Traditional banks and fintech: Embrace ‘coopetition’ to drive innovation

GlobalData

Tue, Apr 29, 2025, 1:44 PM 5 min read

“Coopetition,” the positive-sum game of cooperating with a competitor, may sound like another corporate buzzword. In reality, it describes the current dynamic between traditional banks and fintechs. Established banks and financial institutions are realising that the fintechs they once considered disruptive startups are becoming bigger players and can directly compete with them and they are here to stay. Banks have also recognised that they can unlock new high-growth opportunities by working with fintechs, helping them to capitalise on opportunities and new customers and be agile to new technological innovations.

Payment transactions are no longer solely managed by incumbent banks and financial institutions but by a complex network of neobanks, platforms and fintechs, all collaborating to deliver a better payments experience for businesses and customers alike. The adoption of technology has been driven by fintechs’ focus on the customer experience and their ability to quickly adapt to changing demands. The result of that is a whole new underlying infrastructure that is rapidly changing the financial ecosystem.

Based on the learnings and adaptations over the last decade or so, banks have become more open-minded to working with fintechs. Established fintechs now prioritise robust risk management, stringent compliance and controls that meet global regulatory standards. Trust, the cornerstone of any successful long-term partnership, is built through these rigorous compliance frameworks. Fintechs not only meet regulatory requirements but also adapt to the evolving landscape as new use cases emerge. As they expand into new markets and verticals, the complexity increases, making continued investment in compliance and transparent communication essential for maintaining trust with banking partners.

While fintechs continue to innovate and make financial services more accessible, they also face the challenge of an evolving financial crime landscape. Balancing rigorous regulatory compliance with a seamless user experience and scalability is crucial. Fintechs often adopt a collaborative approach to banking relationships, emphasising trust, industry insight and mutual benefit. This involves staying deeply informed about both current and upcoming regulations across the various markets they serve.

Despite the strong risk management and compliance measures that are put in place in order to be a reliable and trustworthy partner, working with fintechs can still be considered a big step for traditional banks. Yet those that embrace collaboration with fintechs are often more adaptive to change, with many of those waiting on the sideline facing an increasingly high barrier to entry to the new technological era of finance and payments.