How to Choose the Right Fintech Partner

Partner banking is currently a seller's market. A combination of banks exiting the market and strong programs frustrated with some other incumbents means the best banks can pick and choose who they take on. As a fintech, how do you get the bank you want? Getting a sponsor bank to yes isn't rocket science. Two fundamental things make a huge difference to your ability to get the right bank partner. 1️⃣ Put yourself in their shoes. When a partner bank takes you on, it is, in essence, putting its hands up to its regulator and saying, "We got this. If something goes wrong, you can kick us." So role play your bank partner sitting with their regulator and think about how you, in their shoes, would explain why this is OK. Part of that is about being able to the risks and have a great story about how you will control them. It's useful to think this through using a product/customer/geography lens. As much as you can, test your hypotheses with knowledgeable folks in the industry and make sure you aren't missing anything before talking to banks. And work out what you will need in terms of systems, controls, policies, procedures, reporting, etc. Also think about how the bank would present our company to your regulators. You can control for some of that. For example, showing you have qualified compliance resources and sufficient runway goes a long way 2️⃣ Understand how your stage of development impacts your partner bank strategy. Partner banking is a scale business. The level of oversight needed for even small programs means that, even with monthly minimums, its hard for a bank to do much better than break even on new programs. If you are small, the bank is making a bet that you are going to be able to grow. That's not an issue if you are CashApp, Chime, or Mercury and can offer a new bank significant volume immediately. But for smaller companies it really helps if you can reduce the costs of them getting to yes. Here are 3 ways to do that: - Restrict the ways you need to be 'out of the box' to those critical to your business model - and more generally avoid unnecessary complexity. - Consider working through a technology platform or program manager that one or more banks you want to work with have already onboarded. This is especially powerful if you can used processes for things like chargebacks that the bank has already diligenced. - If the bank you want to work with has preferred vendors for things like KYC, use them. Even if they are a little more expensive or harder to integrate with. In a seller's market, it's a huge advantage to be a buyer that can think like a seller.

New technologies can either be risky or rewarding. And the difference lies in the quality of your partnerships. You need tech creators who align with your goals and become part of your team. Together, you can design solutions that fit your processes, not software that disrupts them. How do you find such partners? Start by knowing your business needs and objectives. Be clear about your deadlines and success criteria. Then, look for partners who share your vision. Check their track record and ability to deliver custom products that integrate smoothly. Once you choose a partner, set clear expectations upfront. The right partner will not push you generic software with unnecessary features. They will listen and co-create solutions that make a difference. So avoid those who only care about features, not your needs. Instead, find creators who understand your goals and work with you to achieve them. Purposeful tech partnerships can improve your business. The key is to aim for joint success from the start.