While the popular narrative is that fintechs are lone wolves looking to disintermediate incumbents and disrupt traditional payments networks, new research reveals that fintechs are in fact keen to collaborate and are prioritising relationships with those that can help to scale their organisations more efficiently.
In fact, 98 per cent of fintechs pinpointed ways their business could benefit from the backing of a partner, with a large majority pointing to payments networks as key, according to the Fintech State of the Union study from 451 Research (part of S&P Global Market Intelligence) and global payments brand Discover® Global Network.
The study, which surveyed 852 financial technology vendors across the US, Canada, UK, Germany, China/Hong Kong, India and Singapore, identified key areas where these fintechs believe they could gain an edge with the support of a partner. Fintechs headquartered in North America and Asia showed the strongest appetite for partnering across the broadest range of categories.
In the survey, fintechs revealed where they feel they could benefit from partner support including 47 per cent that need help accessing customers, 41 per cent suggest financial investment, while 37 per cent want marketing support. Other areas fintechs are looking to partners for support include technology, such as core infrastructure development (34 per cent), access to training (34 per cent) and strategy development (33 per cent).
Interestingly, it is larger and later stage fintechs (Series D+, mature) that demonstrate the strongest desire for support across a variety of areas as these more developed businesses have deeper resources and greater infrastructure to incorporate partner involvement.
“Partnership means more than sharing technology,” says Kiran Pookote, director of strategy and business development at Discover Financial Services.
“By creating partnerships between innovative tech firms and established brands, we can dramatically cut the time taken to deliver a new product to market and realise cost efficiencies across the value chain.”
Pookote also noted that Discover Global Network has the infrastructure, capabilities, and regulatory expertise to provide connections to key payments ecosystem players (e.g., enablers, acquirers, merchants, etc.) to help fintechs scale their solutions in market.
Payments networks as partners
The Fintech State of the Union report reveals that payments networks play a strong role in expanding a fintech’s reach, with the majority viewing them as business partners and important components of their strategy and operations.
Seventy per cent of fintechs currently partner and 28 per cent see an opportunity to partner with a payments network. As many as 89 per cent say they are highly or somewhat reliant on payments networks as part of their strategy or operations.
Two-thirds of fintechs view payments networks as partners, and more than half (51 per cent) view them as customers. Only 29 per cent view them as competitors.
“With many young fintechs, once they’ve established a viable proposition, a lot of them then seek opportunities to expand their business further. We provide the elements these companies need to grow – network security, regulatory and payments know-how, technical excellence and relationships with banks. Most of all, though, we’re a trusted brand with a track record of success – and that’s attractive to fintechs,” Pookote said.
As fintechs look to the future, they are focusing on both current and next-generation payments use cases. Almost two-thirds (65 per cent) of fintechs are strongly interested in partnering with a payments network to jointly develop solutions.
Mature fintechs were much more likely to indicate a strong reliance on payments networks than those that are seed/pre-seed (55 per cent compared with 37 per cent). Fintechs in the US (50 per cent), India (64 per cent) and Singapore (54 per cent) are more likely to strongly rely on payments networks than those in China (20 per cent) and Germany (29 per cent).
While payment processing (41 per cent) is the key area where fintechs want to further their expertise, areas such as artificial intelligence (34 per cent), cryptocurrency (34 per cent) and open banking (32 per cent) also ranked highly. Fintechs headquartered in North America indicated a greater appetite to learn about cryptocurrency than those based in other regions.
Fintechs are now required to do more with less and must enhance their focus on strategies that drive long-term, sustainable growth
Nearly half (44 per cent) of fintechs indicated open banking was highly relevant to their business with the most popular use cases including account-based payments (47 per cent), account linking (46 per cent) and credit risk assessments (44 per cent). Among the top connected commerce use cases are payment-enabled appliances (41 per cent), touchless authentication (40 per cent) and blockchain-based data sharing (40 per cent).
In particular, the highest interests identified by current Discover Global Network partners that were surveyed were connected commerce (57 per cent) and embedded finance (54 per cent).
After easy access to capital over the past several years, the macroeconomic backdrop of rising inflation and volatile global markets have acted as major headwinds for companies in 2022.
Developing relationships with investors (50 per cent), determining the right funding source for their business (48 per cent) and delivering a scalable business model (47 per cent) rank as the biggest challenges that fintechs face in securing financial investments.
Fintechs are now required to do more with less and must enhance their focus on strategies that drive long-term, sustainable growth. Partnerships can play a key role in helping fintechs more efficiently and effectively meet their growth goals.
Learn more about how Discover Global Network partners with
fintechs to bring innovative payments technology to consumers
at Money 20/20 USA in Las Vegas this month. Meet them at Booth #2704.
Source: 451 Research, part of S&P Global Market Intelligence Global Fintech Vendor* Surveys commissioned by Discover Global Network, Q2-Q3 2022
*n=852 Fintech vendor respondents in VP, C-suite and founder roles, headquartered in Canada, China/Hong Kong, Germany, India, Singapore, the UK and the US.