Garnet Capital Advisors Blog

Excerpt:  The shift to digital banking cannot be ignored. In the past five years, the top 10 banks in the U.S. have made investments totaling more than $3.6 billion in over 50 financial technology firms, or fintechs. Partnerships offer opportunities for both banks and fintechs. 

In the past five years, the top 10 banks in the U.S. have made investments totaling more than $3.6 billion in over 50 financial technology firms, or fintechs. Fintechs continue to augment and transform the banking industry, providing everything from platforms as a service to streamlined digital payment methods. 

The convenience of mobile payments is expected to contribute to the growth of fintech partnerships.

The examples below demonstrate the reach of fintechs and potential synergies between traditional lenders and fintechs. 

Splash and Bank of Lake Mills: Transforming Educational Debt

Recently, the fintech Splash Financial and the Wisconsin-based Bank of Lake Mills joined forces to offer educational loans to medical trainees. People undergoing medical training often have a high level of student debt. The American Medical Association estimates that three-quarters of them have, on average, $190,000 of student debt that finance both their educations and their training. 

Fintechs are often able to use the online platform model to provide better service and potentially more advantageous terms to consumers in terms of interest rates and fees than traditional lenders such as banks can. Giving the rising levels of student debt in the U.S. over the past decade, student loans are an appealing market for fintechs.

The Splash and Bank of Lake Mills partnership, according to a press release, plans to leverage the former’s innovative methods and the latter’s expertise in student loans to provide opportunities for medical trainees to consolidate and refinance their loans. The Bank of Lake Mills was founded in 1893 and has made more than $1 billion in student loans. 

Automotive lending and other forms of service in the automotive sector are drawing enormous fintech interest.

The Automotive Industry: Leveraging Digital Payments and Interconnected Systems

Although traditional lenders like banks handle almost one-third of financing for new vehicles in the U.S., fintechs are eyeing lending and other forms of service in the automotive sector eagerly.  Frost & Sullivan forecasts that fintech investment in the automotive sector will soar between 2016 and 2025, from $16 million to $230 million. 

The potential areas for fintech expansion are finance and leasing, insurance, digital methods of payment, retail sales conducted by digital methods, and automotive services. 

Frost & Sullivan estimate that fintech services will move hand-in-glove with the ability of cars and other vehicles to be digitally connected to suppliers for automotive and other products. Digital payment at gas stations can be handled via fintechs, for example, as can drive-through meals. 

New forms of mobile payments, connected either to car company lenders, automated cars, fintechs, or some blend of all three, are expected to follow increasing consumer acceptance of – and even a demand for – mobile payments. 

Work with an Experienced Loan Advisor 

Banks once viewed fintechs somewhat warily as competitors, but that has changed. Fintech's innovative technology is increasingly being recognized for its ability to provide synergies and potentially spur loan origination levels. The result is increasing numbers of partnerships and other joint efforts. 

A bank’s chances of financial success are improved if they work with experienced loan sale advisors who are seasoned in both types of businesses. Garnet Capital provides expertise with both traditional banks and innovative fintechs. 

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