Fintechs have revolutionised the finance sector in recent years with their innovative, customer-focused offerings. There has been much talk about the threat these companies pose to traditional banks. In reality, however, banks and fintechs can provide more value by working together—prioritising collaboration over competition.
Consider the following statistics;
- EY states that “A full core banking replacement is a multiyear transformation” that might cost banks up to $350 million or more, potentially taking 4 – 5 years based on their company structure
- By working with fintechs, banks can quickly gain the capabilities they need and sidestep these mammoth, costly, all-encompassing projects. That’s why approximately 70 – 75% of banks are already working with fintech partners (or plan to do so in the next year), according to Finastra
- When choosing who to bank with, over 90% of UK-based consumers believe that having a strong technology offering is an important factor. Partnering with technologically innovative fintechs will help banks attract and retain consumers going forward
You’ve probably come across examples of banks partnering up with fintechs to improve the quality or range of their services. Take N26, for example, which partnered with TransferWise to provide its clients with cheap access to over 30 currency pairs. City National Bankand Extend worked together to launch a virtual Visa commercial credit card solution, while TSB chose to join forces with ApTap to provide their consumers with a subscription management service.
This blog will outline why banks should work with fintechs before exploring the specific advantages of collaborating with a collections fintech company.
The benefits for banks who choose to work with fintechs
Working with innovative fintechs allows banks to satisfy their consumers and surpass their competition. There are 5 main reasons why this happens.
1. Faster implementation
McKinsey suggests that 70% of digital transformations fail. What’s more, they usually take a huge amount of time, money, and effort. Implementing a fintech solution allows banks to completely avoid these types of risky, resource-intensive projects—and to quickly gain the capabilities they need.
Fintechs already have ready-made solutions to banks’ problems. By working with a fintech company that has cloud-native capabilities, for instance, banks can shorten their implementation time to a month or even less.
2. Reduced IT workload
The best fintechs offer low-code (or even no-code) applications, making the system incredibly easy to use. But there is another major benefit: banks’ internal IT staff can focus their time and energy on truly urgent projects rather than on trying to solve basic technological issues internally .
3. Cutting-edge technology
COVID-19 has drastically accelerated digital transformation. In fact, Microsoft suggested that the pandemic caused 2 years’ worth of digital transformation in just 2 months. Consumers’ expectations have gone through the roof—they now expect to be able to access services digitally at all times.
Banks have therefore been quick to replace, or update, their traditional legacy systems. And it increasingly appears that those that fall behind the competition might not be able to catch up.
4. Diverse functionalities
Fintechs generally offer well-rounded solutions that provide a diverse array of functionalities to banking institutions such as drag and drop content builders, strategy builders and self-service features. For instance, Pactum GmbH was able to reduce its operational costs while increasing its overall revenue by implementing receeve’s all-in-one collections and recovery software, increasing its cash efficiency by 15%.
5. Reduced security risks
Many banks still rely on outdated legacy systems that lack advanced, up-to-date security protocols. On the other hand, innovative fintechs were created to combat today’s cybersecurity challenges, meaning they can provide a much-needed additional layer of security.
How fintechs can improve banks’ collections operations
The examples mentioned above all show how fintechs can improve banks’ repayment functionality. However, too few banks realise the crucial role that collections plays in their institution—and more importantly, how fintechs can improve their end-to-end collections processes.
Innovative collections management systems provide 3 main benefits:
1. Increase cash flow
Collections fintechs allow banks to raise their debt collection and recovery rates, generating more profits and increasing their cash flow with exactly the same revenue, growth, and expenditure. In fact, they might even help banks reduce their collections-related expenses. By making each agent more efficient and reducing the amount of time that they need to spend on each individual account, collections departments can reduce their headcount while increasing their productivity.
2. Reduce outbound calls
Collections management systems offer advanced digital capabilities, allowing collections agents to communicate with customers across a wide variety of channels: email, SMS, instant message, or more. They no longer need to call up every individual customer—instead, they can communicate on the low-cost, easily scalable channels that consumers prefer.
These systems also allow agents to easily track their customers’ behaviour. Agents can dive into the platform and see whether each individual past-due customer has opened their message. They can monitor how a past-due customer is progressing through the dunning process without needing to pick up the phone every time they want to check in.
3. Customisable messages
Too many collections departments operate with outdated, inefficient processes. For example, agents might need to consult with their IT department every time they need to make even small changes to their dunning messages. This is overly time-consuming and prevents agents from operating in real-time according to how past-due customers are behaving.
Fintechs make the dunning process easier by offering drag-and-drop interfaces that allow agents to create customised templates tailored to each customer segment. They can create personalised messages in minutes without needing to ask for anybody else’s help, and without having to wait.
The innovation shortcut
The pace of change in the finance sector is quicker than ever before, thanks largely to agile, innovative fintechs that are constantly redefining the boundaries.
If banks want to keep up with this endless digital disruption, they must embrace collaboration instead of competition. Working with fintechs allows banks to provide tailored, consumer-friendly solutions while avoiding lengthy, costly projects that might not even work.
This is especially important when it comes to collections. Financial institutions that can recoup what they’re owed as quickly, cheaply, and efficiently as possible will satisfy consumers, surpass the competition and generate more profit with the same revenue.
Ready to get started? If so, book a demo with a member of our team and see precisely how receeve can help you unlock your full potential.