Business owners, strategists, and analysts take note: API-enabled financial-technology swarms are accelerating service delivery to businesses and consumers alike, and laying the groundwork for ongoing improvements in efficiency, client service, and collaboration.
Accelerated by the coronavirus pandemic, the global fintech market is expected to top $350 billion in 2022, according to one industry source. That’s up from $128 billion in 2018 for an estimated compound annual growth rate of nearly 29%. The “enterprise,” or “embedded” part of the fintech market was worth $45 billion in 2021, Juniper Research tells us.
Precisely how that’s impacting the growth and influence of fintech swarms hasn’t been quantified, but technology consultancy Gartner sees them as vital to “the future evolution of the fintech world.”
Coupled with advances in cloud-based service delivery, fintech swarms are opening new channels for no-touch payments and point-of-sale financing that empowers businesses that wish to sidestep banks and other old-school loans and payments processors. Right now, says Gartner, smaller fintechs are banding together to help businesses deliver increasingly robust embedded tech services.
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A fintech swarm is greater than the sum of its parts
Say “swarm” and most people think of insects — bees, ants, locusts — moving in seemingly coordinated, and typically destructive, arrays. As individuals, component creatures can’t do too much, either for good (by, say, producing honey) or ill. In a swarm, however, a single termite can help turn a mansion into dust.
Now remove the destructive connotations, and apply this concept to business. In an analog world, small companies pose little threat to established conglomerates. But in tech-linked swarms, isolated outfits can co-deliver competitive advantages based on these three principles recently outlined by Gartner:
- A swarm member gains more power by leveraging the strengths of other constituents to provide better services
- A fintech swarm is about sharing, not hoarding. As part of a swarm, a tech provider bolsters its strengths while obviating its weaknesses
- Old-line views on competitiveness make no sense in a fintech swarm. If the members of a fintech swarm simply focus on common goals and making meaningful contributions, “making money will follow,” says Gartner.
Focused fintech swarms can help traditional storefront and B2B enterprises — especially ones with so-so social media capabilities — reach more potential customers. Other business benefits of fintech clusters include:
- Reducing barriers to new verticals
- Overcoming geographic challenges and becoming global, not just regional, players
- Making digital giants (like Amazon, Microsoft, and Google) objects of head-on competition rather than trepidation
As mentioned, fintech swarms depend on APIs, or “application-processing interfaces” to provide embedded functionality. How? Consider your smartphone and the apps on it that you use every day. Apps provide services you want or need — from making you look like a kitty cat to reallocating your 401(k) — within your phone’s operating system. In the context of providing financial services, APIs connect distinct offerings that come from members of the swarm to form an embedded financial-service platform that’s integrated with a client organization’s existing sales, communications, and accounting software.
For Gartner, most fintech swarms come in one of three flavors.
1. Queen bee
Built around digital giants such as Amazon, Apple, or PayPal — or a sector leader like TurnKey Lender
2. Enabled colony
These tend to coalesce around governments (and regulators) and nonprofits. Examples include e-krona in Sweden and the Unified Payments Interface in India
3. Independent
These swarms — which consist of independent and typically cloud-based organizations that work together in a common-standard environment for sharing information and tools through APIs — are the only “true” swarms because they reach for higher “empowerment, shareability, and achievement” for all constituents, says Gartner. One example is investment-platform provider Wealthfront’s partnership with Green Dot to offer digital-banking services.
Again, Gartner emphasizes that members of fintech swarms must put cohesion and progress before short-term grabs for “power and profitability.”
FinTech swarms as an alternative to monolithic providers
Elena Ionenko is co-founder and global operations chief for TurnKey Lender, one of the first lending-technology providers to make it big. In her view, “Fintech swarms will come together in many different ways. It could start with a conversation at a tech conference, or take shape through formal bidding processes.”
Or, adds Ionenko’s colleague Marc Pickren, CEO for TurnKey Lender’s operations in the Americas, fintech swarms can evolve from partnership programs (like one his firm already manages).
In a recent example of this partnership program in action, TurnKey Lender had begun working with BankersLab to help TurnKey Lender’s clients launch new portfolios and refine lending strategies in a “virtual world” setting designed to enable digital transformations.
“It’s like a fighter-jet simulator,” says Pickren. “In the spirit of ‘practice makes perfect,’ our partnership with BankersLab prepares whole teams to fly fast, safe and efficiently in any environment — except by ‘fly’ I mean ‘deliver financial services,'” he jokes.
Companies in TurnKey Lender’s Partnership Program include:
- Plaid
- Repay
- Alkami
- Verofax
- Refinitiv
- airSlate
- Shopify
- Pagaya
- DecisionLogic
- Codat
- BulkSMS
- Boss Insights
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TurnKey Lender, which operates in more than 50 countries worldwide, also stands out for the rigor of its core competency. This, says Ionenko, comes down to “providing straightforward, supported, and secure financing operations at any point of sale, from factories to container piers and showrooms — anywhere and everywhere in fact that commerce takes place.”
In general, Ionenko adds, TurnKey Lender’s white-label, modular lending platform unlocks a number of benefits for its clients, among them:
- 67% higher customer lifetime value
- 44% sales conversion growth
- 280% increase in operational efficiency
- 25% higher accurate credit-decision accuracy
- Up to 40% profit boost
- 10% to 24% higher customer-approval rates
- 35% drop in bad-debt rates
All in a system that can process more than 460 applications — every second of the day.
“Any organization that provides digital financing should be aware of independent fintech swarms as an alternative to monolithic providers, especially those with a one-size-fits-all mindest,” says TurnKey Lender’s Ionenko. “To make the most of this emerging fintech-delivery model, companies need to understand how and why they’re starting to pose a direct threat, not just to traditional banks, but to digital giants that often lack the agility of hungrier fintechs.”
