There’s no denying that the fintech space is a major source of disruptive new ideas in payments. It’s why we keep a close eye on fintech news in this blog.  

It’s also why the trend we’re about to discuss is so intriguing. 

Fintechs are usually founded by entrepreneurs—people who want to change the world in one way or another, often by challenging the status quo in some fashion. They often take an adversarial stance to industry incumbents. 

Often—but not always and not in every way. One of the most fascinating dynamics in the world of payments right now is the “frenemies” relationship developing between many fintechs and incumbent players. It is increasingly common to see financial services organizations and fintechs agreeing to collaborate in a particular geography or segment of their overlapping businesses while continuing to compete head-to-head elsewhere. 

For example, online payments processor Stripe partners with a number of much older financial institutions, including Barclays, Citigroup, and Goldman Sachs, to offer checking accounts and other banking products, while still competing on many payments fronts.  

In a similar vein, Stripe competitor Wise (formerly TransferWise) dedicates a vertical to collaborating with incumbent banks. Members of its partnership program include French incumbent Groupe BPCE and Stanford Federal Credit Union, to connect Stripe users with the services they need to thrive in today’s digital economy. Ecosystem partners include Shopify, Squarespace, Amazon Web Services, and Accenture.  

The trend is also cropping up in the world of buy now, pay later (BNPL). I’ve had conversations with major retailers who view BNPL fintech Klarna as competition in one area of their business while collaborating with it in other areas.  

In some ways, these developments have precedent in payments. For instance, you could think of SWIFT as an agreement between incumbents to work together in select ways to make cross-border payments better for everybody. However, these older examples of collaboration between competitors are all focused on the back end of business. They do not face the consumer. That’s what’s new about these more recent agreements between payments “frenemies”. 

So what’s driving the change? 

Speed. The modern digital world moves very quickly, and this speed is often taken for granted. Today’s customers expect that moving money should be nearly instant. Their expectation is mostly fulfilled. This context puts new urgency on the old maxim: “do not let perfect be the enemy of good”. In many cases, getting a satisfactory solution into the market today is more valuable than developing a perfect solution to launch next week. 

And that’s an attitude embraced by fintechs, who prize agility and praise the merits of “failing fast”.   

Will these partnerships last long-term? Only time will tell. But it’s undeniable that they’re a growing and important part of the payments space right now. 

If you’d like to discuss what payments “frenemies” mean for your business, I would love to hear from you. I can be reached here.

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