The fintech dating game is hot in Paris.
Entrepreneurs in Europe‚Äôs financial-technology sector pushed low-cost payments solutions to steal market share from banks, hoping the challenge they pose will spur the lenders to buy them or seek partnerships with them.
Many startups eyed deals or potential backing in Paris this week as they met with top executives of French finance at the city‚Äôs annual Fintech Forum. How fintechs defy incumbents is a prime theme of discussion there,¬†with payments¬†an area of focus, as banking alternatives from Alipay to M-Pesa already dominate in China and Africa.
‚ÄúBanks will continue to acquire smaller and more nimble companies to add value to their products,‚ÄĚ said Jacob de Geer, co-founder of Swedish payments company iZettle.¬†‚ÄúThey need to innovate to keep customers, and they‚Äôll continue going to fintech for that kind of innovation.‚ÄĚ
Fintech solutions have become a competitive tool for banks as online consumption and transactions soar. Global investment in fintech was US$8.2 billion in the first nine months of last year, according to a KPMG report. At the Paris gathering, about 140 firms from more than 30 countries put their ideas on display, presenting everything from robo-advisers to artificial-intelligence-driven wealth management.
European companies are earmarking increasing funds for early-stage fintech projects, either through direct acquisitions or venture funds. Corporate venture capitalists poured more than US$600 million into fintechs in Europe in the first nine months of 2017, the highest level on record, data by KPMG show.
‚ÄúThere‚Äôs a lot of room‚ÄĚ for co-operation between banks and fintechs, and payments are likely to be an area in which lighter regulation would create opportunities for disruption, BNP Paribas‚Äôs Bonnafe said at the forum. Whenever newcomers ‚Äúcan provide us with a better service or better approach, I can tell you we are really happy, because there are so many things to be delivered‚ÄĚ for customers, he said.
iZettle,¬†which has positioned itself as a cheaper alternative for¬†smaller businesses that need to process card payments as well as other services, is preparing for an initial public offering this year but doesn‚Äôt exclude looking for private funding instead, De Geer said.¬†The company is open to more partnerships¬†after it expanded out of Europe to Brazil and Mexico through a deal with Banco Santander SA, its co-founder said.
‚ÄúThe financial services of tomorrow will revolve entirely around partnerships,‚ÄĚ SocGen Deputy CEO Severin Cabannes told reporters, two months after the bank announced it will set up a fund of as much as 150 million euros (US$186 million) to accelerate innovation. ‚ÄúWe‚Äôre going toward an open world‚ÄĚ for financial services, based on partnerships and team-ups, he said.
At the conference were Germany‚Äôs mobile bank N26, French SME lending-platform Lendix and GiniMachine, a Belarus startup that provides artificial intelligence to assess credit risk.
Among the fintechs seeking partners was Famoco, which makes Android-based software and devices for securing electronic transactions. It was looking for deals to help distribute its products globally, and would be open to discussing a stake sale,¬†co-founder Lionel Baraban said. He‚Äôs not ruling out selling the company, though that‚Äôs not currently a priority.
Famoco counts among its customers Orange SA, the French phone company that launched into banking and has a payments-solution rival to M-Pesa in Africa. Other clients include Alipay, an affiliate of Chinese billionaire entrepreneur Jack Ma‚Äôs Alibaba Group Holding Ltd. that‚Äôs pushing forward with plans to expand in Europe.
‚ÄúWe‚Äôre stealing market share from the well-established players, because we‚Äôre coming in with a cheaper and more flexible payments solution,‚ÄĚ Baraban said. ‚ÄúWe truly believe there‚Äôs a possibility to create a new global leader in transactions. Still, we need partners of big scale to help us distribute.‚ÄĚ
First published at http://business.financialpost.com/entrepreneur/fp-startups/paris-is-city-of-fintech-love-for-startups-seeking-hookups-1