Financial technology, or fintech, has become increasingly popular in recent years as more and more people turn to technology to manage their finances. The rise of fintech has also led to a shift in the banking industry, with many traditional banks exploring partnerships with fintech companies to improve their services and stay competitive. One such partnership model is horizontal layering, which involves banks and fintech companies working together to offer innovative financial solutions to their customers.
Horizontal layering refers to the integration of different financial services across various platforms, providing customers with a seamless experience. For example, a customer may use a bank’s mobile app to access their checking account, while also using a fintech app to manage their investments. By combining the strengths of banks and fintechs, horizontal layering creates a more robust and user-friendly financial ecosystem for customers.
There are many benefits to horizontal layering for both banks and fintech companies. For banks, partnering with fintechs can help them stay relevant in a rapidly evolving industry. By working with fintech companies, banks can leverage their expertise in areas such as mobile banking, digital payments, and data analytics. This enables them to offer a more diverse range of services to their customers and improve the overall user experience.
Fintech companies also benefit from horizontal layering partnerships with banks. Partnering with banks provides fintechs with access to a wider customer base and allows them to tap into the existing infrastructure and regulatory framework of banks. This can help fintechs overcome the challenges of building their own infrastructure from scratch and navigating complex regulatory requirements.
Another advantage of horizontal layering is that it allows banks and fintechs to focus on their core competencies. Banks can concentrate on providing traditional banking services, such as loans and deposits, while fintechs can focus on developing innovative solutions in areas such as payments and investment management. This division of labor can lead to more efficient and effective financial services for customers.
Horizontal layering also has the potential to drive innovation in the financial industry. By working together, banks and fintechs can combine their knowledge and resources to develop new products and services that meet the evolving needs of customers. For example, a bank could partner with a fintech company to offer a new type of mobile payment solution that leverages blockchain technology.
One potential challenge of horizontal layering is the risk of cannibalizing existing services. Banks may be hesitant to partner with fintechs if they believe that doing so will cannibalize their existing business. However, by embracing innovation and partnering with fintechs, banks can position themselves as leaders in the industry and attract new customers who are looking for innovative financial solutions.
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In conclusion, horizontal layering between banks and fintechs offers many benefits for both parties. By combining their strengths and focusing on their core competencies, banks and fintechs can create a more robust and user-friendly financial ecosystem for customers. This partnership model has the potential to drive innovation, improve the overall user experience, and help banks and fintechs stay competitive in a rapidly evolving industry. As such, it is likely that we will continue to see more horizontal layering partnerships between banks and fintechs in the years to come.
Partner at LiteFin