FinXTech Intel 2023 report final 2 - Flipbook - Page 25
WHAT HAPPENS IF SOMETHING GOES WRONG?
By: Kiah Lau Haslett
Engaging a fintech partner to provide a product or service can be a large, expensive
and strategically important initiative for a bank. No one wants it to go wrong.
Avoiding failure, disappointments and regulatory scrutiny are why it’s so important that bankers find good
partners, conduct thorough due diligence, and ensure there’s appropriate risk management and oversight is
in place. But executives should also think about — and plan for — common pitfalls and missteps.
A fintech partnership can miss the mark for a bank by a variety of measures. Sometimes the implantation
itself goes wrong. Sometimes these partnerships fail to deliver their desired result and don’t generate a
reasonable return on the bank’s investment. Sometimes, the bank’s implementation, oversight and risk
management of the partnership is deemed insufficient by regulators, or the bank violates laws.
Pro Tip: Assign a point person at the bank.
Bankers can manage the ups and downs of any partnership by ensuring there’s alignment of priorities and
objectives between the two groups. How will the partnership mitigate, address, prepare or manage issues
when they come up, and stop them from getting worse?
One way for banks to do that is by empowering an executive or an employee to be a liaison to important
technology partners and vendors, someone who is tasked with having “frequent and honest communications
with them,” suggests Ron Shevlin, managing director and chief research officer at Cornerstone Advisors.
The bank should have a good sense of the issues that the fintech partner is having, and receive their quarterly financial results to get a sense of fundraising and spending that could impact continuing operations.
“Somebody has to have the responsibility to manage and oversee these partnerships, and that involves not
just the technology/integration/deployment aspect, but the assessment of how well is this company being
managed, how are they doing, what’s going on?” he says. This oversight prepares a bank to act if their technology vendor runs into funding issues or other challenges that could threaten or complicate the partnership.
What Could Go Wrong: Failure to Deliver ROI
For a refresher
on talent
allocation, see
strategy on
page 6.
Part of any strategic internal discussion should include a conversation about implementation, goals and
benchmarks. While bankers shouldn’t overstate the potential impact of the technology on their financial
results or workflows, they should have some measure of realistic outcomes, and communicate those objectives and expectations to a potential technology vendor during negotiations.
One way to do this is by creating benchmarks, according to the Federal Reserve’s 2021 white paper on
FINDING FINTECHS: HOW DO YOU DECIDE? | 23