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Fintech firms seek backing from banks looking to accelerate innovation
Entrepreneurs in Europe’s fintech sector are pushing low-cost payments solutions to steal market share from banks, hoping the challenge they pose will spur the lenders to seek partnerships.
Many start-ups are eyeing deals or potential backing as they meet with the top executives of French financial institutions, from BNP Paribas SA’s Jean-Laurent Bonnafe to Societe Generale SA’s Frederic Oudea, in Paris at the city’s annual Fintech Forum. How fintechs defy incumbents is a prime theme of discussion there, with payments an area of focus, as banking alternatives from Alipay to M-Pesa already dominate in China and Africa.
“Banks will continue to acquire smaller and more nimble companies to add value to their products,” said Jacob de Geer, co-founder of Swedish payments company iZettle. “They need to innovate to keep customers, and they’ll continue going to fintech for that kind of innovation.”
Fintech solutions have become a competitive tool for banks as online consumption and transactions soar. Global investment in fintech was $8.2 billion in the first nine months of last year, according to a KPMG report. At the Paris gathering, around 140 firms from more than 30 countries put their ideas on display, presenting everything from robo-advisers to artificial intelligence-driven wealth management.
“There’s a lot of room” for cooperation between banks and fintechs, and payments are likely to be an area where lighter regulation creates opportunities for disruption, BNP Paribas’s Bonnafe said at the forum. Whenever newcomers “can provide us with a better service or better approach, I can tell you we are really happy, because there are so many things to be delivered” for customers, he said.
IZettle, which has positioned itself as a cheaper alternative for smaller businesses that need to process card payments as well as other services, is preparing for an initial public offering this year but doesn’t exclude looking for private funding instead, De Geer said. The company is open to more partnerships after it expanded out of Europe to Brazil and Mexico through a deal with Banco Santander SA, its co-founder said.
“The financial services of tomorrow will revolve entirely around partnerships,” SocGen Deputy CEO Severin Cabannes told reporters Friday, two months after the bank announced it will set up a fund of as much as €150 million ($186 million) to accelerate innovation. “We’re going toward an open world” for financial services, based on partnerships and team-ups, he said.