3 listed fintechs discuss the benefits of a partnership approach

Aussie fintechs are increasingly moving towards a collaborative approach as the sector matures, experts say.

Speaking with Stockhead, Fintech Australia CEO Rebecca Schot-Guppy highlighted the 2019 Banking Royal Commission as a catalyst for the shift.

“I think that was the trigger point in terms of a move towards collaboration in the ecosystem, rather than disruption,” Schot-Guppy said.

She added that the benefits of collaboration were evident during the peak of the pandemic, where fintechs that established partnerships with incumbent players had “weathered the storm a little better”.

In addition, Schot-Guppy flagged examples of collaborations between fintechs themselves, such as the 2019 tie-up between payments platform TransferWise and Aussie neo-lender Up Bank.

“I think it will continue to be a trend going forward and we’ll see more companies work together, because it’s a huge part of growing ecosystems,” Schot-Guppy said.

Bigger is sometimes better

In the listed space, Wisr (ASX:WZR) CEO Anthony Nantes recently spoke with Stockhead about how the company’s existing partnerships helped it navigate through the worst of the COVID-19 pandemic.

Wisr shares were in the firing line when markets seized up in March, but it was able to maintain strong loan growth in May as the stock rebounded into the end of the June quarter.

The company runs a capital-light model where established lenders take on the risk and reward of the underlying loan funding, while Wisr generates transactional revenue from its consumer tech offering.

Nantes said Wisr could “leverage those partnerships for a lot of the ‘rails’ that sit around what we’re trying to deliver as a fintech”.

“We allow our partners to provide the big infrastructure rails that sit next to us, and do those things well where scale is an advantage. Then when it comes to being close with the customer, being smaller and nimble can be advantageous.”

“So what those partnerships really enabled us to do in that time was be much much closer to the customer and be focused on that challenge, rather than worrying about some of the background operational stuff.”

Win-win scenarios

Compliance platform Identitii (ASX:ID8), whose Overlay+ technology is designed to run off top of banking client’s legacy infrastructure, is also optimistic about a more collaborative ecosystem.

“I think it’s accelerated the conversations we’ve been having because there’s this renewed push to digital solutions, and doing more with less,” Identitii chief marketing officer Clare Rhodes told Stockhead.

“The goal of our platform is to take some of the manual burden off banks so they can focus on high value tasks. When we talk about regulatory reporting requirements, they’re not going away.

“But the reality coming off this crisis is budgets are tighter, so banks need to do more with less while meeting regulatory goals and providing the right level of customer service.

“Partnering with a fintech can help them achieve their goals and do what they do in a faster way. As we recover from the crisis, I think fintechs really have a role to play in helping financial institutions, particularly as they move to more digital processes.”

That view was shared by 9Spokes (ASX:9SP) CEO Adrian Grant, who said that for banks, partnering with a fintech “is most often seen as an opportunity to accelerate digital transformation”.

And for 9Spokes, which operates a dashboard platform for clients to monitor their business data, partnering with larger players is a “strategic imperative of ours”.

“The relationships we build with our banking partners work for everyone,” Grant told Stockhead.

“Businesses benefit from data-driven insights that help inform decisions, and banks grow their digital offering for business customers and gain greater insight on how they’re tracking. The added benefit for us is that we gain access to new distribution channels.”

Looking at the sector more broadly, Grant said examples of collaboration in the space had become “more prolific”, as companies were forced to grapple with the speed of innovation and competition from global tech giants.

When done effectively, collaboration can “save resources, improve products, and accelerate that business learning curve. And that usually means delivering a more comprehensive and effective product or service,” Grant said.

“I also think it’s a natural reaction to changing customer expectations, who are getting comfortable with using multiple providers. They’re not necessarily moving away from their banks, but they might start using additional services to enhance their experience.”

Wisr’s Nantes added that building good partnerships was “vital”.

“Any fintech in Australia that’s gotten to a certain scale, they certainly haven’t done it by themselves,” he said. “They’ve always had other partners that provide different services.”

“As we grow we’ll have to rely on a whole range of partnerships. So the aim is to attract strong partners who believe in us as a purpose-led company, see what we’re trying to do and want to lean in when it comes to working together.”

Looking ahead

In terms of the post-COVID recovery, Nantes said he’s taking an approach of “cautious optimism” to the broader economic outlook.

“The macro environment is still uncertain, so we have to be cautious and prudent,” he said. “But within our business we’re optimistic we can grow the company even if credit markets contract because our overall share of the market is still relatively small.

“So we still think we can 5x or 10x our business from here, even outside of what’s happening more broadly in the credit market.”

Rhodes said the focus for Identitii was on taking advantage of an acceleration in partnership discussions coming off the back of the crisis.

“From our perspective it’s more about the speed,” he said. “In the traditional procurement process, onboarding and partnerships can take time to get off the ground. But the thing we’re seeing is financial institutions are making it easier to work with vendors.”

“Previously, if you had a six-month sales period and nine-month procurement period to sign off on a contract, that’s a long time in the life of a fintech,” Rhodes said.

“Some institutions we’re talking to are starting to address that by shortening those timeframes, so we’re excited to be working with the major banks to streamline their on-boarding and procurement cycles.”