Tornadoes, whiteout, hurricanes… we can usually see signs of their appending arrival, but even so, we are never quite prepared for the effects they bring. One day, we see a well-known and understood landscape, and next, everything has changed and we must learn how to navigate a new territory.

Thus was the fintech revolution.

But while this shift of the financial landscape may have seemed sudden, there were signs. Once the financial meltdown removed the guarantee of banks being a stable financial choice, the idea of alternatives to the traditional banking model suddenly became a viable option. And with the technological boom, digitalization of finance operations was a logical business innovation. Disruptive and transformative, a wave of financial technology (fintech) startups formed from these two coinciding developments.  While new B2B fintech business models targeted several different facets of the financial world, the majority have focused in on payment and lending. These startups brought the finance industry into an age of technological innovation by infusing automation, real-time payments, and better loan offerings through peer-to-peer lending platforms into the financial ecosystem.

From this, the finance world got much more snug. Suddenly, banks’ dominance of financial markets wasn’t a given, and the financial industry was overrun with competition. The status-quo was no more. But the fintech revolution didn’t stop there. This revolution has undergone an evolution. And competition was just the first step in an evolving chain of transformations that allows not only fintechs to benefit, but banks and clientele as well.

Competition: fintech vs. banks

The recent boom in the fintech industry reaches across the globe as people become more comfortable managing their money and business online. These B2B fintech startups are offering tech-enabled payments, currency exchange, crowdfunding, online lending, and wealth management services. These companies are competing and beating out traditional banks and financial services firms. Why?

The digitization of businesses has heightened B2B customers’ expectations of deliverables. Fintechs offer companies agility, speed, transparency, and integrations that banks have only ever offered businesses on a superficial level. According to Business Insider, 82% of customers said that a primary value proposition of these products is that they are easy to use, 81% said faster service, and 80% said good customer experiences.

There is a large frustration with big banks which allows fintech companies to fill the demand. Goldman Sachs estimates that fintech start-ups could steal up to $4.7 trillion in annual banking revenue, and $470 billion in profit, from established financial services companies.

But competition isn’t solely a worry for banks. Other fintechs also face their own competitors. Like any disruptive business innovation, disruption of industry standards only get you so far. Fintech startups are flooding the industry, and because of this banks won’t be the only ones who disappear in the coming years. And while these FinTech startups may have changed the financial structure for good, when the dust settles, and the new landscape is set, the financial world is going to get much more hostile for these pioneers. This is especially true for fintechs that only have a niche offering and lack the long-standing experience and insight many investors are looking for. But don’t get me wrong, the fintech industry is still growing. Accenture, a leading global professional services company found that, just in 2014, Fin-tech grew by 201% globally. So what does this mean overall? While the fintech industry has amazing potential to overtake banks, it also has its own challenges from within. With fintech lacking the long-term success and wider offerings needed to dominate the financial market and banks lacking the agility to compete head-to-head against fintechs, the realization has occurred that continued survival does not lie in competition, but rather collaboration.

Collaboration: acceptance and integration of digitalization

As fintechs grew in abundance banks tried to compete, but their established internal structure lacked automation, was restricted by regulations, and couldn’t adopt anything that would come close to the agility of fintechs’ SaaS products. On the other side, fintechs found it extremely difficult to garner industry respect and trust without the historical experience that banks have. In this way, fintechs and banks have become two halves of a whole, and thus came about the inspired idea of collaboration.

So it’s settled, fintechs and banks collaborate to create disruptive new offers. Unfortunately, it isn’t as simple as that. How to go about designing a beneficial partnership requires more thought. This hang-up is felt throughout the industry. In fact, according to Business Insider, 46% of banks plan to collaborate with fintechs, but only 13% believe their core systems can handle the technical demands of partnerships. The financial industry believes partnering with these companies is the best way to stay afloat. This makes sense since banks are set up to maximize security and minimize their costs, not to innovate. Reliance on fintech companies for innovation will be critical. And for fintechs, to gain expertise in regulatory matters and create stronger offerings they need to be able to set up an equal partnership with banks. But in order to do this, it is crucial that fintechs and banks find a way to automate and scale this type collaboration. Thus enters automated referral partner programs.

Referral partner programs: Aligning banks and fintech companies

Fintechs and banks both have different strengths that allow them to accomplish a certain level of success, but they each also have challenges that hold them back from growing further. A partnership removes the need for either to have to overcome these challenges internally. But in order to create long-term sustainable partnerships, banks and fintechs need to be able to automate that relationship. A referral partner program does this by facilitating a seamless referral partnership that is low friction. Referral partnerships are at the core of many fintechs’ success. On-Deck, Funding Circle, and Lending Club and TSYS are just a few that have developed referral partner programs in order to establish greater trust, provide a wider offering and reach new customers. This is because referral partner programs can create deep partnerships with banks and fintechs that fill offering gaps to increase the value they can provide customers. Referral partners understand the pains of target customer and can extend the trust they have previously developed to encompass the referred company.

Fintech and banks can go about referral partner programs in three different ways:

1. A company can build a referral partner program for their many different individual partners. These will usually be for unmanaged partners.

2. A company has a major partner entity, for which they create a dedicated referral program. This type of referral partner program would be based off a deeply integrated offering on the technological side and the ideological side. One example of this type of referral partner program is Funding Circle and H&R Block. In this referral partnership, H&R Block made Funding Circle the preferred lender for all their small business customers.

3. A company builds a program for many major partner entities and their sales teams. This is a more advanced and requires the ability for partner entities to have the ability to keep track of, manage, and increase their advocate pool while having greater capabilities to incentivize and manage partner activity. OnDeck has found great success at using a more advanced referral partner program to increase customer acquisition.

As the financial landscape changes, think about how you can overcome your internal challenges and generate more high-quality leads, especially from your smaller partner.


Eric Jacobson is a Venture Partner at RSVP Capital Management and Financial Adviser at Amplifinity. He manages the financing and financial operations of growth-stage startup companies. He has helped companies raise over $50M in venture capital and private equity