Open source systems, peer-to-peer lending, cloud computing, big data and crypto-currencies are some of the technologies bank fintech funds will consider investing in, as the largest financial firms seek to play technological catch up.
Manuel Silva Martinez, vice president at BBVA Ventures, a $100 million fund launched by Spanish bank BBVA last year, said: “The way entrepreneurs are seeing the future of the industry is very powerful and probably more powerful than how we see the future of the industry.”
The blockchain, bitcoin's underlying technology, is one of the areas he is interested in.
Over the past year, banks have launched a number of venture funds to invest in fintech companies with the view to using their technology.
From companies looking to compete on services such as foreign exchange transfers, to early stage businesses developing solutions aimed at helping big banks become more competitive, there is a wide range of areas where banks hope to gain insight from new players.
Christophe Chazot, group head of innovation at HSBC, which recently launched a $200 million fund to invest in young fintech startups, said big data, open source and social networks are creating fast-changing environments that “create efficiency gains, customer opportunities and better business models.”
He said: “Compared to other industries, the banking industry has been slow to embrace the digital revolution.”
Executives also highlighted the need for banks to add value to the companies they invest in, so that entrepreneurs can see the benefits of having a large corporation as an investor.
Vanessa Colella, managing director, head of global venturing at Citi Ventures, said: “We feel that if we can’t really deliver value for our companies and our entrepreneurs then frankly they should take the money from someone else.”
She added that a lot of the technology Citi Ventures invests in isn't specifically financial technology, but in areas that still have strategic value for the organisation such as security and data management.
She said: “These are spaces that probably demand other ways to connect these start-up companies to a large enterprises."
The panelists also highlighted how the role of their initiatives will be aimed at understanding what the bank of the future will look like.
Derek White, chief design officer at Barclays, which recently launched a fintech accelerator in London, said: “You will start to see a spectrum of those that play the more traditional banking role and those that become more technology companies that do financial services.”
Executives also added that this is a space in which banks should collaborate.
Matteo Rizzi, general partner at SBT Venture Capital, a $100 million fund launched last year by Russian lender Sberbank, said: “This session is the demonstration that investing in startups is one of the few areas in the banking industry where banks do not compete. What we are building here is really collaboration.” Alternative lending is one of the areas his fund is interested, he said.
Julio Faura, head of R&D and innovation, at Banco Santander, which this year launched a $100 million fund in the UK to invest in fintech companies, echoed Rizzi’s views.
He said: “The days where big corporates and banks could do it by themselves are long gone. Our approach is to find opportunities where we can contribute but not dominate the world.” Areas of interest for Santander are the blockchain, ecommerce and alternative lending.
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