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    INTERNATIONAL CORPORATE BANKING  |  3 POINT PERSPECTIVE

    The role of banks in FinTech partnerships

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    Contributor: Sabry Salman 
    18 Sep 2023

    Where FinTechs are well placed to move at pace to deliver innovative, front-end solutions that improve customer experience, established banks have decades of experience responding to evolving regulation and developing complex infrastructure required for secure payment processing at scale. Together, they help each other to succeed.

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    In the ever-evolving landscape of global payments, the partnership between traditional banks and agile FinTech businesses is already transforming the way we transact. 

    Sabry Salman, Head of Financial Institutions Group, International Corporate Banking, explores the benefits of successful partnerships, considers the regulatory horizon for the banking ecosystem, and the technology advances driven forward by banks and FinTechs alike.  

    1. The value of partnerships and complimentary skills

    For years, FinTechs have disrupted the financial ecosystem in multiple ways:

    However, the nature of a FinTechs capital structure and investment profile means it needs to grow quickly, which requires scalable infrastructure, processing, and liquidity, in addition to security. There are also significant costs to banks when partnering with FinTechs given the complexity of their transactional requirements and the resources needed to manage the risks inherent in the sector. The partnership needs to work for both parties to be successful.

    Nevertheless, if partnered in a meaningful way, large Financial Institutions can bring great value to players in the sector, filling in the gaps of infrastructure and knowledge, including:

    To succeed in Global Payments and Transaction Banking, both ways of working are necessary to win trust from clients and provide the best experience to them.

    2. Banks help Fintechs with evolving regulation

    For FinTechs to scale globally, not having an established approach to dealing with regulatory issues such as AML and KYC may mean they face issues when finding partners – banks or otherwise – to work with.

    There are many frameworks to consider, but the questions that any new entrant should be asking themselves should start with the basics:

    1. Does the company have a clear business strategy?
    2. How does the company handle global regulatory requirements?
    3. What is it doing to protect customers?
    4. How is it pursuing ESG objectives set by regulators and investors?

    No list is exhaustive, and as the pace of change accelerates, Fintechs will need to ensure their governance meets requirements with existing and upcoming regulation.

    For example, of all FinTechs surveyed in our 2023 Future of Fintech report, only 48% believed they had a robust cyber security programme. On top of managing the direct impact on customers, reputation, and internal systems in the event of a cyber-attack, businesses must be aware of evolving customer protection regulation they need to comply with. In the UK, the Payment Systems Regulator consultation, published in September 2022, will usher in greater protections from Authorised Push Payment (APP) scam losses and will see further action being taken to prevent scams from happening in the first place.1

    Finally, establishing communication channels with relevant authorities and industry peers is an important path for FinTechs to respond to regulation and mitigate potential threats promptly. And as FinTechs become more entrenched in the financial ecosystem, their partner banks can help them meet requirements without starting from scratch, calling on a depth of expertise that exists in the institution.

    3. Tech innovation – the future of payments

    Technology moves faster than regulation and FinTechs face a host of open questions. How will Open Banking connect banks and FinTechs to create innovative solutions? What role will blockchain play in reshaping global networks? How will digital currencies change the game?  

    Banks, meanwhile, must also pay due diligence to maintaining and strengthening the infrastructure they have, such as investing in the SWIFT network as it continues to upgrade to ISO 20022, an open global standard for financial business transactions.  

    Working together has already driven seismic changes to the landscape of global payments, and in turn changed consumer behaviour and expectations from financial services providers. 

    FinTechs continue to deploy technologies such as AI and machine learning to enhance fraud detection, personalize financial advice, and automate processes for faster, more accurate transactions. Banks and FinTechs have also made headway in exploring blockchain and cryptocurrency applications, offering customers new opportunities for investment and cross-border transactions.

    The COVID-19 pandemic accelerated the adoption of contactless payments, with both banks and FinTechs investing in near-field communication (NFC) technology. We expect to see this trend continue to move at pace towards effortless ‘invisible’ payments to drive loyalty and growth in the future.  We’re also seeing greater innovation making its way into the B2B space, notably in digital payments, following the growth of B2B e-commerce and e-invoicing.

    Together, banks and FinTechs are driving the top trends in payments, ushering in an era of faster, more secure, and more inclusive financial transactions. It is important for both sides of the sector to learn from each other’s strengths as the ecosystem develops over the coming decade. This symbiotic evolution in the payments system promises a brighter future for global payments, with innovation and progress underpinned by strong governance and controls.

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    About the expert

    Sabry Salman

    Global Head of FI and Non Bank PSPs, International Corporate Banking

    Sabry Salman is Global Head FI and Non Bank PSPs, which includes Correspondent Banks, Barclays Affiliates, FMI Broker dealers, FinTech and MSBs. He is a member of the International Corporate Bank Management Forum. Sabry has 24 years of experience in global corporate banking, having lived and worked in Asia and the UK. Prior to his current role, he was Global Head of Banks Coverage and Head of UK MNC subsidiary banking for 6 years, covering client markets in the Americas, UK, Europe , Middle East and Asia. Since joining Barclays in 2004, he has held many leadership roles spanning industry sectors and geographies including Africa for 7 years. Prior to Barclays he worked at Standard Chartered and RBS Group. Sabry holds an MBA from Warwick Business School. He attended Mannheim Business School to complete his corporate finance education on Mergers & Restructures in the US and Europe. He is also a qualified Chartered Marketer (DipM MCIM). Further education in corporate treasury helped launch the Treasurer Forum for Barclays Corporate Bank. Sabry is also a member of Corporate Bank Client Advisory Board, CX Council & Digital Execution.

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