Building effective working relationships between financial institutions and start-ups


Financial services have become a trendy industry for startups. prompting all major banks and insurance groups to seek partnerships in the magical kingdom of fintech startups. The sector is in dire need of novel initiatives; as complicated rules and regulations make financial institutions ever more litigious, leaving as little uncertainty as possible and discouraging risk taking. The ability to satisfy the regulator’s requirements, which in other times would have been considered excessive zeal, is becoming a competitive advantage. In a disillusioned financial world, the emergence of start-ups with bold strategies and fearless leaders, bypassing procedures to launch services in a few months under no regulatory control, provokes envy and admiration. Regardless of how it is regarded – with some amusement like an old man facing arrogant kids, or with suspicion like barbarian warriors calling to « change the world », the innovation community now concerns everyone.


Apart from bringing fresh ideas and sparking imagination, interaction between major financial institutions and start-ups is motivated by several issues: it is first and foremost a source of potential revenue not only for traditional banking and insurance products, financing and consulting, but also for wealth management. But enhancing the collaboration with digital start-ups is also a way of promoting an innovative and dynamic corporate image among customers and the general public. This is just a key component of innovation strategies either to develop the entrepreneurship culture, which is missing in financial services, or identify disruptive business models for the future.


If the major financial institutions have all embarked on digital transformation by placing the relationship with start-ups at the center of their communication, these start-ups are treated as more than just corporate customers by banks. With a very high degree of uncertainty, disruptive dynamics that can shift from one model to another at any moment, start-ups are inherently unpredictable, making it difficult to assess risk, when risk assessment is the baseline for new business client-banking relationships. To overcome the constraint of an economic model that is difficult to build, banks mostly embraced partnership models successful in technology sectors: labs, incubators, accelerators in which entrepreneurs are considered primarily active contributors to innovation. These programs, sometimes even conflicting within the same groups, are multiplying. There are so many opportunities for innovation; the profusion of initiatives should certainly not be feared. Yet as always in a new context, there is some danger in developing projects massively, such as the market trend to commonplace products and the replication of successful projects like incubators, just not to appear to be lagging behind but with no clear ambition or positioning. What will go on is rather easy to imagine ; working premises will be provided below market price, with colorful design and meeting points, promoting a young and friendly image (that will particularly appeal to internal employees who don’t enjoy such conditions), and will be quickly fully occupied if they are well located.  But is it enough for success? Because in the world of start-ups, what matters is not the location but the « ecosystem ». The ecosystem is not only the connection to the digital world but also the opportunity value – that is the access to anyone strengthening the start-ups’ fragile business model: business angel, mentor, partner, client, lawyer, technical expert. In this respect financial institutions have nothing to be ashamed of, as they have things to offer, provided they achieve optimum market positioning in a world which is difficult for them.


The best method for developing constructive relationships with start-ups is therefore to define and focus on priority targets. The world of young businesses is as diverse as the population of individuals on Earth and being active on all fronts is just devastating. Start-ups that are chosen as partners should reflect the ambition of financial institutions to either identify disruptive technologies, develop new banking or insurance solutions, or to foster exchange with client companies. Then it is important to understand what innovative companies expect and how to meet their needs. Workplace and services are already a lot, interaction with the institution is better. Big banks and insurers need to make the most of their strengths. They know their trades better than anyone. Some start-ups may dream of “uberizing” banks, but many understand the value of working in partnership. They have to build an ecosystem, an informal and open network that is enriched by mutual exchanges and that can make sense of the collaboration between large companies and start-ups. This imposes to be supported by partners who will provide services and organize events encouraging innovation, but also to provide young companies with their experience, network and advice by making direct links with internal collaborators. Contrary to what might be expected, at the time of digital communication, what young start-uppers value most is first and foremost the quality of human relations …


Financial institutions have a lot to learn about the world of innovation and initiatives are naturally taken in this respect. But any of them having an old disused warehouse to convert into a start-up incubator will be exhorted to take some time (not too much) to think before deciding what to do with it…