Strategic partnerships to upscale and grow - time for action!

During the Amsterdam FinTech Week, Connective Payments, together with law firm Van Doorne, staged a webinar on the importance of strategic partnerships as a prerequisite to upscale and grow in the FinTech industry. In this article, we summarise the key messages from this webinar.
From left to right: Ronald te Velde, Louis Jonker (Van Doorne), Eppo Heemstra

The Dutch FinTech landscape is -still- promising

Research from 2019 shows that the Netherlands has a relatively large FinTech sector with a predominantly positive outlook for the future.

  • Most of the Dutch FinTech companies expected an increase in revenues in 2020, with 28% of them expecting an increase of 100% or more.
  • 65% of Dutch FinTech companies expected a profit increase in 2020
  • 85% of Dutch FinTech companies expected an increase in personnel

And then came COVID-19.

‘None of us would have expected to be in the situation we are currently in. Most certainly the pandemic will lower the aforementioned expectations. Nevertheless, the Dutch FinTech sector is still well positioned and the Dutch economy is doing relatively well, or rather not so bad as many others.”

Ronald te Velde, Growth Enabler / Managing partner Connective Payments

Indeed, the expected economic contraction over 2020 of the Dutch economy is currently a ‘mere’ 5% and the expected economic growth for 2021 is currently 3.5%.
Having said that, everything remains fragile, so there is ample reason for trying to maintain the FinTech sector’s current position, and to expand and strengthen it where and when possible. For this reason the Dutch government has presented its FinTech Action Plan in July 2020, which we summarised in this article.

At this moment the Action Plan is still quite vague and more an overview of current and future policy intentions than a detailed plan, ready to be converted into legislation. Nevertheless, the Dutch government realises the world of FinTech is hyper connected and the Action Plan refers to many strategic partnership drivers, such as access to money/capital (both private and public!), access to expertise, access to customers, access to new markets, access to technology and access to innovation and an innovative culture.

Strategic partnerships rationale

The interdependency of FinTech businesses is high by nature: many FinTech businesses are connected to other FinTech businesses because they need each others services to complete their offering. 
Of course, “strategic partnerships” is a collective term that includes many forms. These are the most common types, with some examples:

Strategic partnerships in FinTech rationale

Technology partnerships like Signicat for onboarding, Payon/ACI as a key connector to the payment methods and PSD2 API connectors like Plaid, Visma and IBANXS.

Sales channel partnerships like the FirstData/Fiserv JV’s with banks like ABN AMRO/EMS;
Products like Paypal, iDEAL, Klarna and Afterpay sold through PSP’s.

License partnerships: PSP’s and banks parent with the domestic and international card schemes for their issuing and acquiring business; BIN sponsoring, of which probably the best example is Wirecard, whose BINs were used by card issuers like Anna Financial, GlintPay, Simpledcard and many more; we also see partnering with a PSD2 certified issuer or acquirer as a common practice to speed up product development.

Innovation partnerships: we see many banks struggling with legacy infrastructure starting investment funds to get access to innovations, or investing in innovative subsidiaries. A good example would be ING investing in Co-Base, or starting their own Fintech venture like Yolt.

Product partnerships with product leaders can have a sound business rationale. Think of Brinks/G4S, servicing its customers with vaults and POS cash processing systems, all provided by partner companies.

Operations partnerships with specialist companies that excel in, for instance, customer services or CDD.

You can have different reasons to look out for a strategic partnership. In general, scale is key in the Fintech industry and established partners can provide just that. Many of our clients seek geographic expansion or hope to acquire new customers and thus increase revenues through partnering. As an example, ING is partnering with Kabbage in France and Italy to offer business lending to small businesses, a customer segment ING was not able to reach themselves in an efficient way.

Others want to tap into new technologies or lower their operating cost. For instance, Mollie is working together with Slimmer AI for transaction monitoring; and Bunq is teaming up with Transferwise for international payments.

Improving customer experience proves to be one of the strongest drivers for strategic partnering, most notably among banks. According to, 85% of banks mention “improving customer experience” as ‘very important’ to their FinTech partnership strategies. Other objectives, like “creating new capabilities” (55%), follow at a considerable distance.

