The recent collapse of crypto exchange company FTX might have banks and fintechs reevaluating their partnership-vetting processes in 2023 to avoid potential reputational damage.

“As a result of the recent circumstances arising in the digital asset space, it may lead to a phase of tread with caution [for partnerships],” Tejus Oza, chief executive, North America of London-based fintech MoneyCorp, told Bank Automation News.

Although partnerships, acquisitions and collaborations will continue, fintechs and banks are expected to take more time to select the right partners, Oza said, noting that now fintechs have a seat at the table. “As much as we talk about a traditional bank looking to partner, it has to be a right fit for the [fintech] as well.”

At foreign exchange and global payments services fintech MoneyCorp, for example, one layer of its due diligence is determining what to build in house, Oza said. The fintech has a team of engineers and capabilities to build technology in house, so that’s where they start, he said, noting, “We are exploring numerous [projects] at any one given time.”

Due diligence

Consultancy Crowe advises banks and fintechs looking for a partner to ask themselves the following questions:

• Do overarching values and business strategies align?
• Are the customer bases coordinated?
• How much data and information are parties willing to share?
• What reporting is expected in terms of transparency?
• Are core systems compatible?
• Can systems integrate?

Fintech funding

While banks and fintechs will continue to team up in 2023, fintech funding slowed this year, according to CB Insights Q3 2022 State of Fintech report released in October.

The report found that U.S. fintech funding fell 43% sequentially in the third quarter of 2022 to $5.1 billion — the lowest it’s been since the first quarter of 2020. Additionally, the number of fintech deals fell to 454 from 480 in the second quarter of the year.

Looking ahead to 2023, there will likely be some reassessment on the buy-versus-build question, Oza told BAN.

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