IF YOU CAN’T BEAT ’EM

Banks embrace a former rival.

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Banks embrace a former rival.

A new chapter is unfolding in the David versus Goliath battle between financial technology (fintech) start-ups and incumbent banks. The traditional rivalry is entering a stage of “peace talks”, as both sides realise they have a lot to offer each other. For example, Barclays has put millions into its accelerator programme, where about a dozen fintech firms are offered seed money and working space in return for a single-digit stake in their firms, the bank’s brand name, and potential contracts should the start-ups’ products be promising.

Spanish banking group BBVA, who bought out fintech company Simple in 2014, provided the networks and financial know-how to help the eponymous app more than double its user base in the short span of one year. The bank with the world’s most mobile users (at a count of 22 million), JPMorgan Chase also recently engaged 18 technology partners to advance its mobile payment system, rather than tackle the problem in-house.

The trend signifies that banks have been stirred to action in shoring up their tech-based services, perhaps by the billions of dollars in missed transactions over the last five years, or by the brain drain due to top executives leaving to work for fintech start-ups. To combat the latter problem, they’ve been kick-starting “innovation labs” to woo their own pool of young talent, the latest of which is the HSBC Innovation Lab at Collyer Quay. Looks like banks are putting their bets on the small guys this time.

BREAKING NEW GROUND

Last year, a $1.4 billion investment by Japanese telco Softbank in Sofi set the record high for fintech funding in a single round.