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Stronger Fintech-bank Partnerships will Revolutionize Finance Operations for Small-to-medium Businesses

Big banks are being dragged into digitalization by customers and leading-edge competitors. Historically risk-averse, innovation is approached with caution.

But financial technology (FinTech) companies are known for taking calculated risks to modernize antiquated, often manual processes for their customers.


More nimble than traditional financial institutions, fintech companies have rapidly personalized customer experiences, enabled instant payments, streamlined back-office processes, and made financial data more accurate and accessible.


In less than two decades, they created mobile wallets, predictive analytics, digital-only banking, automation — and more controversially, cryptocurrency.


Meanwhile, only 30% of banks attempting digital transformation say they’ve succeeded. McKinsey attributes the majority’s failure to “a reliance on traditional operating models, coupled with limited adoption of agile ways of working.”


Where does that leave growing businesses looking to access real-time financial data and automate time-consuming, error-prone manual processes? Let’s find out.

Why banks are slow to adopt new technologies

Banks are not only massive institutions. They’re massively risk-averse.

Sometimes, exceptions to this rule become cautionary tales: Silicon Valley Bank, Signature Bank, and First Republic all failed because of poor risk management.

That’s one reason why so many banks are approaching digital transformation with extreme caution.

Here’s another.

Many established financial institutions are tangled up in a complex web of redundant, outdated technology. So much so, that 90% of their IT budgets go to maintaining infrastructures frankensteined together from years of mergers, acquisitions, and vendors.

Which leads to a paradox.

Banks rely on internal IT resources for innovation. But internal IT resources are tied up keeping old tech running.



Why growing businesses don’t switch to tech-savvy banks

If a business banks with an institution that hasn’t embraced technology, why don’t they switch? Some are thinking about it (22%). The rest may view switching banks as a hassle — or a risk:


  • Switching is work. From credit re-evaluations to re-integrating software and transferring transactions, the onus of switching is on already time-strapped business owners, accountants, and bookkeepers.
  • Switching is costly. Banks charge fees when businesses close accounts — and open new ones. Plus, switching may disrupt cash flow and lines of credit.
  • Switching is not just business. It's personal. Finance teams spend years building relationships with bankers they trust to know their finances inside out.

That’s why customers stick with banks that do just enough to keep their business and little else. But it doesn’t have to be this way.

Financial institutions can partner with fintech companies to build advanced software ecosystems.


Banks are partnering with fintech companies to accelerate innovation

Fintech partnership is the fastest way for slow-moving financial institutions to introduce technologies that attract and retain customers. Examples include:

  • American Express and i2c: Amex partnered with digital card platform i2c to slash the amount of time it takes companies to issue cards on its network.
  • Citi and IntraFi: With IntraFi, Citi launched a service that automates and expedites the movement of excess cash from one country to another.
  • Mastercard and Inswitch: One third of Latin Americans have digital-only bank accounts. Partnering with Inswitch created a growth opportunity for the credit, debit, and prepaid card company.

Today, 80 of the top 100 banks have partnered with fintech companies — 37% to improve payments.


Why payment automation partnerships are a priority

Payment automation puts growing businesses in control of their cash. It eliminates manual accounts payable (AP) and receivable (AR) processes. And real-time reconciliation delivers the insight they need to evaluate opportunities as they arise.

In addition to helping small- to medium-sized businesses precisely manage their money, payment automation software:

  • Enables cross-border payments beyond wire transfers
  • Provides seamless banking through integrations that connect institutions and platforms
  • Improves security measures and protocols for online, mobile, and telephone banking

Financial institutions should partner with platforms that combine AP and AR workflows into a single, all-in-one solution. They’re easier for both banks and their customers to manage.

To fast-track innovation, bank on fintech partnerships

Conservative and risk-averse, North American banks are notoriously slow to adopt new technologies. But now, fintech partnerships make it easy for them to innovate around legacy software and internal inertia.


Integrated ecosystems — where financial institutions embrace specialized third-party companies’ knowledge, skills, and software  — are the best way to provide the products, services, and technology customers want and deserve.


With Plooto, you can try all-in-one AP and AR automation free for 30 days. Sign up and say goodbye to manual payment processes.


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