Banks have been losing consumer market share to fintechs for more than a decade. But in the middle of a pandemic, their focus has shifted to expediting consumer loan opportunities for balance sheet and bottom line wins. Why?

For one thing, deposit growth is well outpacing loan growth this year, according to the Federal Deposit Insurance Corp.’s Quarterly Banking Profile. At the same time, tech companies like Apple and Amazon.com are dipping their big toes into the consumer finance industry. With less of a need to focus on growing bank deposits and an ever-growing list of competitors entering the lending market, banks should take – and are taking – more-calculated risks to maintain their relevance with digitally savvy customers at their points of financial need. To connect with prospective customers where they want to be reached, banks will need to rely on partners that can help them scale their offerings in a fast, frictionless and secure manner.

The easiest way for banks to lower customer acquisition costs and reach more prospective customers with loan opportunities is to use relevant plug-and-play technologies from fintechs. It’s hardly a new concept at this point; most leading banks have already adopted this methodology as the way to unlock more revenue. Per the Global Fintech Report, 94% of financial services companies said they were confident that fintechs would help grow their company’s revenue over the next two years; 95% of technology companies said the same.

The banks struggling to justify the need to partner are missing the big picture: growth opportunities and low-hanging fruit. Take business clients as an example. Far too many banks wait for a business to become frustrated at competitors before competing to win their business. A fintech partnership can help banks go on the offensive and create a strategy that positions businesses as the face of financing by offering point-of-need lending to consumers, driving revenue for the business and improving the bottom line at the bank.

“Coming together is a beginning, staying together is progress, and working together is success.” – American industrial and business magnate Henry Ford

Being open-minded about fintech partnerships allows banks to offer valuable and attractive services to business clients and consumers, especially at a time when both are faced with a life-altering pandemic and natural disasters. Consumers need quick access to credit at reasonable rates; in the face of excess liquidity from deposits and a continued low-rate environment, banks should be look to provide better loans for their customers than their online finance competitors.

Banks that choose not to use fintechs partners may find themselves lacking the ability to get embedded into consumer loan deals and unable to offer consumers a frictionless experience during the process. They can’t leverage alternative data, machine learning and artificial intelligence to get a more-accurate portrayal of a consumer’s creditworthiness outside of their FICO credit scores. Accessing value-add technology and creative solutions allows banks to innovate rapidly to improve efficiencies and meet the future needs of businesses and consumers.

Fintechs have demonstrated their ability to meet banks’ third-party standards. Banks sitting on the partnership sidelines are cautioned to set aside their “sword and shield” mentality in favor of an approach that’s more inviting and open to collaborative innovation. Today’s current economic environment can act as a catalyst for this change.

Banks have proven they are capable of being highly responsive to meet business and consumer needs during recent challenges. This is an opportunity for them to think differently and invest in partnerships to quickly offer new experiences as demand for financial products and services increases.

WRITTEN BY

Barclay Keith