Building a strategic partnership

Creating partnerships is about make or buy decisions. Each step in the value chain should be carefully evaluated on make or buy options. As a rule of thumb, research suggests that the higher the business risks tied to outsourcing, the more sensible it is to develop the necessary capabilities in-house, and vice versa. So with moderate risks, building a partnership can be the best opportunity.

Common pitfalls

But of course with opportunities come pitfalls. For one thing, building a partnership takes time and effort, almost like a marriage. Especially in cross-cultural settings. Remember Geert Hofstede’s cultural dimensions? Even between neighbouring countries or regions speaking the same language, there can be considerable ground for misunderstandings. It may be wise to get some specialist advise on the do’s and don’ts in a different culture than your own.
“Cultural differences” are by no means only cross-border. They can also stem from the type of organisation: startup companies and corporates can easily talk past each other, even if they’re both from Amsterdam. One may be willing to take risks or adapt to changing circumstances, the other may be much more risk-averse or inflexible, sticking to protective policies even though there may be no reason to do so.

Besides a cultural understanding, there should be some sort of fit in strategic focus. Do you share the same driver for a strategic partnership? Are you both looking at the same time frame, i.e. long term versus short term? Will the partnership be exclusive or will that be a no go for your partner? Is there any chance that through the partnership you are going to educate your future competitor?

Knowing your partner is a continuous obligation. Only a few months ago, the Wirecard scandal hit the industry. It presented a hard lesson to a lot of merchants and PSP’s: don’t let your business continuity depend entirely on your partner, and stay aware of legal and operational compliance risks.

Selecting the right partner

‘In our view, selecting the right partner takes three steps, of which “vendor selection” is only the last one, the first two being a clear understanding of the business context and a thorough review of the payments ecosystem.”

Eppo Heemstra, Vision, Management & Implementation / Managing partner Connective Payments

Are you really ready to partner? What we mean is, before you start putting out an RFP and negotiate with a prospect partner about requirements and price structures, be sure you first understand your current and future customer solution needs, the contract volume (in terms of projected number of customers, transactions etc.) and the technical infrastructure. Is there a good fit with your technical architecture? Is there any overlap with other partners? are questions to resolve before you dive into the actual selection process.
Selecting the right partner should not be taken lightly, because switching partners afterwards is in most cases extremely hard.

Managing your partnership

When the contracts are signed, the champaign is uncorked and the cooperation begins, it’s time to sit back and relax, right? Well, no. You need to manage the partnership for the duration of its life cycle. Communication, resource allocation, decision making, performance assessment and continuous improvement are key elements to manage the alliance with your new partner. The contract never lays out everything that needs to happen. A good partnership gradually updates and evolves with people working together, solving problems and making joint decisions.

In most cases, if not all, appointing a separate partnership or alliance manager is required to guarantee a healthy and productive collaboration. He or she will be there to reduce and sooth tensions and solve inevitable problems, having insight knowledge of business and technology issues and fully respecting all stakeholders involved.

It may sound unromantic and harsh, but it’s also wise to have an exit strategy from the start. All kinds of circumstances can trigger the dissolution of the alliance: underperformance, costs, unexpected compliance issues, reputational damage, bankruptcy. Therefore, managing the partnership and its contingencies also means answering questions on:

  • Risk: what will be the likelihood of any of these circumstances to happen?
  • Impact: how will any of these circumstances affect your performance?
  • Measures: how can you mitigate the effects?
  • Communication: what should you communicate at any of these circumstances?

We’re here to help you

As the Dutch FinTech Action Plan points out, building the right strategic partnerships is crucial to be successful in the FinTech industry. But as we have pointed out, that is easier said than done. In this article, we have highlighted some of the elements to consider, with an overview of the rationale, the most common pitfalls to avoid and some of the typical problems to overcome.

‘The Connective Payments team is here to help you prepare for, select and manage your strategic partnerships to grow your business. If you feel ready to go down this road, let’s connect.”

Ronald te Velde, Growth Enabler / Managing partner Connective Payments


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