Banks see FinTechs as 'annoying mosquitos’
Written by Hannah McGrath
Established financial institutions should stop seeing FinTech startups as an “annoying mosquito” circling their business and strike up partnerships with their more nimble digital rivals, according to a panel of experts.
Speaking at the FinTech Connect conference yesterday, a group of startup funding experts agreed that the only way for established players to adapt to the pace of digital disruption was to reach out to innovative challengers.
Harrie Vollaard, head of FinTech ventures at Rabobank, said many established banks and financial institutions find it “difficult to reinvent themselves” against a backdrop of rapid technological change and shifting customer expectations. As a result, these institutions are now choosing not to compete directly with their more agile rivals, but rather to enter into partnerships with FinTech challengers.
In August it was reported that RBS had co-opted challenger bank Starling to help advice on its plans for a standalone digital bank Bo, while mobile bank Monese and payments app Revolut have partnered with established foreign exchange platform CurrencyCloud to facilitate international payments infrastructure.
Meanwhile Transferwise has also struck similar partnerships with German digital challenger bank N26 and Monzo for international money transfers.
Paul Hamilton, partner at technology transformation firm PA Consulting, agreed that the ‘if you can’t beat the, join them’ strategy has become the obvious path as banks struggle to keep up with the digital innovations and mobile-driven strategies of the likes of Starling, Monzo and Revolut.
He said that for incumbent financial institutions “FinTechs have been this annoying mosquito”, explaining that “we can’t move fast enough, the only option [for banks] is to evolve is to partner with FinTechs”.
Hamilton explained that it was important in such partnerships for the two companies to respect and learn from one another’s cultures.
However, Tara Reeves, a partner at Local Globe, a seed funding vehicle for technology firms, warned that in her experience partnerships have worked best when the FinTech is not a natural customer of the larger company, as there is increased risk of a buyout or takeover scenario.
“They may have shared interests” she said, “but it’s unlikely one would ever buy the other”. Reeves added: “If your partner is a natural buyers of your business then I am very sceptical as to whether that’s going to work.”