The demise of the traditional bank is imminent, if technology titans are to be believed. Legendary tech investor Marc Andreessen, for one, has spoken out about how finance is stepping into the 21st century with or without these mainstays of the industry.
"Financial transactions are just numbers; it's just information," Andreessen said last year. "You shouldn't need 100,000 people and prime Manhattan real estate and giant data centers full of mainframe computers from the 1970s to give you the ability to do an online payment."
It's true that Silicon Valley startups are disrupting traditional banking services. Banks, however, aren't going anywhere. Banks are the lifeblood of our economy and play a leading role in the flow of commerce. (Full disclosure: my company, Bill.com, has partnerships with three major U.S. banks.)
In fact, fintech startups rely heavily on banks to enable their innovative services. Financial services are heavily regulated at both the federal and state level. Without bank partnerships, fintech startups are dead in the water. That's why when it comes to the future of finance, the fusion of innovative financial services technologies and traditional banking makes for a powerful combination.
Just take a look at the needs of small businesses. A May 2015 Barlow Research Associates survey of 4,522 small business owners showed that 86% of small business owners say that when it comes to choosing a new bank, branch convenience is the most important consideration not technology. By contrast, the availability of mobile banking was most important to 37% of respondents.
The Barlow study also pointed to the importance of personal attention and service in banking. Of small business owners planning to change their primary bank, 50% said it was because of lack of personal attention.
At the same time, it's impossible to ignore the power of innovation and its ability to change consumer behavior and preferences. Paying an employee or sending in a bill can now be done on a smartphone between meetings.
Meanwhile, marketplace lenders are rapidly expanding and speeding up loan access. And companies like Vouch are bringing social connections back into lending with a 21st-century take on the community banking model of days past. This innovative approach to an age-old service is indicative of what startups can provide the banking industry.
The respective strengths of each industry are why I predict more and more marriages between fintech companies and banks. Traditional banks can bring much needed scale, resources and institutional clout to the table for young fintech companies not to mention customers, lots of customers.
Meanwhile, banks have long wanted to improve the customer experience through innovation. But the regulatory environment has prevented them from keeping up with more nimble startups. The finance industry could replicate the technology that's already out there, but they would be better served by partnering with tech companies and bringing those innovations up to scale.
Partnerships between banks and startups allow customers to have their cake and eat it too. Financial tech companies benefit from access to new markets and infrastructure, while banks stay on the cutting edge and continue providing groundbreaking services to customers. That's a win-win scenario for everyone involved.
René Lacerte is the chief executive and founder of Bill.com, which he launched in 2006.