Home > Blogs > Fintech Alliance Assessment: Four Criteria that Matter

Fintech Alliance Assessment: Four Criteria that Matter

October 10, 2017 -  Ethan Wang Product Manager, Infosys Finacle


A fintech alliance plays a significant role in a bank’s digitalization strategy. Digital banking, combined together with fintechs’ complementary capabilities, results in a digital ecosystem that can give a bank an edge over rivals. However, bank executives usually don’t have the same insights and visibility of a fintech solution as bank’s internal systems. The success of a fintech partnership traces back to a very early stage of the alliance: the Know-Your-Fintech stage.
In this article, we have identified 4 key fintech assessment criteria: novelty, complementarity, compatibility, and viabilit). A combination of these 4 should give a bank a balanced view of the fintech alliance value contained in a particular partnership.

Criteria 1 Novelty

Novelty is the quality of being new or following from that, of being striking, original or unusual.

  • Being original
    Fintech, by definition, is an industry composed of companies that use new technology and innovation with available resources to compete in or complement the marketplace of traditional financial institutions. Banks hope to have more access to new ideas and strengthen their capacity to implement the same. One way to score novelty is in terms of its originality: be it technology, use case, or business model
  • Digital strategy alignment
    Some financial institutions may err on the side of being too original. There are other factors to calibrate novelty. In circumstances where a bank is taking a progressive approach to digitalization. The less aligned the fintech is with a bank’s overall digital strategy, the greater the chances of the partnership creating undesirable outcomes.
  • Customer experience
    Novelty should be evaluated not only from a technology perspective but also from a customer experience standpoint. Customers are the lifeblood of an organization, and a unique customer experience is maybe the most important way by which a business can truly differentiate itself from competitors. On the other hand, technologically new and original doesn’t necessarily translate into a positive customer experience.

Criteria 2 Complementarity

Complementarity is a relationship in which the fintech company and the bank can improve each other’s qualities in digitalization.

  • Functionality
    In any review of a fintech product, a visible and simple metric is the presence of complementary functions. Nevertheless, bank executives should assess the startup’s functional fitness within the broader context of a digital ecosystem, rather than solely based on the bank’s existing business capacity.
  • Use case
    To make an effective partnership assessment, the bank should define a priority list of use cases where a fintech can add value based on the bank’s needs and the fintech’s capabilities. This is particularly important for fintechs that are use case neutral. Lacking focus and a sense of priority in use cases – and this happens often – may waste both effort and investment.
  • Product roadmap
    It is also worth pointing out the importance of understanding the roadmap of both banking and fintech products. Banks and fintechs are both organic organizations that change constantly. An outline of future plans is a guideline to examine any overlap of mid-to-long-term goals between a fintech and a bank.

Criteria 3 Compatibility

Compatibility is the state of being compatible in which fintech and bank are able to work together in combination without conflict.

  • Market match
    Compatibility with the fintech firm is a significant factor in leveraging the business potential of the alliance. Market segmentation is a starting point for evaluating compatibility. Bank executives need to have a clear idea of what customer segmentation the fintech targets.
  • Regulation and compliance
    Innovation comes together with risks.
    Banking is probably the most regulated industry in the world. Although regulation usually does not subject banks to certain technology requirements or restrictions – it focuses more on business guidelines – they need to make adoption of any new technology transparent, especially when there is an impact on customers. Bank executives should also conduct due diligence as per corporate IT policy, for instance, in the use of open source tools and public cloud.
  • Access to resources
    A partnership is nothing but to access each other’s knowledge and resources, in terms of communication, discussion, engagement, and implementation.
    Bank executives need to assess the fintech’s capacity before signing an alliance deal: For instance, how many projects are they running? How many banks are they working with? What are their available resources? And what is their human resources plan? A delayed response from the fintech firm in the early negotiation stage could be a sign that it may not be able to commit its efforts to the future relationship.
  • Integration architecture
    Fintechs are often designed based on the latest architecture, for instance, service-oriented architecture (SOA), RESTful API, and micro-services. The flexibility enabled by these modern, componentized architectures explains why integration with fintechs is usually less of a concern for bank executives. Bank executives should assess integration not only from the organization’s point of view but also from the ecosystem’s perspective.

Criteria 4 Viability

Viability is the ability of a fintech to survive or do business successfully.

  • Funding
    There is certainly no one-size-fits-all rule to select an appropriate fintech based on funding. Fintechs in early incubation stage may be too small to offer a mature and approved solution. Fintechs that have passed Series C or even E funding may be too independent to rely on banks for business expansion. The bottom line is the company should be financially healthy with reasonable cash flow to support its daily business, regardless of whether it is self-funded or funded by VCs.
  • Business model
    A report on revenue and cost is an effective touchstone for understanding a fintech’s “real world” business. In spite of the fact that many fintechs are still in the growth stage with negative net profit, and not able to provide detailed financial reports, understanding the business model properly is an alternative to analyzing business potential. Be it a monthly subscription model based on the number of customers, software license model, or fee generation model, a proper and clearly articulated business model is critical for understanding how the revenue stream is generated and how revenue could be split between the bank and the fintech, and importantly, for assessing any financial impact to customers who use the services: a fintech alliance relationship is fundamentally a commercial contract between two parties.


There has been a strong growth in fintech across the globe, sparking a digital revolution within traditional financial services. Banks have started partnering with fintechs to address these challenges. To select the right fintechs to work with, bank executives should:

  • Make sure fintech candidates align with the bank’s digital banking strategy. If they haven’t got one yet, it is time to create it first before forging a fintech alliance.
  • Assess the value of fintechs based on the four key criteria discussed: novelty, complementarity, compatibility, and viability in the context of the bank’s business focus.
  • Carefully review the customer list of fintechs as a strong reference of the assessment criteria.
Infosys Forrester Research http://www.experienceinfosys.com/bedigital
Finacle Connect: Truly Digital Banking: https://www.edgeverve.com/finacle/finacleconnect/trulydigital-banking/
Wikipedia https://commons.wikimedia.org/wiki/File:Startup_Financing_Cycle.png

 Ethan Wang

Product Manager, Infosys Finacle

Ethan Wang has over 15 years of experience in information technology and banking. He works with the Finacle Product Strategy Team, based in Singapore. His primary focus is thought-leadership collaboration and product innovation – including digitalization, Fintech ecosystem and new technology/business-model trends especially in APAC region. Prior to joining Infosys, Ethan was a Research Director from Gartner’s global banking advisory team. He was also a wealth management banker at HSBC and held a variety of senior consulting roles at IBM.

More blogs from  Ethan Wang >

Related Blogs All Blogs


Blockchain Technology – Is it the way going forward?
April 23, 2018


The Rise Of The Better Indian Bank
August 29, 2016

Leave a Reply

Your email address will not be published. Required fields are marked *