Few FinTech Payment Startups Acquired by Banks
Financial technology startups, which are making inroads into the payments industry, are least likely to be acquired by the established banks they are challenging suggests a report.
The fourth edition of the
‘Payments Innovation Jury Report’
contains insights from a panel of 40 business leaders in the payments sector from 23 countries across six continents. It concludes that the most likely end-game for a successful startup developing innovative new ways for making payments in the FinTech sector is being acquired by a major technology firm such as Apple and Google.
After being acquired by a tech giant, the most likely future is then being bought by an established payment tech vendor or a payments scheme. Although an initial public offering (IPO) or other type of public offering is a less likely option, it is regarded as preferable to being bought up by a bank.
“Large, regulated organisations answering to shareholders are not typically breeding grounds for innovation,” commented one of the 40 leaders who contributed to the report, which is sponsored by Currency Cloud, Ixaris and WorldRemit.
“Mould-breaking ideas are more the province of startups, but ‘driving’ innovation requires resources, something the tech giants and networks can leverage once they recognise and acquire innovative small businesses.”
Author of the report and chairman of the payments innovation jury, John Chaplin, comments that it’s not surprising that tech companies are increasingly moving into the space occupied by financial services firms, with examples including Significant acquisitions made by tech firms include Samsung’s purchase of LoopPay and Google buying SoftCard and TxVia.
“This is because most FinTech firms partner with and/or supply multiple banks and therefore being owned by a single bank could be a problem,” says Chaplin.
“There are some notable exceptions to this such as; Barclays’ acquisition of Logic Group, BBVA’s of Simple and Commonwealth Bank of Australia’s of banking technology firm Tyme, but they are rare.”