Checklist: Questions to Ask When Integrating with Fintechs

By Charles E. Potts

As more community banks engage with fintechs to support their business plans, due diligence continues to become an even bigger piece of the puzzle. While every bank is different there are several questions every community bank should consider as they enter into these agreements.

While banks must be prepared to answer the overarching questions to help assess the value—including its value to the bank or its customers, the associated costs, and any potential downsides of the engagement, Philip Taliaferro, global head of partner and fintech ecosystem at Finastra, says the subtle questions are just as important.

He says it’s these details that address wide-ranging topics—including what happens if a provider is acquired or if the solution becomes unavailable—that ensure alignment with overall business strategy.

“As community banks look to expand their fintech relationships, start with strategy,” advises Shane Ferrell, vice president, product strategy at Computer Services Inc. (CSI). “What is the market problem you’re solving? Why is this solution relevant to your community bank?”

Because strategic alignment drives successful partnerships. ICBA assembled a sample checklist of key questions for community banks to consider when engaging with a fintech (see sidebar). Being fully aware of the benefits and potential pitfalls before entering agreements makes the engagement more straightforward, transparent and builds a solid foundation from day one.

As Greg Ohlendorf, president and CEO of $200 million-asset First Community Bank and Trust in Beecher, Ill., recently shared, working with fintechs doesn’t have to feel like navigating a brave new world.

“We’ve executed contracts that are fair, but we’ve de-risked them,” Ohlendorf said. “Some of them have one-year contracts with milestones that have to be met. If they don’t meet the objective, we don’t have to stay. We don’t have long-term commitments, and the fintechs understand that. They know if they do a good job we’ll happily remain customers.”

As it turns out, fintech engagements are much like other community bank relationships where each side brings chief strengths to the table. Fintechs bring new technology to solve for community bank pain points, and community banks advance their missions and support their communities’ needs in new, engaging ways—creating a winning combination that benefits all parties.

Fintech Partnerships: Sample Strategic Questions Checklist

  • What is the problem I’m solving with this product?
  • What value does it bring to my community bank?
  • How will the solution support customer needs and relationships?
  • Does this solution need to integrate with the core? If so, how specifically will that integration occur?
  • How experienced is the fintech in navigating these integrations?
  • How much work is involved for my staff?
  • What is the engagement process like?
  • How long will contract negotiations take and how does that align with my timeline?
  • Where does this product fall in our risk profile?
  • What additional safeguards, if any, will need to be put in place to enable it?
  • Is the fintech a cultural match for our bank? Why or why not, and how important is that?
  • Is this a temporary fix or a long-term relationship? How does that shape my decisioning?
  • What certainty do I have about the viability of this fintech?
  • What’s my back-up plan if the solution is no longer available a year or two in the future?

To learn more about the program and its 2022 cohort, join us for the ICBA ThinkTECH Accelerator virtual kick-off event on Jan. 11 at 5:30 p.m. (Eastern). Register now. More information about the ICBA ThinkTECH Accelerator, including registration for the program may be found at icba.org/accelerator.

Charles E. Potts is ICBA executive vice president and chief innovation officer.

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