Over the years, successful partnerships among companies have yielded positive results for players involved. It is a collaboration opportunity that empowers companies to achieve specific goals together, rather than one company attempting to go about it alone. The rapid development currently happening in the financial technology industry makes it quite impossible for one company to keep up with these developments and specifically meet customers’ needs while also working to expand operations. As a result, disruptions in the financial services industry have happened as a result of strategic partnerships among players.
Financial technology companies are driving innovation in payments and other financial services through strategic partnerships. The current wave of growth acts as evidence for the big changes that are currently happening in the industry. As a result, financial services firms will be forced to rethink their short and long-term strategies to stand out.
In this article, I share ideas on how partnerships benefit companies in several ways.
- Cost-effective and Faster Implementation
It requires an extensive amount of time and money for a company in the financial services industry to expand beyond its shores/ enter new markets. The company would need to undergo compulsory processes including regulatory compliance in the new country, identify and hire local talents, strategize on new target market success among other things to experience a smooth operation. To avoid the difficulties that accompany these processes, establishing cross-country partnerships can easily enable companies access to the resources of their partners and an opportunity to adopt their existing processes - all of which benefit the parties involved.
Last year, DriveWealth partnered with Fintech Unicorn Chipper Cash to bring first-time Access to U.S. equities in Uganda. Through its partnership with DriveWealth, Chipper Cash is empowering everyday investors in Uganda with safe and affordable access to the U.S. stock market.
Beyond reducing costs and time investment, a successful partnership helps both parties reduce the level of risks involved in business expansion and market feasibility.
2. Comprehensive Solutions
One of the first things required from a financial company looking to enter new markets is to perform detailed market research and strategize on how their proposition will benefit target customers. However, it can be a time-consuming process to develop a solid understanding of international markets.
By aligning strategic interests, a company can establish a partnership with a local partner that can help redefine its offerings by combining their experience, specialist knowledge/expertise and resources to improve offerings in new markets. Most often, this results in an improved and/or diversified service or product as the parties involved are able to integrate their technology platforms, which also drives increased revenues. Usually, these kinds of partnerships are mutually beneficial to both parties and in some cases, depending on the goals, can help a party gain increased market share in the other’s market enabling a cross-border network of services.
South Africa’s Standard Bank partnership with Flutterwave is another good example. This partnership will help the bank enhance its digital payment offerings for its customers in Nigeria, Zambia, Tanzania, Uganda, Ghana, Mauritius, Cote D’Ivoire and Malawi.
3. Build Trust
In the financial services industry, trust is an active currency that is difficult to earn. It is a bedrock of financial activities because customers are extremely careful about their money. A good partnership enables the party involved to earn trust far easier while starting out operations in new geography. Partnering with a local player will make the company familiar and accessible.
In addition, partnerships happening between fintech innovators and more traditional players such as banks show the importance of trust. Fintech businesses are trusted to offer a more flexible, agile approach to financial services, while traditional banks are known to be relied on for their strong customer base and credibility.
Finally, it is important that partnerships are entered with clear-cut understanding. All parties must first ensure that their strategic objectives are aligned and their business models complement one another. It is also important to involve the compliance teams of the different parties in order to easily identify potential obstacles beforehand and evaluate them before they become detrimental to the partnership. Some other important issues to consider include cultural differences, leadership influences, performance objectives, business mission, reputation among others.
