Fintech Firms and Incumbents are Collaborating Instead of Directly Competing in Post COVID World, Industry Analyst Explains

Collaboration is the “new competition” in the financial technology industry, according to Melody Brue, a Senior Fintech Analyst at Moor Insights & Strategy.

Brue, a startup veteran and advisor, notes that almost every industry or sector had to “pivot” in many different ways in order to adapt to the dramatic changes and challenges brought on by the COVID-19 pandemic in 2020. Brue pointed out that Fintech was one of the “most impacted,” with people across the globe working, shopping, and banking from home because of social distancing and lockdown measures enforced after the Coronavirus outbreak.

Brue writes in a blog post published by Forbes that while partially resulting from the pandemic, the Fintech trends in online banking, lending, and digital and contactless payments are most likely permanent. She predicts that they’ll continue in a “surprisingly collaborative way.”

She believes that the race “to win” in the Fintech arena now seems more like a “relay race than a winner takes all endeavor—it’s a team sport, with everyone building solutions and products on top of existing financial services infrastructure.”

Like most other financial industry experts, Brue thinks that the COVID-19 outbreak has accelerated the shift to digital platforms like e-commerce sites and online payments, and in some cases completely replacing the retail and merchant experience. She claims that this may be due (at least in part) to these Fintech services having to continue to work in various stages of COVID-related lockdowns while addressing consumers’ financial services requirements.

She pointed out that consumer behavior changed really fast, and the only way to address them quickly and effectively was through collaboration.

She also mentioned that at a Silicon Valley startup (where she comes from), everyone is focused on “disrupting” the industry. But Fintech firms are showing us that collaboration could be a more beneficial path forward in a post COVID world. Many of the widely-used startup payment methods we may have used to pay for everyday goods and services were developed upon traditional banking institutions’ infrastructure, Brue explained. She argues that this collaborative approach lends the incumbent banks “relevance” and “innovation” while offering Fintechs “decades of trust, customer loyalty, and ultimately, security for its users.”

She further noted that in the startup and traditional financial sectors, the “real winners” are the ones who “embrace embedded finance and the rising importance of the API.” She pointed out that Visa’s (planned but challenged) multi-billion acquisition of Fintech Plaid and Mastercard’s M&A (mergers and acquisitions) spree (including acquisitions of Finicity and Net), is “indicative of the banks’ current flurry to reinvent themselves.”

Many strategic acquisitions took place throughout this year which was marked by socioeconomic uncertainty created by the COVID-19 pandemic. For instance, Netherlands based firms made several important Fintech acquisitions in 2020 in order to diversify and strengthen their business operations, according to a recent report.

Meanwhile, in the US, JPMorgan recently acquired Fintech firm 55ip in order to help advisors with setting up tax-efficient portfolios. US-based Fintech Affirm also acquired Canadian Buy-Now-Pay-Later provider PayBright for CAD 340 million.

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