For a financial institution, especially those of regional or community sizes, partnering with a fintech company is a great way to bring an increased level of quality to your digital customer service offerings. You can outsource the development of key features that you otherwise wouldn’t have the time or resources for so that you can provide a next-level experience. When looking at potential fintech partners, however, there are many different factors to consider: for instance, the age of the company. Do you want to get involved with a new and innovative startup, or a company with some more experience under its belt?

Getting involved with a new fintech in its formative years has its advantages: you’ll be afforded a level of flexibility and personalization that a more established company wouldn’t offer. However, this definitely comes with its fair share of risks: “I would think, [with an early fintech startup], whether you invest or not, [if you partner with them] you are an investor in that fintech. You are providing way more value than any of their capital providers, and taking a significant amount of risk personally and for your financial institution” says Jake Tyler, CEO and Co-Founder of Finn AI. Early stage fintechs may be diamonds in the rough, early innovators with new technology not found anywhere else, but partnering with them runs the same kinds of risks as any other investment. You’re taking your chances on a product that has yet to prove itself in the wider market, but in return are getting a level of interactivity with the development of this solution that would not be possible with a more developed fintech.

Later stage fintechs, however, will have both more experience as well as more reliability. They’ll have a proven track record with other successful customers, and have developed their product to a much higher degree. They also have larger teams and more rigid and developed processes, meaning less flexibility and many more voices and opinions getting mixed in with the development. You ultimately are trading flexibility or personalization for a more developed, tested, and vetted product.

The process of transitioning from one of these early adopter fintechs into an early majority is referred to as ‘crossing the chasm’. For Finn AI, this represented a change in the business model to go from catering their services to fit the needs of a few customers, to finding something that worked for any customer who approached them thereafter. “You’ve got to really rebuild your platform completely, from something that worked and you could scrape together for the first three to five customers, to something that can scale out and deliver repeatable value for thirty to fifty customers,” Tyler explains. ‘Crossing the chasm’ is a laborious process, but it’s the means by which a new fintech can go from an almost experimental expenditure to offering a complete, full-service experience. Finn AI can now say that they see themselves as having fully crossed over, now offering a very much developed and mature product to offer to new customers. 

The primary differences between partnering with an early adopter or a later stage fintech is that with an early adopter, you potentially have the opportunity to get your hands on new products never before seen but at the risk of taking a chance on a brand new player. A more experienced fintech will have a history of customer success and a guaranteed ability to perform, at the cost of flexibility. 

Fintech partnerships are vital tools for the growth and development of a financial institution’s digital customer service, so it’s important to know the benefits and costs of either choosing to partner with a new player on the scene, or a seasoned veteran with experience to their name.

Want to hear more from Jake Tyler on this topic? Check out the full session recording to learn more about partnering with fintechs at various stages of development.