you won’t be able to find anywhere else online.

If you would like to share some of your favorite new examples of financial and technological partnerships, feel free to share them in the comments section below.

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