Pub. 15 2018 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Issue 1 • 2018 17 When to Partner with Fintechs Partnering with fintechs may make sense in some cases for banks, particularly if the fintech offers access to a market segment difficult to tap or a patented or differentiated prod - uct. But before entering into negotiations, banks may want to get answers to the following questions at a minimum: • Does the fintech have a track record and has it been tested and survived credit, busi - ness, and/or economic cy - cles? • Is the company well-funded? Does funding depend heavily on sustained growth? • How reputable is the com - pany and its management team? • Is the potential partner an existing market leader? • Is the potential partner (or its service) endorsed by well- known organizations (e.g., American Bankers Asso - ciation or the Independent Commun it y Banker s of America)? • Is the fintech provider recog - nized for customer service? • Does the company compete directly with banks and, if not, might it do so in the future? • Does the organization make Service Organization Con - trols (SOC) reports available? • Is the organization regularly audited or examined, not only by accountants, but also by banks and/or regulatory agencies? • How well does the orga - nization know banks—in particular, with respect to the regulations and security issues that may apply? What do the fintech’s bank clients say about their experiences? A Better Path Forward In hindsight, these developments would seem predictable. Did any fin - techs recognize from the start that working closely with banks—not seeking to replace them—would be key to their success? In fact, a model of true collaboration with banks evolved more than 15 years ago, not in a hotbed of innovation such as Cal - ifornia or Manhattan, but among veterans of the federal government in Washington DC, who built an innovative financial technology company across the Potomac in Arlington, Virginia. The year was 2002, well before the finan - cial crisis that gave rise to the recent growth in the fintech movement. Former executives of the Office of Comptroller of the Currency, the Federal Reserve System, and the Federal Deposit Insurance Corporation founded a company with a strength in innovation that is reflected in the 20 issued patents that it holds to date. But from the beginning, working closely with banks was key, and the company understood its future was contin - gent on the success of its partner banks. From its inception, Promontory Interfi - nancial Network has been steadfastly com - mitted to serving banks, not competing with them, and to a meticulous attention to detail that belies the disruptor stereotype, even when doing so leads to higher costs for itself. The company works closely with the industry’s two major national trade associations and has marketing alliances with nearly 40 national and state banking trade associations. Several of its services are endorsed by the American Bankers Association (ABA). The ABA publishes due diligence reports on the company’s services, and the company undergoes due diligence scrutiny by many of the banks that participate in its services. Standing behind the company’s ser - vices are a board and management team staffed with veterans of the Fed, the OCC, the FDIC, the SEC, and the Federal Home Loan Bank. This comprehensive grounding in the complexities of banking drives Promon - tory Network’s consistent growth. From just 10 clients at launch, the company has developed a network that has been chosen by more than 3,000 banks nationwide over the past fifteen years, and now encompass - es 46 percent of all community banks in the United States. Fintech’s New Frontier A decade and a half since Promontory Interfinancial Network opened its doors, the promise of fintech continues to inspire an industry. Its recent stumbles notwith - standing, fintech continues to be funded at a dynamic pace. Equally certain, fintech is reinventing itself in ways the proponents of disruption once considered inconceivable. Banking is now a partner, not a barrier, to fulfilling fintech’s promise. A company founded with little fanfare during the early stages of the fintech movement, and now at the center of banking’s ongoing evolution, was among the first to show the way. And from the beginning, it has been a stable, collab - orative friend to banks, not a competing influence—no ordinary fintech company. n This comprehensive grounding in the complexities of bank ing dr ives Promontor y Network’s consistent growth. From just 10 clients at launch, the company has developed a network that has been chosen by more than 3,000 banks nationwide over the past fifteen years, and now encompasses 46 percent of all community banks in the United States.