The COVID-19 crisis has challenged financial institution (FI) operations at every level, confounding bankers’ best-laid plans for support, performance, and profitability. As banks and credit unions work to address growing demands on resources and technology, they’re re-examining where third-party providers like fintechs and vendors may provide relief.

While partners can help tame timing and cost pressures, FIs need to assess their expectations for these relationships. Below are key activities that can help financial organizations ready themselves for new partnerships or enhance alliances they’ve already built.

Evaluate existing partnerships

According to McKinsey & Company, FIs typically outsource 40-50% of their operating expenses. These vendor relationships deserve a fresh look; existing partners may offer a faster, more cost-effective answer to meet unexpected needs and gaps.

FIs should consider identifying strategic partners – those exhibiting trustworthiness, relevant capabilities and innovations, reliable performance, and effective two-way communication. Open and honest dialogue with established strategic partners can help uncover new products, services, and collaborative opportunities to address pandemic-fueled problems. Another plus: adding capabilities from an existing partner is often less costly and complicated than onboarding new solutions and new vendors.

Seek companies with similar (but not identical) traits

For many, compatibility is a driving force; humans generally find some degree of similarity beneficial and preferable in relationships. It’s not a huge leap then to understand why similar competencies and strategies can simplify problem-solving and accelerate innovation within business alliances. Common targets, vision, values, and strengths make it easier for FI and partner teams to build cross-functional plans, share complex ideas, and develop creative workarounds when challenges arise.

Employing appropriate due diligence is often the first step in ensuring compatibility with third-party providers. After establishing an alliance, many FIs find regular checkpoints on scheduling and timing, resourcing commitments, skill sets, security and compliance, metrics, and ROI useful for staying in sync. As an alliance grows and matures, mutual agreement on priorities and results remains crucial.

Develop meaningful metrics

“Where performance is measured, performance improves” is a maxim that certainly applies to partnerships. Managing, tracking, and evaluating alliances are all equally essential to ensure expected outcomes.

FIs should focus on progress indicators to gauge the ongoing health of the alliance (such as the volume of new ideas generated, or speed in reaching critical decisions), as well as metrics that speak to ultimate performance (unit sales, revenue targets, etc.). Progress indicators help chart the partnership’s momentum, especially during early or less dynamic stages of the journey. These meaningful, realistic progress metrics are invaluable for ensuring enthusiasm and support remain strong.

Foster continual collaboration

Teamwork can be encouraged in several ways within a partnership. Mechanisms such as committee assignments, panel discussions, and recurring brainstorming sessions are important, but the willingness to collaborate can be encouraged through additional methods.

Both organizations need to honor resource and timing commitments. Ensuring the right resources are available and accessible significantly improves cooperation and collaboration. Avoid the “blame game” when problems arise. Instead, encourage a solution-oriented approach to course correction.

Before entering a partnership, a complete risk/reward assessment should be conducted. A partnership is a major strategic decision, and while most are useful and practical, some may be a fast means to an end for an FI and its account holder.

When a partnership opportunity comes along, please use these partnership pointers that outline central issues and questions for further research. They will help in making the right decisions.

Additional resources

Visit Q2’s case study library to learn more about our work with FI partners facing a variety of challenges.