How Banks are investing in Fintech

speed-dating

Speed dating? Hiring Silicon Valley scouts? Investment funds? Partnerships?

HSBC’s recent investment in Kyriba and BBVA’s investment in Taulia show if you cant beat em, join em strategy being deployed by some banks around Fintech. Or there is the Citibank method, put your toe in the water with a number of ventures to keep abreast of the latest technologies before they scale and become mainstream.

The reality is that connected commerce, APIs, mobile technology, peer to peer lending, crowdfunding, and of course cloud and data analytics are and will impact bank product offerings, alliances, partnerships, organization structures and of course the way they do business going forward.

An analysis of the strategies being adopted by banks across the world to address FinTech shows the preferred strategy for most banks is to create start-up programs to incubate FinTech companies. London is the Fintech hub, as European banks dominate FinTech related engagement with over 80% of the banks analyzed headquartered in Europe. North American banks account for only 20% of the banks.

In fact, Sberbank, with its fund Silicon Valley based SBT Venture Capital, has already invested about US $50 million into Moven (track spending via mobile) and NetGuardians (uses behavioral analysis to monitor risk in a bank’s operation)

If anything, these start-ups are changing the way banks work but not necessarily disintermediating the banks altogether. Remember, Paypal, Square and others still require the banks payment infrastructure. Lending Club, Prosper and OnDeck use the banks for referrals, and of course many out there use the banks for balance sheet given their cheap access to deposits.

Chart courtesy of @avinashswamy

fintech spend

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