THE FINTECH REVOLUTION COMES TO REGIONAL AND COMMUNITY BANKS

Crowdfund Beat Fintech Center. 

download-20

 

Manatt Survey Reveals Collaboration, Not Competition, Between Banks and Fintech Is the Way Forward

LOS ANGELES – Oct. 24, 2016 – Thousands of regional and community banks are turning to fintech in order to meet the needs of customers who demand services on their computers, tablets and phones, according to a new report by Manatt, Phelps & Phillips, LLP. Conducted in conjunction with Mergermarket, the report, “Growing Together: Collaboration Between Regional and Community Banks and Fintech,”  is based on survey responses of senior executives from regional and community banks (50%), fintech companies (25%), and private equity firms, venture capital firms and investment banks (25%).

The survey reveals that executives are optimistic about future collaboration between the two industries, with 54% of bank respondents calling fintechs a potential partner and 89% believing that partnerships between the two will reign in the next decade. The benefits are clear to both sides. As banks seek to gain a competitive advantage, they see fintech as a way to offer online services to customers while decreasing technology costs and offering lower lending rates. Fintech firms also see the potential in working together (58%) as an advantage to gain access to the clients of midsized and smaller banks.

“Rather than compete or acquire one another, we’re seeing these institutions begin to form partnerships, and we predict that collaboration will be the primary way that they continue to interact,” said Brian Korn, chair of Manatt’s digital finance and marketplace lending practice. “In September, Radius Bank announced it would team up with online lender Prosper in an innovative deal to help make small business loans, a model that continues the collaboration theme demonstrated by other banks and lending platforms, such as JPMorgan Chase and OnDeck and Regions Bank and Avant. This is the beginning of a new trend that points specifically to an increasingly symbiotic environment.”

While the benefits of working together are unmistakable, adapting to the fintech revolution is not always smooth. Banks need to be prepared for the challenges of implementation, as well as possible security risks. As an executive of one Southeastern community bank put it, “We would have to restructure all our processes and push management and employees through training in order to get accustomed to the new technology. But we foresee a slowdown in our business if we do not find new solutions to implement. So currently I would say we are unprepared, but on the way to getting prepared, for the necessary changes.”

Banks are hyperaware of regulatory risks and therefore demand high standards from fintech companies when it comes to compliance—bank respondents who are not partnering with fintech (19%) cited cybersecurity among their biggest worries. The threat of data breaches is part of digital services, and both banks and fintech firms know how dangerous security risks can be to their businesses. As a result, the two sides must pay careful attention to the issue when preparing to collaborate.

“Despite the demand for mobile services, cybersecurity will be the chief concern as these institutions come together. Fintech opens numerous doors for traditional banks, but at the same time, it leaves the possibility of a cyber breach wide open,” said Craig Miller, co-chair of Manatt’s financial services practice. “Manatt is well equipped to help these institutions navigate compliance challenges that will arise during this exciting time in financial services, from counseling on cybersecurity preparedness and response plans to exploring the different types of partnership agreements that exist and ensuring those agreements are legally compliant. Building on Manatt’s traditional strength of working with depositary institutions and our leading digital finance and marketplace lending practice, we look forward to helping banks, fintech companies and investors develop strategies to overcome these challenges.”

Here are four key takeaways that are useful to everyone in the banking and fintech sectors when approaching the challenges that come with collaboration:

 

  • Banks are on board with fintech. At 81%, the overwhelming majority of regional and community banks are currently collaborating with fintechs. In addition, 86% of regional and community bank respondents said that working with fintechs is “absolutely essential” or “very important” for their institution’s success.

 

  • Lower costs + a better brand = a win-win. For regional and community banks, enhanced mobile capabilities and lower capital and operating costs were highlighted as the benefits of collaborating with fintechs. Fintechs named market credibility and access to customers in regional markets as the main benefits to partnering with banks.

 

  • Data security remains a challenge. Both banks and fintech companies are highly sensitive to the ways in which data is shared and secured. This means extra attention must be paid to cybersecurity when the two sides collaborate—especially given the cultural mismatch that can exist between them. Despite the optimism among banks for collaboration, preparedness is a large concern. Almost half of regional and community bank respondents said they are just “somewhat prepared” or even “somewhat unprepared” for this kind of partnership.

 

  • Regulatory concerns remain paramount. For banks and fintech firms, structuring relationships that are regulatory compliant, including, if required, prior regulatory approval, is critical to ensuring success and the opportunity to change the way financial services are ultimately delivered.

The full report is available for download on Manatt’s  website. 

 

 

Tags: , , , , , , , , , , , , , , ,

HEADLINE NEWS

messenger-inquirerLaw change could boost state crowdfunding lawsmessenger-inquirerVideoscore owner Darryl Ingram decided to seek Wisconsin investors through a process called state crowdfunding, a relatively new and underused tool available to small businesses. What he didn't real [...]

Madison.comLaw change could boost little-used state crowdfunding lawsMadison.comDarryl Ingram of Racine founded a consulting business, Videoscore, that helps high school athletes connect with college teams. He hopes relaxed federal rules for state crowdfunding makes it easier for entr [...]

PR Newswire (press release)Vodi's Crowdfunding Round Reaches More Than $60,000 Raised in ...PR Newswire (press release)The next-generation mobile messaging app eclipses its first fundraising milestone with more than 70 investors on the WeFunder platform.and more » [...]

Black EnterpriseWomen Are Crowdfunding Their Maternity Leave in DrovesBlack EnterpriseWith only three states (California, New Jersey, and Rhode Island) mandating paid family leave, expecting parents are turning to crowdsourcing platforms to fund maternity and paternity leave after the [...]

Mitchell Chapman: Crowdfunding proves to be no panaceaBerkshire Eagle (subscription)PITTSFIELD — Since the establishment of crowdfunding sites such as GoFundMe, Kickstarter, and Patreon, individuals and teams on the internet have been able to subvert traditional means of publishing an [...]

Crowdfunding for 'off-road wheelchair' for Luke WoodDaily MailBut now Luke, a former lifeguard, has been given new hope by his big-hearted girlfriend Amber Johnston, 19, as she tries to crowdfund £15,000 for a 'life-changing' new off-road wheelchair that will help [...]

Key Takeaways from 7 of the Most Profitable Crowdfunding CampaignsChipInBusiness financing via crowdfunding is huge. More and more startups are leveraging crowdfunding as a means of generating the capital they need without many of the headaches of more conventional approaches. With we [...]

Crowdfund InsiderNextGen Crowdfunding® Appoints Lyndsi Stevens as New General Manager to Oversee All Company OperationsYahoo FinanceNextGen Crowdfunding®, the leading company that helps people explore new types of crowdfunding, announces the appointment of Lyndsi Stevens as General Ma [...]

CNNCrowdfunding cancer treatment for Kashmir's poor, 30 cents at a timeCNNA group of businessmen in Srinagar heard of Sana's initiative, and launched a crowdfunding campaign called #TwentyRupeesMiracle in February. The campaign asked for contributions of 20 rupees, around $0 [...]

Times LIVE'Crowdfunding is the future'Times LIVE"In 2015, the vast majority of South African market activity, which was $13.8-million, came from peer-to-peer consumer and business lending, with the remaining $1.2-million spread across micro finance, donation-based and r [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |