Fintech companies have been seen as a disrupting force in the banking industry as the adoption of things like embedded lending has exploded over the past few years. This has been described as a disruption because, from the consumer side, it seems like lending and banking have taken on a completely different form pretty rapidly.

This description of fintech companies disrupting banks positions fintechs and banking/lending institutions on opposite sides of a growing divide in the industry, but does it have to be that way? 

For those that have been watching the industry closely, the answer is clear: Not at all, and it isn’t that way even now. There are many industry trends that have been led by fintech companies, but that doesn’t mean that banks and lenders have been left behind, and it doesn't mean that the fintechs are doing it all by themselves.

To better explain what is going on, we are going to cover:

• New trends brought about by fintech
• How fintech firms and banks are working together
• How banks and lenders can get involved

Trends Brought About by Fintech Companies Disrupting Banks

Some may be wondering why fintech was seen as a disruptor in the first place. There are a few developments over the past decade that have changed the way people bank and finance their purchases, and fintech firms were the ones that brought these to the table.

They include:

• Embedded lending/POS financing
• Online-only banking
• Omnichannel functionality

All of these have become expectations for consumers, especially those that shop online, whether they know the professional lingo or not. After seeing these major developments, though, some readers may be thinking of a few traditional banks or lenders that they have seen offering these same features. That’s where fintech partnerships come in.

How Fintech Firms and Banks are Working Together

As consumers began preferring more customer-centered options like those listed above, banks and lenders began to take notice and consider offering these features themselves. To deploy them quickly, many of them chose to partner with fintech providers that already had ready-made software platforms that could be adapted to their use cases.

These partnerships are used for things like:

• Banks offering their lending products through a third-party fintech’s software platform.
• Fintechs partnering with banks to originate their loans and handle compliance.
• Banks partnering with fintechs to create better self-service portals and banking apps.

Fintechs were able to rapidly shift the banking and lending industry through their tech capabilities. The issue is, as regulators have gotten more involved with some of the products they created, they have found themselves less equipped to handle new laws than traditional institutions with long histories of compliance with ever-changing regulations. This has led to some fintech giants, like Klarna, reducing their offerings in places like the US, where regulations are being considered.

Other fintech firms, like Affirm, have gone a different route. They’ve realized that, to thrive long-term in the banking industry, fintech companies need to become more like banks. So, they decided to partner with established banks to better adapt their products to regulations and to become a more stable option long-term. These banks originate all of Affirm’s loans, ensuring that all loan agreements can rest on the established banks’ compliance structure.

Generally, banks offer the benefit of funds, longstanding compliance structures, and experience. Fintechs offer their tech capabilities, which come in the form of software platforms, apps, and integrations, as well as the maintenance and development structure to fix and upgrade them over time.

Find the Right Fintech Partnership With Skeps

Skeps offers a comprehensive, end-to-end consumer financing platform that helps lenders and merchants connect with convenient and modern financing options. Working with an entire network of established lenders and a wide variety of merchant partners, we go above and beyond instant installment payment plans. We help lenders offer a few different types of consumer financing through third-party merchants, including:

• Instant installment financing
• Co-branded credit cards
• Consumer loans and leases

If you’re looking to partner with a forward-thinking fintech company that will get your financial products in front of as many consumers as possible, Skeps is the perfect fit.