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Picking the Right Partners for Fintech Innovation

Daniil Saiko April 18, 2018

Partner Selection for FinTech Innovators

The importance of automation and integrated solutions has been the subject of much buzz in the payments industry. Many industry players are pumping out material on why API is the way to go and it is hard to argue with integrated solutions for many business and use cases. However, when selecting that partner or vendor, I would like to suggest some criteria that should be fulfilled before blessing the integration.

Technology

Solution fitting. Often solutions come out of the box and there is pressure to fit the problem to the solution. You may hear “We are working with companies in your space on a similar solution” (read: competition) or feel pressure for an out-of-the-box solution that is “turnkey” without going into the weeds of the actual problem you are trying to solve. The question to ask: is the solution is fitting the use case or the use case is fitting the solution? You want to avoid the latter. This is where modularity and flexibility are needed. It still may not be a 100% fit, but it will be much easier to understand the gaps and close them. And if you are more aware of the gaps from the inception, it will be easier to plan and price all the relevant components, with no surprises and no spending beyond the budget. Modular or microservices frameworks may require more work up front, but in the case of a new solution, the flexibility can give it an edge.

Pricing Engine Capabilities. Regardless of the asset class and sub-industry, pricing engine capability is important in helping sculpt the final solution. If there is no room to manoeuvre on how fees or spreads are applied, it may limit a new use case or new solution for the partner. In the FX market, the ability to apply different rates based on volume or dictate fees by more than one parameter is important as different industries and sub-industries have their own unique requirements. An example of this would be in B2C fintechs. Often the end user is much more sensitive to the fee due to smaller transaction amounts. And in others, a guaranteed final amount is non-negotiable, regardless of fees down the line. Isolating and pricing specific use cases becomes a competitive advantage.

Infrastructure Depth

For companies specializing in pure technology solution, having proper financial infrastructure is crucial if they wish to deal in the money service industry.

Bank account network. Having a network of bank accounts across the globe has many benefits. The main one is that partners don’t have to go through the pain of opening and maintaining them. When it comes to delivery or receipt of funds, a wide network of accounts in a variety of currencies greatly enhances the flexibility of end solution. Having local currency accounts allows much better rates on the incoming funds as no auto convert is applied, and enables better delivery on outgoing funds.

Credit Facility. The ability to facilitate credit terms at a partner level can smooth out payment and trading processes. Without a strong credit backbone, a solution may fall short and offer an inferior capability. Example: company X can do same day delivery of currency XYZ, but it must be good funds, meaning in the account and ready to be used. If it takes a day or two to receive and clear the funds across the globe, same day delivery becomes one- or two-day delivery.

Integration team ties it all together. If you have designated resources for the project, that’s a great start. But knowledge breadth on the team is crucial. Implementing API dogmatically will fall short of expectations if the team doesn’t understand the operational process and the actual cash flows. If you are developing with partners’ APIs, but have not seen even a workflow diagram of some sort, that’s a bad sign.

Innovation requires not only the right vision but also the right tools to execute it. Not every solution needs all the elements covered here, but being cognizant of them and factoring in solution design allows you to reach truly innovative market solutions rather than refurbishing the old.

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