Startup onboarding is one of the main challenges for mature players to innovate with fintechs. In a recent study by Fintech Solutions, more than 60% of the interviewed mature players stated startup onboarding as one of the main challenges to run a proof of concept.
Startup onboarding is challenging because it is typically an unstructured process that greatly depends on the point of contact and their internal decision power. In addition, other factors hinder the possibility of success such as:
1. Startups are highly time sensitive - even though they are focused on closing the deal, startups will eventually lose interest if a potential client keeps raising obstacles to collaborate
2. Compliance and regulation are complex in the financial system and stakeholders often have distinct opinions on the same topic
3. All obstacles related to culture and traditional due diligence.
In addition, mature players tend to think that the startup is entirely dedicated to them. From the perspective of the startup, it has to deal with hundreds of Ndas, procurement processes, onboarding processes and internal check points, leading to significant unproductive time invested.
To tackle this issue, and because mature players understood it was a shared pain, the Fintech Pledge was established and has now a growing number of signatories.
The Fintech Pledge was developed by Tech Nation’s Fintech Delivery Panel, supported by the UK government, and is designed to strengthen the UK’s fintech innovation capabilities and leadership through both practical and actionable changes which support collaboration between financial institutions and fintechs.
The Fintech Pledge signatories commit to five main principles:
1. Clear guidance startup onboarding process through a dedicated landing page
2. Provide clarity to startups on their progress through the onboarding process
3. Provide a named contact, guidance, and feedback
4. Encourage good practice and improvement
5. Commit to implementing this process 6 months from signing this pledge.
The principles are quite simple and the key to the success of the pledge resides in the clarity of its public commitments. Initiated in September 2020 with five banks (Lloyds, HSBC, Natwest, Santander and Barclays) the pledge now has 20+ signatories across banking, insurance and asset management.
Ravi Shukla, Head of the Fintech Delivery Panel, shared how the Fintech Pledge is changing fintech collaboration in the UK.
1. Collaboration between mature players and startups faces several challenges. Why address Startup Onboarding?
Startup partnering is increasingly attractive to established financial institutions as they recognise the many benefits this can bring to accelerate product innovation, access to emerging technologies and offer new capabilities. Internally, it can also help foster a more innovative and collaborative mindset across business units. The FDP partnerships working group had previously worked together to create a set of onboarding guidelines and so it made sense to build on this. On one side, fintechs need to be better prepared and on the other, larger financial institutions to provide clear guidance, timely feedback and transparency around their onboarding processes to enable successful collaborations to start happening. The Fintech Pledge contains five short principles, but its implementation requires a clear vision of how an organisation manages innovation, both from a formal perspective and a cultural one.
2. The Fintech Pledge was first signed in 2020. Entering 2022, can you share a balance of the impact so far?
The feedback has been very positive both from the signatories and many startups, with institutions now approaching us proactively to voluntarily commit to the Pledge principles, as a way to drive digital transformation, develop better practises and also demonstrate their strong commitment to building productive partnerships with start-ups. Through implementing the Fintech Pledge, we have seen institutions not just set out their existing onboarding processes more clearly, but enhance and streamline due diligence requirements and consider more proportionate procurement questions. For example, depending on whether the collaboration is to undertake a proof of concept to trial and test vs full adoption and roll out to customers. The fintech pledge is helping reduce the time cost of partnerships, driving greater process familiarity and setting new clear expectations.
3. Does the Fintech Pledge intend to go beyond and grow to other areas of startup partnering?
At this point, the Fintech Pledge is currently focused on ensuring that partnerships between fintech and financial institutions are conducted with a renewed vigour, building industry leading transparency, guidance and communications standards. Signatories meet regularly, which also creates a platform for them to work together, share and learn from peers.
The objective of the fintech pledge is not to adopt a prescriptive one size fits all approach, but to elevate the overall ecosystem through encouraging and facilitating greater levels of collaboration, by improving the quality of interactions between large institutions and fintechs.