In recent years, the relation between banks and FinTech startups has evolved from marginal investments to closely knit collaboration and integration. The convergence of traditional and modern financial services is still in its infancy, but so far the results have been promising.

For years, traditional financial institutions have kept their distance from the FinTech industry. But as financial technologies continue to expand, legacy players have come to accept the disruptive role of FinTech startups and the need to work together. This increase in FinTech partnerships further proves that we’ve entered the most profound era of change for financial services companies since the 1970s.

According to a survey from global law firm Mayer Brownwhich surveyed 70 UK financial services providers including banks, insurers, and asset managers – partnerships with FinTech startups has helped banks cut the costs of developing customer-facing services and optimizing legacy processes while increasing revenue. Banks and insurers have also been able to benefit from the collaboration to improve customer engagement through cutting edge technologies. The result has been beneficial to both parties as well as consumers, who now have access to more efficient and versatile financial services.

Below, some findings of the Mayer Brown survey:

Cost savings

Eighty-seven percent of respondents said they were able to cut costs to some extent by working with fintech providers. These savings likely come from incumbents spending less on the development of new customer-facing services, as well as the efficiencies fintechs can bring to legacy processes thanks to their agile structures and use of the newest technology.

Brand refreshes

Eighty-three percent of respondents said collaborations with fintechs offered opportunities for incumbents to refresh their branding. That’s likely because partnerships with fintechs enable legacy players to improve customer engagement and launch innovative products and services faster than they could build them in-house. This allows incumbents to reposition themselves as better serving a particular market, or simply as cutting-edge.

Increased revenue

Fifty-four percent of respondents said partnerships had resulted in boosted revenue. It’s worth noting that this is the benefit seen by fewest incumbents, which suggests it may take longest to emerge as the parties involved work out a business model that suits everyone. 

FinTech startups have the advantage of speed and agility, helping banks adopt new technologies. These startups are extremely efficient at implementing emerging trends such as Blockchain and machine learning. P2P payments, smart loans and AI-powered fraud detection are just some of the innovations that FinTech startups have brought forth. Using mobile apps and easy-to-use web services, FinTech startups simplify many of the services that banks offer.

However, to grow and succeed, FinTech startups need access to the capital, scale, data and regulatory authority of banks. Banks are now getting involved at different levels to help FinTech companies get off the ground. This includes an increasing number of buyouts, mergers and partnerships. An example is Goldman Sachs, a banking firm that has invested more than $570 million in FinTech companies since 2012.