Banks want to invest larger amounts in fewer fintechs

According to FT, the idea is that the industry has to look for "partners who can help them turn around their core business"

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  • A EY specialist says that there are at least three main reasons for this;
  • One of them is that more mature fintechs already have a high value market to be acquired.

Apparently, the boom of fintechs in recent years is causing a change in the way banks invest in this kind of startup. An analysis published by Financial Times indicates that traditional financial institutions are looking to invest larger amounts in fewer fintechs. The idea is that the industry has to look for “partners who can help them turn around their core business”.

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According to FT, in addition to the fact that more mature fintechs have a high market value, Chris Schmitz, European fintech leader for EY and professor at the Frankfurt School of Finance, gives two other reasons for this change: fintechs that changed their business models from B2C to B2B due to the acquisition costs of individual customers; and the culture shock that still exists between banks and fintechs, which, in the medium term, eventually leads employees and founders to leave the traditional institution after contractual restrictions, and to a scenario of less innovation.

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He also said to FT that banks currently see big techs as their biggest competitors. With a lot of money and technology knowledge, it would be easier for them to get a license to act as a bank than the reverse scenario where banks have to chase technology.

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