January 5, 2023
Hans Morris, founder of NYCA Partners: How can banks create stronger partnerships with fintechs?
The seventh guest on the Banking on Innovation podcast is Hans Morris, Managing Partner of NYCA Partners, a premier venture capital and advisory firm focused on the fintech sector.
Hans brings a unique perspective because of his rare blend of investment savvy, extensive operating experience and deep fintech knowledge. His former roles include President of Visa and CFO, Markets and Banking at Citigroup.
NYCA has an enviable roster of Limited Partners, highly accomplished former industry executives who operate as advisors to portfolio companies. Hans, who is a member of the NYCA board, and his colleague, Bobby Mehta, have been amazing confidants and advisors of mine at Personetics.
NYCA’s vision is to bridge the worlds of banking and fintech by connecting innovative companies to financial institutions. If banks want to lead in innovation and quickly improve customer experience, they must learn how to develop strong relationships with fintechs, Hans says.The best fintech companies will prefer to work with banks that have created a working environment that is conducive to cooperation.
To earn “the reputation of being good to work with”, banks must demonstrate that they make good decisions quickly, will implement technology that works, are fair and straightforward to deal with and won’t give their partners the run-around.
By contrast, banks that are unattractive to fintechs “will take forever to make a decision, their priorities change all the time and they’ll put you through all kinds of vendor ropes.
4 criteria for successful customer interactions
I asked Hans what he saw as the biggest technological challenges facing banks and credit unions.
“The most important issue it to take friction out of the consumer experience,” he says. “It’s everywhere, including bad practices, fee arrangements that don’t make a lot of sense, lots of forms and lots of redundant activity.”
The core reason this friction exists is that “data is not well organized to deliver highly personalized, relevant and fair proposals.”
Banks should measure their interactions with every customer on four criteria, he says:
- Is the service seamless?
- Is it fair?
- Is it safe?
- Is it relevant to the customer? But while this sounds straightforward, he says it is rarely delivered. The barriers include delivery mechanisms operating independently from each other, rather than being integrated in a modern tech stack; and the difficulty in organizing the data in a way that is easily accessible across the institution.
Innovation is not a technology problem – it’s a leadership state-of-mind
Another barrier to delivering the four criteria is that “many institutions spend too much time focusing on the wrong thing,” by delegating innovation to technology teams rather than treating it as a management priority and pulling the whole team together to deliver.
“I don’t see this as a technology problem – it’s a leadership issue,” says Hans.
In organizations that innovate at pace, the CEO and management team take ownership of innovation and are aligned on what they’re trying to achieve. They have clarity on the key deliverables and how projects are progressing.
Make it easy for fintechs to work with you
Leveraging the capabilities of fintech companies is another key to successful innovation.
Hans recommends that banks focus on making this relationship smooth and efficient. This requires clear, top-down priorities for innovation and internal processes to get technology which fits into those priorities quickly approved, tested and implemented. One example of such a process is Hans’ “three meetings to Proof-of-Concept (POC) rule”.
“If a bank can’t make a decision who what to test in three meetings, then that’s not very efficient. [This rule] helps create a good standard for both the enterprise company and the fintech company in terms of where both of them should be focusing.”
Additionally, banks need to create seamless vendor onboarding to reduce friction, although this can be complicated due to security issues.
But when all this is in place the banking institution will develop a reputation for tight, speedy processes and help attract the very best fintech companies.
How fintechs are extending the customer franchise
Despite the challenges, making these relationships work provides opportunities for banks not only to leap ahead with innovation and separate themselves from the laggards, but to access new markets.
One area where fintechs have done well is to target customer segments that banks would otherwise perceive as not profitable or attractive, says Hans.
“That is to me a good opportunity to rethink how you deliver to certain segments, to say, how can we make this profitable using a different type of technology and delivery system?”
Every bank will also be focused on certain sectors, each of which is going through its own digital transformation. Banks have the opportunity to cooperate with fintechs to create new operating systems for these verticals, rather than delivering standard products and services.
“Are you plugged into the software and digital changes taking place in it and how you complement that? Not just delivering your products, but rethinking the products completely. You don’t necessarily have to deliver all this [yourself] – Personetics and other companies can help you do that – but that should be an important management objective for you and your team.”
Hans’ original goal when he set up NYCA in 2014 was to bridge the worlds of fintech and banking, long before it was truly fashionable. Under his savvy investment approach and advice, dozens of fintechs have evolved and prospered through bank partnerships. Banks and fintechs alike should pay heed to his salient insights. He is a true industry thought leader whose advice is steeped in experiential knowledge as an investor, operator, and advisor.
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