Innovation is risky, so when it comes to funding new fintechs, banks should hold with a more traditional view of risk than the one proposed by Silicon Valley.
In other words, banks can apply the famous “move fast and break things” mantra of Silicon Valley’s technology entrepreneurs to quite a few facets of the industry—but investing in fintech startups shouldn’t be one of them. At least that’s the strategy for BNP Paribas, as the bank tests the fintech waters.
“We really want to work with startups that can increase our efficiency or better our relationships—we’re not looking at it from a speculative frame of mind,” Sadia Halim, head of innovation for BNP Paribas, told Bank Innovation. “It may be easier to first work with more established fintechs with a bit of history as we get more comfortable with these partnerships.”
An increasing number of financial professionals see startup culture as a challenge to partnerships, studies show, meaning working with a more established fintech would also ease the strain of a cultural shock.
Banks also need to keep things like regulatory concerns—costs of which FIs expect to increase during the remainder of the year—in mind when investing.
For banks that are just starting to build an internal innovation ecosystem, partnering with more established fintechs can provide a confident foot in the door. In addition, there’s nothing to suggest that partnering with an “older” player will stall innovation, or will make a bank less interested in leading the industry change.
“I approach innovation with an open mind, because I have always been interested in change,” Halim told Bank Innovation. “When I look at an industry changing I don’t see it as a negative, I see it as an opportunity.”