Fintech alliances aren't just for traditional banks anymore.
The new partnerships, which provide financial incentives to customers for using multiple fintech services, underscore the increasing ways banks and young companies are pursuing ways to work together.
There are several examples of banks partnering with alternative lenders to offer fast, online loans over the last several months. For a neobank, however, such alliances are novel and banks ought to take note. If fintechs start working more closely with their contemporaries to offer a more robust suite of products, they could become more formidable challengers to banks than working on their own.
"The pairing up of monoline fintechs represents a threat to traditional banks," said Alex Johnson, senior analyst of credit advisory service at Mercator Advisory Group. "Even the most digitally inclined consumers still want the convenience of being able to acquire and manage multiple financial products in a single place."
To be clear, the partnerships are largely related to connecting brands via a payment method, not merging services onto a single platform — yet.
For Moven, its new partnerships signal the neobank's wider goal of becoming "the card on file for your life," as Alex Sion, Moven's president and a co-founder, put it.
Moven users will receive $100 if they consolidate their credit cards with Payoff and $200 if they consolidate their student loans with CommonBond. CommonBond borrowers will also see their interest rates reduced by 25 basis points when they pay via Moven. Moven is promoting the services in emails to customers who will earn the credit once they link their accounts to either service.
Still, the pairings are a way for the companies to stand out and avoid lemming status in an increasingly crowded and maturing market.
It is a smart move, says Stessa Cohen, a research director at Gartner, because it positions Moven and its counterparts as a digital banking platform at a time when more startups have launched in the U.S. to promote similar functionalities and banks seek to emulate aspects of what was once considered a novel experience.
"They were first but now they aren't the only," Cohen said of Moven. "You have to keep coming up with things. It's the nature of digital banking."
Online lenders, meanwhile, are in hot pursuit of driving awareness of and engagement to a product that doesn't require frequent interactions. Prosper, for instance, announced in September that it was buying the personal finance app developer BillGuard in order to bump interactions, among other things.
Essentially, banding together could be a way for neobanks to clear the hurdle they inevitably face: broadening their offerings when they lack a bank charter. Neobanks, aside from customer experiences, have struggled to provide much that leapfrogs traditional bank functionalities.
"To me this would be the 'disruption' that fintech startups have promised is coming but so far havenīt been able to make happen," said Stephen Greer, an analyst at Celent's banking group. "They need to rebundle before any significant disintermediation takes place."
This could, however, include rebundling fintech services through the bank.
Phil DeGisi, CommonBond's chief marketing officer, says more fintech partnerships are coming — be it with banks or other fintech companies. Moven, for instance, also white-labels its technology to banks. TD Bank in Canada and Westpac in New Zealand have signed partnerships with the money management app.
"I don't think it's an either-or," he said.
Besides the potential competitive benefits, the partnerships are rooted in obvious overlapping goals, Sion said. All three companies are devoted to promoting and improving the financial health of their users.
"The synergies are pretty darn clear," he said. "[You] can look at the mission statements and think [you're] looking at the same thing."
The targeted audiences are young adults who potentially got into a product — or several products — they didn't understand, Sion said.
The partnership is a "natural extension" that will help the brands get in front of an audience who could benefit, said CommonBond's DeGisi.
"It's bringing student loan savings to more people," DeGisi said. "This is much more closed-loop than, 'Hey, this is about leads.' "
It also offers a hack to customers who desire to connect the increasing amount of personal finance apps. To connect those dots, Sion likens the partnership model to Barry Diller's IAC model, which puts seemingly disparate Internet businesses together and packages them under one umbrella, but for financial services.
In addition to uniting fintech apps together, the alliances could help make the customers less risky in time. Moven, which was co-founded in 2011 by Brett King, provides digital products that help guide on-the-go consumers analyze their spending on the fly in a bid to motivate them to make smart spending decisions — including spending guidance in context of loan obligations.
Sion, who shied away from sharing the revenue model or its target goals, says he believes there is a benefit from the seamless deposit to payment down the road.
Playing to a very specific audience is a good thing in this instance, observers say, as it should further distance Moven from traditional banking.
"In my view, this is finally an instance a neobank is trying to go above and beyond," Greer said.