Partnerships between banks and fintech startups are “mutually beneficial”, as smaller companies can produce much faster innovation and more agile customer support.
That is according to Andreas Demleitner, co-founder of South African startup Peach Payments, who he is convinced partnerships between banks and tech startups are good for both parties.
“Specific customer segments require faster innovation and very agile customer support, especially also in technical aspects, and that’s where small and focused companies have proven to provide superior solutions over traditional banking products,” he said.
“As a result, well-structured partnerships can be a key element to support a bank’s growth and make sure the bank can also address fast-changing market requirements in a digital age.”
Peach Payments knows this better than most, signing a proof of concept partnership with Barclays having taken part in the bank’s accelerator programme in Cape Town. The startup also works with a number of other banks in order to facilitate payment processes such as online card acceptance, online EFT acceptance, debit order and batch EFT payment processing.
“In most cases, Peach Payments would provide these services to customers based on technical integrations with the partner bank’s core processing systems through a merchant- and consumer-friendly payment platform that leverages latest technology to constantly innovate in order to solve existing and emerging market needs,” Demleitner said.
“So in a way, we’re a technology partner for the banks as well as a distribution and service channel for joint customers.”
Barclays is just one of a number of banks in Africa that are backing fintech startups, having realised the need of partnering with smaller companies rather than competing with them, and Demleitner said there are benefits for both parties.
“Specific roles in the payment processing chain are reserved for regulated and licensed bank, so in many cases, a partnership is essential,” he said.
“Also, the banks’ economies of scale, their trusted brands and their large existing customer base allows for great synergies between established financial institutes and fast-moving, flexible and technology-oriented startup companies.”
Though he said there have been changes in recent times in terms of how open banks are to partnering with smaller players, establishing close working relationships can still be a challenge.
“Naturally, a large banking organisation with a culture dominated by risk management and compliance aspects isn’t an easy partner that welcomes rapid change and decision-making as tech startups would be hoping for,” Demleitner said.
“But once a smaller company has proven its value to the bank and has also established a reputation as a reliable and transparent partner, many doors that were closed initially would open.”
Demleitner believes banks have realised the benefits of working with tech startups, and are increasingly launching initiatives to foster partnerships.
“This has made it a lot easier for startups to start discussions with the banks and to be given a chance to prove themselves,” he said. The African fintech space is certainly set for a prosperous future if more such relationships can be successfully nurtured.
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