2023 represents a bit of a speed hump because funding costs have increased and new FinTech development has slowed down as a result of difficulties in the VC and private equity sectors. The long-standing pattern of cooperation between banks and FinTechs is still evident, though.
Banks now have a better knowledge of these digital-only start-ups and how they may help the banks’ own technical roadmaps and advancement amid the major digital revolution.
Youakim asserts that “FinTechs are becoming more ‘in touch’ with the compliance and regulation requirements. They have been ‘professionalized,’ integrated into society, and might be ready to enter a bank at this point.
Youakim observed that there would always be interest in FinTechs that concentrate on the “customer-facing” aspect of the equation because banks are constantly looking to expand into new markets. They are also interested in infrastructure and back-end operations improvement.
Searching to Launch and Scale
Although they are improving, banks still struggle with digital, according to Youakim. And in at least some instances, when it comes to developing cutting-edge, digital solutions, “they don’t have the chops or the ability and talent, internally, to launch a new product or get it to scale.”
He emphasized that not every bank will want to acquire its smaller FinTech partners. He said that some banks don’t take on the role of acquirers, instead concentrating on “professionalizing” collaborations. In reality, certain financial institutions, such as Web Bank and Cross River Bank, are experts at “growing” FinTechs to the point that another financial institution is eager to acquire the fledgling company.
