Long live the fintech accelerator.
With all due respect to American Banker‘s BankThink portal and Forrester Research, the future could not be brighter for fintech accelerators, and I write that not just because Bank Innovation has launched an, er, fintech accelerator with Fiserv, U.S. Bank, and Cross River Bank.
Last week, Oliwia Berdak, a senior analyst at Forrester, the research consultancy, published a BankThink opinion article that boldly stated that “Bank Fintech Accelerators Are Destined to Die.” Berdek, who unfortunately made a multitude of errors in her column, was right about one thing: bank fintech accelerators will not thrive, but fintech accelerators are set to soar.
Let me explain. Berdek’s column addressed internal accelerators at banks. Here’s what she said about them:
[B]usiness incubation is notoriously difficult and accelerators gobble up resources. Good ones require a lot of work upfront to sift through applications and select the most promising startups to promote.
Yes, that’s true. An internal accelerator at a bank faces a far more pronounced challenge: it must go at it alone, largely outside the fintech ecosystem. This is akin to a hyena hunting outside the pack. It’s just a tougher task.
A successful accelerator operates within the ecosystem. And a successful fintech accelerator operates within the fintech ecosystem. The fintech ecosystem, in our view, encompasses not just the Silicon Valley scene, but traditional financial services companies, traditional banking technology companies to “stitch” new technologies to the establishing banking economy (where the real scale is), and the global fintech scene, because — and this might shock some Silicon Valley diehards — not all great fintech startups come out of the Bay Area. I know, I’m “shocked,” too.
This is why Berdek’s column is so curious. Her assertion in the very first line of her column that “These days most banks seem to have an innovation lab, accelerator or a venture capital fund to encourage tech experimentation” is wide of the mark. The truth is many banks seem to engage in an innovation strategy to “encourage tech experimentation.” This engagement with innovation might include an internal innovation operation, such as a lab, but in most cases also includes an engagement with the broader fintech ecosystem. (We obviously maintain that banks should pursue outside accelerators that are better incorporated into the fintech ecosystem than is possible by any inhouse program.)
Finally, when I read Berdek’s column, I sensed a certain despair. Pursue an internal innovation venture and you will find failure seemed like the overall message. I hope bankers don’t despair.
We believe that fintech innovation remains in its early stages, that great advances are yet to come, and that even technologies we know of today will find meaningful new applications in the years to come. And we also believe that it is banks that are the key partners in this advancement. Yes, there are fintech startups that have “unicorn-ed” outside the bounds of traditional banking and bank charters, but they are relatively few. Rather, while innovations might come in smaller bites in the future, they will be made meaningful by attaching to the established customer bases of banks. Or, to put it another way, everyone wins: startups, investors, banks, and consumers.
Learn more about fintech innovation at Bank Innovation Seattle on Feb. 29 and Mar. 1. Request your invitation here.Like This Post