Banks want to buyout or partner with FinTech startups, but concerns over data abuse rise

Rick Steves

FinTech started brewing in the years following the financial crisis, the Dodd-Frank Act and other regulatory policy changes, skyrocketing since 2014 with total funding coming at $12.2 billion with added participation from the banking industry, coming to a total of $19.1 billion in 2015, in a bid to boost efficiency of the business. VC-Backed Fintech […]

Banks want to buyout or partner with FinTech startups

FinTech started brewing in the years following the financial crisis, the Dodd-Frank Act and other regulatory policy changes, skyrocketing since 2014 with total funding coming at $12.2 billion with added participation from the banking industry, coming to a total of $19.1 billion in 2015, in a bid to boost efficiency of the business. VC-Backed Fintech investment continues to lead funding, and saw a 106% growth from 2014 to 2015.

fintech trends

Source: KPMG

The strategy, however, is coming to a change. Instead of buying in as minority stakeholders in startups, big banks are now looking to partner with or buyout startups, making them part of the business.

Lending, payments, billing, personal finance, asset management, money transfer, remittance, digital currency, institutional tools, equity crowdfunding, insurance, p2p, RegTech, Artificial Intelligence, Big Data, Virtual Reality, cloud applications, are some of the areas – many intersecting – where FinTech is disrupting the financial industry.

Big banks have been diversifying their allocation, investing in almost every FinTech area, given their broad position in the financial sector, from investment banking and insurance to retail banking, etc.

While consolidation is the keyword of the year among competitors, startup buyouts are in fashion as consulting firms have been calling for a serious adoption of FinTech if traditional banks don’t want to lose further market share to entrants.

A $275 million deal saw Ally Financial buying online brokerage TradeKing Group earlier this month, and BlackRock acquired online investment firm Future Advisor for $150 million in August 2015. Texas-based online retirement planning service Honest Dollar was sold to Goldman Sachs.

Finnish banking startup Holvi was bought by Spanish bank BBVA in March, and BNP Paribas stroke a partnership deal with SmartAngels just recently, as reported by FinanceFeeds.

A pressured banking sector sees benefits to partnering up with startups as way to avoid potential M&A costs, while promoting efficiency in their processes, but integrate and monetize some of the startups, such as marketplace platforms for unsecured lending, has been a challenge with an increased pain: risk of data spills. JP Morgan Chase CEO Jamie Dimon complained about it this month, saying that some third-party apps take more data than needed for their own economic benefit.

That kind of abnormal behavior could endanger the confidence that the financial sector puts in FinTech startups, leading to reduced real-time access to customers’ bank accounts, where mobile banking and finance management apps are heavily dependent on, and could also affect next funding and partnering moves.

 

Read this next

blockdag

These Altcoins Have The Potential To Make You a Millionaire in 2024

The crypto market is witnessing a surge, and certain alternate coins are catching attention for their rapid growth.

Digital Assets

Point72 invests $77.5 million in Bitcoin, Morgan Stanley holds $269.9 million

Point72, the $34 billion hedge fund owned by billionaire and New York Mets owner Steven Cohen, held $77.5 million in the Fidelity Wise Origin Bitcoin Fund (FBTC) at the end of the first quarter, according to a recent filing.

Digital Assets

Binance claims Nigerian officials sought $150 million bribe

A Nigerian court has ruled that Tigran Gambaryan, a Binance executive detained on charges of tax evasion and money laundering, can stand trial on behalf of the world’s largest cryptocurrency exchange.

Digital Assets

Kraken reviews Tether listing in Europe ahead of MiCA adoption

Cryptocurrency exchange Kraken is “actively reviewing” whether to delist the stablecoin Tether (USDT) from its European platform, according to a report by Bloomberg.

blockdag

Discover How MoonBag Coin Presale Stacks Up Against Dogecoin & Litecoin

Discover how the MoonBag Coin presale compares to Dogecoin and Litecoin, with unique features, a robust presale structure, and new opportunities in 2024.

Fundamental Analysis, Market News, Tech and Fundamental

Global FX Market Summary: Federal Reserve Policy, USD, May 17 ,2024

Overall, both the Federal Reserve’s policy and the US dollar’s outlook are shrouded in some degree of uncertainty.

Market News, Tech and Fundamental, Technical Analysis

Ethereum Technical Analysis Report 17 May, 2024

Ethereum cryptocurrency can be expected to rise further toward the next resistance level 3200.00, which is the top of the previous impulse wave i.

Digital Assets

Hong Kong adopts digital yuan payments through Chinese banks

Hong Kong has launched a pilot program enabling digital yuan payments through major Chinese banks, marking the first instance of China’s digital currency project being deployed outside the mainland.

Retail FX

Saxo Bank increases client assets five-fold to $116 billion

Copenhagen-based broker Saxo Bank has achieved a major milestone, surpassing $116 billion (DKK 800 billion) in client assets.

<