A recent blogpost by cross-border payments company Currencycloud has examined the importance of partnerships to the success of FinTech companies.
Many FinTechs begin their lives full of ideas and aspiration, however the challenge of putting together all the capital and regulations needed to operate can lead a lot of these companies to crash and burn.
How can FinTechs change this? According to Currencycloud, the way to fix this common problem is through partnerships. It states in the blogpost that companies can quickly go from A-Z and get to market quickly by having access to an existing ecosystem system of pre-integrated partners.
Currencycloud added firms can achieve ‘what they want in weeks and not months or even years’ through partnerships, meaning initial build costs can be made more cost-effective compared to what they would be alone.
One of the key abilities many FinTechs are required to have is the ability to evolve flexibly, as the needs of customers are constantly changing an evolving. Currencycloud noted that in this respect, it is important FinTechs use the services of an established organisation that ‘from the start works with where they are now while keeping in mind where they are going in the future’.
Importance of partnerships
When FinTechs commonly start out, many of them will work to define their product and go off to raise the seed funding money to fund their idea. However, for companies that really want to take off, there is a growing realisation amongst many FinTech firms that partnerships are vital to taking that next step up the ladder.
Currencycloud stated, “The first thing they [FinTechs] need to do is find a bank and also get some form of regulation to offer their services. This means they need experienced people, clear policies, and processes all in place to enable this. Not to mention a huge amount of capital investment behind them.
“All of a sudden everything grinds to a halt. Months, even years, can go by spending a lot of money before they’ve even launched their first product, won one customer or invested in a marketing campaign. The very essence of being a Fintech: moving fast, being agile, and spending little, feel frustratingly out of reach.
“If you’re relying on your own expertise across all aspects of building a financial product, service or solution, the task can look insurmountable right from the outset. You don’t have to do it by yourself: no one, but no one, does this. So, using outside expertise seems like a sensible idea.”
The company detailed, however, that not all providers are the same – and a FinTech would want to guarantee that even if they if they can support you functionally, the partner should be the right fit for your business culturally.
After a FinTech has picked a partner, they then must build the mechanism to piece them all together. Currencycloud refers to this as the ‘Complexity Tax’ that are the various layers in financial technology. While every partner may be a subject matter expert in what they do, there can sometimes be uncertainty with what other partners in the supply chain are doing – meaning it is important FinTechs develop a complete picture of what all providers offer, where there is overlap and where there are gaps and how it all comes together to make your Minimum Viable Product.
Read the full blogpost and a case study on Currencycloud’s Fuse solution here.
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