The Fintech Assist: What Community Banks Can Expect Next in Fintech Payments

Sixty percent of all fintech startups are intersecting with the payments space in some manner. Increasingly, they’re partnering with banks or targeting their offerings directly to support community bank operations. Cue the rise of the banking- and payments-as-a-service relationship as exhibit A.

So, what does this collaboration mean for the future of fintech-community bank relations? To unpack the underlying opportunities and challenges, I sat down with Damon Moorer, the president and CEO of TCM Bank N.A.—ICBA Bancard’s credit card bank—during the Community Bankers of West Virginia convention. What follows is a snapshot of that conversation.

Giorgio: We’re in a state of co-opetition with fintechs. Some are collaborators, and some are competitors. In 2022, PayPal generated over 22.3 billion transactions, accounting for $1.36 trillion in transaction volume from 435 million users.

It’s not just payments at risk, either. Research from Cornerstone Advisors showed that if big tech firms started offering bank accounts, then customers—particularly Millennials—would sign up. A whopping 46 percent of those aged 26-40 said they would hold a checking account with Amazon, and 39 percent said they would with Google.

It’s a serious concern, particularly when those consumers are not aware of the protections that nonbanks lack compared to what community banks offer. Fortunately, policymakers are starting to shine a light on Big Tech and question their role in our banking and payments system.

Moorer: I like to look at the glass half full: Community banks are partnering with fintechs that can provide innovative technology and services. Programs like ICBA’s ThinkTECH Accelerator are making these positive partnerships happen.

Giorgio: That’s true. Community bank-fintech partnerships make for the best of both worlds—high-tech, high-touch is what we like to call it. So, what do you look for in a fintech partner to support your payments business?

Moorer: Every community bank is unique, and what we look for in a partner differs based on what our community needs. The beauty of a community bank is we understand the pulse of our market, and that knowledge drives our competitive advantage as well as our technology requirements.

However, most community banks don’t have large research and development budgets to test the waters with new technologies, so it comes down to selecting a partner that not only meets your needs today but can evolve with you into the future. I rely on partners that:

1. Offer solutions that align with my bank’s strategy and add value to consumers, the community, and the bank. For example, if there is a high concentration of health-care workers in your market, consider a fintech partner that makes delivering products unique to health-care professionals easy.

2. Have a commitment to the community banking industry—and an eye on the long game.

3. Present demonstrated, actual—not theoretical—return on investment that comes from additional revenue or expense reduction through process automation or streamlined operations.

4. Thrive on change, agility, flexibility, and a forward-thinking approach to business.

5. Provide ease and speed of implementation. In today’s environment, we can’t wait to act on a new idea for months at a time; ideation to execution needs to be a fast-paced, seamless experience. Most technology today is built in a cloud environment, which enables faster deployment.

In the end, if I can identify a partner that meets these five requirements, I know it’s going to be a fruitful relationship.

This is practical advice for the next generation of community bank partnerships, but there is a lot more to unpack as the industry evolves. So, look for the continuation of this conversation, focused on payments shifts and innovations, in my October blog.