Leveraging Bank Partnerships for Fintech Growth

Leverage bank partnerships for fintech growth in 2024 and drive profitability through technology. Discover the potential for fintechs to thrive by collaborating with banks.

In 2024, banks are expected to seek more partnerships with fintech companies due to the challenges posed by the macro environment and tight funding. This is a cost-efficient strategy for both parties, as it is difficult for banks to fund internal growth to build new functionality. The rising cost of capital and higher cost of living has led to a drop in fintech-originated loans in 2023, particularly for low- and moderate-income borrowers. However, fintech lenders are anticipated to have the opportunity to grow in 2024.

With rates remaining higher for longer, the environment for traditional loans is not favorable, and the Federal Reserve's potential pause in further increases does not alleviate the challenges. Consumer lending will present opportunities for refinancing as pandemic-era programs come to an end, while businesses will need to adopt a watchful approach. This presents a favorable opportunity for fintech lenders and others with low costs to grow.

The market is in a phase of recovery, and both fintechs and banks are reevaluating their relationships in light of increased scrutiny. Many are expected to seek new partnerships for better security and expertise, with more fintech companies looking for bank partners than ever before. The fintech/bank model is likely to remain the preferred model for most fintechs in 2024, as opposed to attempting to obtain a bank charter.

Lenders are braced for volatility and are focusing on managing portfolio risk and long-term performance while continuing to digitize and boost operational efficiency. Research has shown that consumers are increasingly comfortable sharing various types of financial data, which lenders are open to using to approve borrowers and avoid delinquencies.

The year 2024 is expected to see increased collaboration between banks and fintech companies as they navigate the challenges of the macro environment and seek opportunities for growth.