The fintech dating game is on in Paris. Entrepreneurs in Europe’s financial-technology sector are pushing 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 are eyeing deals or potential backing as they converge on Paris this week to meet with the top executives of French finance, from BNP Paribas SA’s Jean-Laurent Bonnafe to Societe Generale SA’s Frederic Oudea, at the city’s 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.
“Banks will continue to acquire smaller and more nimble companies to add value to their products,” said Jacob de Geer, co-founder of Swedish payments company iZettle.
“They need to innovate to keep customers, and they’ll continue going to fintech for that kind of innovation,” he added.
Fintech solutions have become a competitive tool for banks as online consumption and transactions have soared. Global investment in fintech was $8.2 billion in the first 9 months of last year, according to a KPMG report.
At the Paris gathering—on 30 and 31 January 2018— about 140 firms from more than 30 countries put their ideas on display, presenting everything from robo-advisors to artificial intelligence-driven wealth management.
European companies are earmarking increasing funds for early-stage fintech projects, either through direct acquisitions or through venture funds.
Corporate venture-capitalists poured more than $600 million into fintechs in Europe in the first 9 months of 2017, the highest level on record, data by KPMG showed.
IZettle, which has positioned itself as a cheaper alternative for smaller businesses that need to process card payments, is preparing for an initial public offering this year but doesn’t exclude looking for private funding instead, De Geer said. After it expanded out of Europe to Brazil and Mexico through a deal with Banco Santander SA, iZettle is open to more partnerships, its co-founder said.
“The financial services of tomorrow will revolve entirely around partnerships,” Societe Generale Deputy chief executive officer, Severin Cabannes told reporters on 26 January 2018, two months after the bank announced it will set up a fund of as much as 150 million euros ($186 million) to accelerate innovation.
“We’re going toward an open world” for financial services, based on partnerships and team-ups, he said.
At the conference in Paris were Germany’s mobile bank N26, French small and medium enterprise lending-platform Lendix and GiniMachine, a Belarus startup that provides artificial intelligence to assess credit risk.
Among fintechs seeking partners is Famoco, which makes Android-based software and devices for securing electronic transactions.
It’s looking for deals to help distribute its products globally, and would be open to discussing a stake sale, its co-founder Lionel Baraban said. He’s not ruling out selling the company, though that’s not currently a priority.
Famoco’s 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’s Alibaba Group Holding Ltd that’s pushing forward with plans to expand in Europe.
“We’re stealing market share from the well-established players, because we’re coming in with a cheaper and more flexible payments solution,” Baraban said.
“We truly believe there’s a possibility to create a new global leader in transactions. Still, we need partners of big scale to help us distribute,” he said.