Banks Should Scavenge Troubled Fintechs’ Talent and Technology

By Steve Cocheo, Executive Editor at The Financial Brand




As a recession seems increasingly likely, 2023 advice for banking from Forrester analysts stresses the need to 'batten down the hatches' while preparing for an eventual upturn as well. Innovation must become practical and pragmatic, but future competitiveness can't be sacrificed for current profits.


Banking has an unusual opportunity to glean the best from fintech companies slammed by a shortage of venture capital and lack of profitability. But financial institutions could blow this opportunity — and the dollars they’ll put into it — if they simply treat it as a fire sale and don’t use what they pick up intelligently and appropriately.

This warning comes from the banking team at Forrester as one of a series of technology-oriented predictions for 2023.


The research and consulting firm believes the massive drop in fintech valuations will drive many to seek partners or to put themselves on the block.


Fintech Crunch Changes the Balance: Forrester projects that by the end of 2023 one out of ten fintechs will either be bought by a bank or sell an equity stake of at least 50% to a bank.

How Fintech Friendly Is Your Bank?


“Often many fintech executives may have originally come from traditional banking and financial services,” elaborates Clarke. “They moved away to fintech because they didn’t feel like the banking culture was right for them. They wanted to do more innovative things, and to move faster.”


Banks that don’t “transplant” acquisitions of companies, tech and talent into good ground won’t hold onto the essentials. Once an upturn comes, former fintech staffers who aren’t happy in banking will look elsewhere or create their own startups, Clarke warns.

Acquirers of whole firms may still retain the software and other intellectual property that their fintech targets bring aboard.


“But at the end of the day, you’re going to need the people in order to keep it current,” says Clarke. She adds that without the talent, “it’s questionable whether banks have got the skills internally to help it survive and go forward.”


The “acqui-hire,” to use a increasingly common term, of talent by banks with deep pockets to buy fintech firms hasn’t always worked out for the talent. For example, BBVA’s U.S. arm bought the fintech Simple, hired marketing muscle, and not long afterward shut it down as the banking operation was on its way to being acquired by PNC.


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