In a world where customers want a banking relationship that reflects their identity, traditional banks can no longer afford to be all things to all people. It’s now easier than ever to build a product that targets individual parts of the market, and new reports suggest that people are now more likely to recommend their FinTech provider than their bank.

With regulations in the pipeline that encourage this competition, we can no longer afford to ignore this trend. In the past, banks kept up with changing customer behaviours either by building their own products, or by acquiring companies to plug particular technology or knowledge gaps. However, it can be difficult for banks to keep pace with this technological innovation internally, and acquiring startup after startup is certainly not a sustainable model.

 

The benefits of collaboration

 

Financial service providers are increasingly waking up to the realisation that when it comes to innovation, if they can’t build it and they can’t buy it, then the only way to remain competitive and relevant is to collaborate. The Bank of England is one of the most recent organisations to recognise this with the announcement of their own FinTech accelerator last month.

But it’s not just the banks that benefit from increased collaboration. Aside from the potential increase in revenue, startups that choose to collaborate are able to validate their business model, as well as tapping into their new partner’s reach, customer data, client relationships, and years of compliance and regulatory experience.

 

 

 Convincing the business

 

However, it’s not always easy to convince those holding the purse strings that FinTech collaboration is the way forwards, and one of the biggest reasons for that is the uncertainty inherent in all innovation projects. Applying SMART metrics to FinTech collaboration is not easy, and it’s often tempting to prioritise projects that are more likely to deliver a short-term return on your investment.

One of the ways to overcome this is to focus on known inefficiencies in the business’ existing processes. Barclays recently signed a framework agreement with Cutover, a startup that participated in one of the recent cohorts of the Barclays Accelerator powered by Techstars, whose solution enables large teams to plan, rehearse and execute complex IT change events. Lowering the risk of IT change should lead to less abortive work, fewer systems outages, and fewer reputational issues - music to the ears of any senior executive.

Proving your effectiveness with existing business challenges will win over hearts and minds internally. Not only will this give you the freedom to start exploring collaborations around new products and new markets, but it will also begin to shift the culture and values of your organisation. Encouraging colleagues to embrace the opportunities of open innovation will allow you to deliver innovation cheaper and faster than when working in isolation, helping you to create the products and services that best meet the needs of your customers.

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Lubaina (author) is the head of Rise, created by Barclays. Rise brings together the best and brightest startups and experts to create the future of financial services. With a global network of talent, world-class innovation programmes and workspaces, Rise is an exclusive community where the best and brightest can develop, collaborate, and scale together. To find out more please visit thinkrise.com