Summary of How Do Banks Interact with Fintechs?

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How Do Banks Interact with Fintechs? summary
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Recommendation

The growing presence of fintech is forcing banks to rethink their business models. Banks are allying themselves with technology providers in varying arrangements to improve financial products, operating efficiencies or both. According to academics Lars Hornuf, Milan F. Klus, Todor S. Lohwasser and Armin Schwienbacher, the pace of modernization has consequences for each party in a technology collaboration. getAbstract recommends this timely analysis of the banking industry’s digital transition to financial professionals.

In this summary, you will learn

  • What factors motivate and shape alliances between banks and fintechs,
  • What the most common partnership arrangements entail, and
  • Why the corporate-valuation impact of an alliance varies for each partner. 
 

About the Authors

Lars Hornuf is a finance professor at the University of Bremen. Milan F. Klus and Todor S. Lohwasser are research associates at the University of Münster. Armin Schwienbacher is a finance professor at Université Lille.

 

Summary

Fintech companies offer technology that generates fresh business models and financial products. Simpler organizational structures and the absence of legacy systems enable these entrepreneurial firms to innovate with far greater agility than banks can. Banks are highly regulated, making them slow to embrace change. Thus many banks are taking up alliances with fintech companies. Research conducted in 2018 determined the conditions that lead to and help structure these partnerships. The study also investigated the impact of alliances on the corporate valuations of fintechs and banks.   


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