An executive at a large Financial Services Institution (FSI) in Australia recently lamented, “we have a history of killing fintechs we work with”. Like an elephant dancing with a mouse, without any intended malice, more often than not a large enterprise will end up suffocating their smaller partners.
All the major banks have investment arms with portfolios abundant with up-and-coming fintechs. Unfortunately, hidden behind those portfolios is a graveyard of failed partnerships that has burnt through many investment funds, which confirms the mutual suspicions held by both sides regarding compatibility.
When it comes to working together, large organizations are afraid of the reputational damage and risk of working with upstart companies that just ‘don’t understand’ the regulatory environment and responsibilities of a ‘serious’ financial services institution. Fintechs in turn proclaim that their agility, product focus and engineering efficiency is out of kilter with large financial organizations which they are quite possibly bad-mouthing in their publicity and recruitment drives.
As word gets out that a large FSI is trying something new with a fintech, more and more internal stakeholders get wind of the initiative and pile in with their compliance and feature requests. Before you know it a simple 2 month trial to test customer appetite has become a 12 to 18 month multi-million dollar behemoth drowning in program managers and steering committees.
Looking into why this doesn’t work reveals some common patterns of engagement. Large FSIs are used to working in a model of vendor and supplier. The implication of this is that one organization is supplying something and the other is receiving. This works if we are talking about purely the purchase of a good or service, however, it starts to unravel when there is the need and expectation of additional benefits to the relationship from both sides. This is where the concept of a partnership becomes a better model and has a better definition of the roles required by each organization.
The forming of a vendor / supplier relationship is typically slow, painful and expensive and often co-ordinated by lawyers and procurement managers rather than product owners. Due diligence is onerous and difficult for the participants creating barriers to entry and delays in the onset of the engagement.
The vendor-like nature of the relationship means that specified requirements and detailed documented interfaces are often stipulated before working together, leaving no room for innovation in response to what is learnt from the customer.
So far we’ve seen what doesn’t work, so what do we need to do to address those challenges and foster healthier working relationships? The characteristics of a good, effective partnership will include elements of the following;
The common aspects of the effective partnerships has been a ‘platform’. Often an overused word, a true platform concentrates on the consumer of the platform. Calling something a platform will in itself not enable success. But there are some common characteristics and principles of a platform that will give it the best chance of fostering partnerships that become effective.
Fintechs and large organizations working together effectively is often the fastest and most cost-effective way to test new market propositions at scale. All parties benefit:
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.