Nearly every bank interviewed for the Business of Financial Inclusion report identified partnerships as an essential strategy for financial inclusion. Banks are building expansive partnership ecosystems in order to reach the unbanked and underbanked. Perhaps, one of the most surprising stakeholder groups they are engaging with are financial technology startups. While often pitted against each other in a classic narrative of old players versus new, disruptive entrants, commercial banks and startups are increasingly working together.
Highlighting Partnerships between Commercial Banks and Startups
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Looking Beyond Universal Financial Access
Startups offer agility, a proclivity for risk-taking, technology know-how, and a disruptive mindset. On the other hand, banks already have the customer scale, comprehensive product portfolio, robust infrastructure, deposit insurance, branding, and experience/expertise. The combination of these strengths can be especially enabling when seeking out previously unreached population segments, because the business models for serving those segments often depend on technologies that bring down costs. Startups can offer banks the tools they
need to serve lower-income customers who would be difficult to serve within the confines of their traditional banking models. At the same time, many startups need access to customers and financial resources that banks can provide.
In a mapping exercise of these partnerships, we examined four areas where banks are frequently partnering with startups; blockchain and digital payments; lending and credit scoring; KYC and compliance; and financial capability building.