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Corporate innovation refers to how businesses experiment with modern practices, technology, and improved strategies to improve the competitiveness of their business models. Corporations that find that start-ups are ahead of them in innovation may partner with the start-ups to promote corporate innovation and stay competitive.

Financial Technology, popularly known as ‘FinTech’, has widely been described as the application of technology in delivering financial products and services to clients or customers. In the Fintech space, corporate innovation is often manifested when companies either hire or partner with Fintech companies to assist them to drive their innovation, modernise their business operations or simply improve service delivery.

There is no definite structure for collaboration between Corporations and the Fintech industry. The structure adopted by an entity is influenced by pragmatic business decisions and an interplay of internal and external forces that apply in the industry of operation.

Some models for corporate-start up partnerships in the Fintech industry are:

a. Startup incubators

A startup incubator is a collaborative program designed to help new startups succeed. It usually helps tech entrepreneurs solve some of the basic problems associated with running a startup by providing a workspace, seed funding, mentoring, and training to help tech entrepreneurs grow their businesses. Start-up incubators create an enabling environment for start-ups to engineer solutions and receive mentorship and support from industry experts.

b. SaaS (Software-as-a-service)

This is an arrangement where Technology companies license or sell their technology to institutions. Typically, this would be a white-label offering where a company puts its branding on a product created and run by a tech start-up to offer an end-to-end solution.  The corporations obtain authorization to use the software for some time and pay for the software they are using.

 c. Referrals

This is a model where a corporation refers clients to relevant Fintech startups to plug the gaps in their service offerings. Fintech companies,  stand to benefit from a constant stream of business, and revenue through the companies’ loyal customer base.

d. Outright Purchase

Corporations may also opt to either wholly or partly purchase an interest in a software, innovation or product created by a Fintech startup. In an outright purchase, the benefit for corporations is that they get exclusive rights to the technology that could give them a competitive edge, rapid expansion into new markets, and a new customer base.

For Fintechs, merging under an established corporation’s ecosystem also means access to additional funding for the further development of products and hands-on financial market expertise to guide product creation.

e. Funding

Several organizations collaborate with tech companies through equity and debt funding. Equity funding gives the investing company shares in the fintech company in return for the amount of money invested in the company. This is usually done by way of share issuance to the funder in exchange for  funds invested in the company. In regulated industries like banking and finance, depending on the amount sought to be invested, approval of the regulator may need to be sought.  Funding through debt however usually takes the form of loans from the investing company to the Fintech on agreed terms.

In conclusion, there are various forms of partnerships that can be explored. When innovation is done within the ambits of the law, it allows corporate-FinTech partnerships to thrive and to benefit from the protection of the law and the incentives offered by the regulators.

Author: Priscilla Wepia Ametame

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