Old Banks Tap New FinTechs to Gain Technology Competitive Edge

Community, state and even regional banks are not going to have the money it takes to build the technology that they need to compete in today’s market — but they’re going to need that technology to compete for commercial customers.

These banks are getting squeezed on two sides by FinTechs and the big banks.

As a result, many of these smaller banks are partnering with FinTechs to get the products they need without having to build them themselves. What’s more, they’re ending up with products that are often better than what big banks could build themselves.

“If you’re a bank and you adopt one of these solutions and you can present to your customer something that has a better user interface, better technology and better supplier enablement to drive adoption — there’s a lot of compelling reasons to go this direction,” Steve Tackett, executive vice president and head of the B2B division for Priority, told PYMNTS.

Trending Toward Bank/FinTech Partnerships 

On April 11, Priority announced a partnership with Century Bank, a community bank in New Mexico and Texas, to deploy Priority’s accounts payable (AP) solution, CPX, for customers.

See also: Priority Partners with Century Bank on B2B Payment Solutions

We’re out of the early adoption phase for ePayable platforms, Tackett said. While only upper-tier banks and a few regional banks were doing this 10 years ago, all banks with B2B customers need to have one of these programs to retain those customers today.

“All of these banks, regardless of size, generally have some B2B  clients that started maybe as small businesses, that have grown up with the bank, and as they get bigger, they start looking for banks with other services and products,” he said. “This is just one of those products that these banks can add to level the playing field and to compete head-to-head with the big banks.”

At the same time, the banking industry has been pushing hard to generate additional non-interest fee income, and licensing a product like CPX is an easy way to do that without making a huge upfront investment. Combine that with the fact that over-reliance on paper checks has become a greater liability for companies since the pandemic started, and you have a vendor segment that’s primed for growth, Tackett said.

“They can cross-sell it to their existing customers, they can sell it to their prospects, there’s a big payoff, there’s retention opportunities, but it’s not a huge investment,” he said.

White Labeling and Co-Branding FinTech Solutions 

Since showing up in the payments space over 15 years ago, FinTechs have expanded their offerings and developed better products in consumer, B2B, acquiring and issuing spaces.

“There’s just a general trend here: ‘Let’s have the banks do the actual banking and leave the technology, the customer experience and all of those types of things to technology companies that can do it better and adapt to change faster,’” Tackett said.

This is going to continue, he said. Looking ahead, he said electronic payment will continue to take market share, customers and partners will continue to adopt programs that help them with the monetization of payments, the importance of technology will continue to accelerate and FinTechs will lead the way.

“When I say the FinTechs are taking over, it’s not just FinTechs as competitors, it’s FinTechs as partners — banks using those FinTechs and white labeling their technology, co-branding it, whatever form it may take to offer the bank’s customer the payment experience they want,” he said.

Read more: Buyers, Suppliers Lean Into Automation to Reduce Payments Frictions