Darwin was certainly onto something long before the terms “fintech” or “start-up” were part of the regular business vernacular. Collaboration is undoubtedly critical to financial institutions expanding their technological capabilities to meet the rapidly changing needs of tech-savvy customers. But what is the key to success for fintech start-ups looking to collaborate?
Most fintech start-ups are eager to collaborate, seeing partnerships as an optimal way not only to survive, but to expand client reach, develop technology further and strengthen credibility. Yet only a few have a unique proposition or a model that could be considered a genuine threat to incumbent banks and established financial services firms.
Collaboration is at the centre of our business strategy at Saxo Bank and has been a constant driver in our company’s growth and expansion since our first technology-driven white-label partnership in 2001.
We have a long history of championing the power of partnerships as we believe they are the best way to innovate and improve the customer experience.
Prospective partners look at Saxo and understand the benefits of our institutional partnerships offering, Banking-as-a-Service, with state-of-the-art products and platforms, OpenAPI access to a comprehensive trading infrastructure, global markets and our expertise in back-end processing.
During the past two decades we have been approached by countless start-ups, each looking to partner and utilise the Saxo Bank platform and technology.
So what makes a strong and successful fintech partnership?
Scalable business plan
It goes without saying, that a successful fintech start-up will need to offer a service that fills a gap in the market, improve on an existing service, or provide an entirely new service that is scalable.
This is regardless of whether they operate on a B2B basis (helping other banks and financial services to strengthen their proposition), B2C level (competing with banks and financial institutions for the same customer with superior tech and pricing) or offer a hybrid model (providing a service direct to clients, banks and financial institutions).
To ensure a successful fintech collaboration, a start-up needs a solid pitch which effectively communicates why and how they are going to be successful, and also how they are going to deliver bottom-line revenue to the partner rather than top line.
So many start-ups have big aspirations, to reduce cost for users or include new customer segments, but ultimately it is difficult to make this work commercially using traditional metrics, with many fixed and variable costs eating into margins when targeting the mass market within a regulated industry.
Often, there is a need for massive scale to reduce the effect of these operational costs, requiring substantial marketing budget to achieve the client acquisition needed.
Proof of concept
Of the many start-ups that approach Saxo Bank, the stand outs display a good vision, a strong mission and proof of concept. One of the immediate ways to win us over is to explain what makes the offering unique, and why a partnership would be mutually beneficial.
This is no mean feat – investing in a collaboration with a fintech start-up is a big risk. The competition is not just other start-ups, but also regional commercial banks with proven track records and tens of thousands, maybe hundreds of thousands of customers already signed up.
The recipe for success
A good example is Saxo Bank’s recent collaboration with Sarwa, the UAE-based fintech and online investment advisory platform. The first Robo-advisor in the region, Sarwa used the first-mover advantage to build an expanding client base, generate assets under management, (AUM), and grow regionally. They have a proven concept.
The Sarwa team recognised the need to partner with Saxo, to utilise our innovative platform and technology. Through this collaboration, we are helping Sarwa to easily scale their business and to enable them to provide more services and products for clients as they expand into new markets.
Understanding the landscape
Many prospective collaborators in the fintech start-up space have interesting and potentially ground-breaking ideas. But they have little knowledge about financial services.
Any successful fintech must have a management team with knowledge of both financial services and technology. If they don’t have this initially, they must hire the right people along the way.
The benefit of bringing in top-level experience in both sectors is invaluable. It helps these fledgling companies to understand potential limitations in their products.
Of course, some shortcomings can be levelled up through collaboration, but a potential partner would undoubtedly need to know and understand the bigger picture, including what the start-up is doing to strengthen and support their ideas.
Successful start-ups need to demonstrate proof of concept to budding partners, and show a strong proposition, a truly viable business plan and a realistic growth strategy.
To borrow once again from Darwin, it is the survival of the fittest out there for fintech start-ups, regardless of whether these fledgeling businesses want to go it alone or collaborate. The strongest will survive, but for partnerships to flourish, their proposition must be sound, stable and secure.
