Emmanuel Touboul, Head of Startup Acceleration at L'Atelier
An expert eye

Emmanuel Touboul

Head of acceleration

Many Fintech newcomers are now deciding to pivot, repackaging for the use of established banks products and services originally aimed directly at the general public.

The first reason for this sea-change is that it is no easy matter to compete with banks, especially when it comes to winning over the general public. In order to reach out to the mass market, Fintech firms need to overcome non-negligible obstacles – ensuring compliance with banking regulations; managing relations with customers who are unwilling to put up with any technical hitches in their financial affairs; and generally building trust, an indispensable condition for anyone who wishes to carve out a share of the financial market. Addressing these issues costs a great deal of money and has a serious impact on Fintech startups' business models, which in turn makes them less appealing to investors. Add to this the difficulty of gaining access to the market, not least the struggle to be seen and heard when major banks are investing considerable sums every year in marketing campaigns. Meeting these challenges is likely to cost fintechs a lot of money, which will weigh heavily on their profitability. A favoured few may get there, but the others will have to re-think their growth strategies and realize that the best way to get into the market is to work with traditional banks. One salutary example is that of robo-advisors, whose creators are struggling to obtain the necessary impetus to attract investors’ attention.

The same thing is happening with account aggregators such as Budget Insight and Linxo which, in spite of a promising regulatory environment – not least the imminent advent of the second European Payment Services Directive (PSD2), which will force banks to make data available and thus enable aggregators to initiate transactions – have decided to offer their services to banks. Nevertheless, these pivoting manoeuvres by the newcomers should not lead the major banking corporations to declare victory and rest on their laurels. It is absolutely clear that the Fintech companies are engendering an innovative spirit and bringing ideas that are likely to shake up the world of finance. It is therefore in banks’ interests to open up to startups and also to think seriously about investing in them

While the level of investment will vary according to the specific strategy pursued by each individual banking corporation, no bank these days would shy away from involvement in the Fintech ecosystem.

The Fintech ecosystem enables banks to take advantage of a range of opportunities, such as for example farming out part of their R&D or delegating it to an accelerator programme, usually in order to address an innovative area in which the bank does not wish to invest directly. This offers financial institutions a fantastic opportunity to accelerate their digital transformation. However, the recent developments have reshuffled the cards once again and thrown up some new issues. Startups wishing to cooperate with banks will have to adapt to their new target market and make some concessions. The whole area of data processing, for instance, often proves to be a thorny point. The Fintech startups will also need to show a mature attitude in their commercial relations with their new allies because while it may be perfectly possible to win over one bank, it will be far from easy to turn them all into clients. And, without debating the rights and wrongs of their approach, some will definitely hesitate to offer exactly the same functionality as their competitors.

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Meanwhile, the banks will have to come up with attractive investment mechanisms, because their entrepreneur partners may well think twice about giving their main client a seat on their board, which might then reduce their chances of being able to work with other banks. After all – it is perhaps worth underlining here again – Fintech startups tend primarily to be more interested in the bank’s distribution channels than their money. Secondly, the banks will have to be able to promote these young newcomers to their customers while at the same time leaving the startup founders sufficient operational and strategic room for manoeuvre – which will not be all that easy when you consider all the security issues and the existing structures in place to address them!


So, it looks as if the Fintech specialists are not about to radically disrupt the banks but they will nevertheless be very much part of the banks’ thinking and will increasingly become part of their growth strategies. And the most sharp-witted and efficient banks will no doubt succeed in seizing the right opportunities.


By Emmanuel Touboul