Bigtech M&A threatens B2C fintechs, not B2B

While bigtech acquisitions may hurt B2C fintechs, B2B startups will continue to grow through bank partnerships, a Money 20/20 Moneyfest panel argued yesterday.

“Bigtech firms and card networks recently have been on a buying spree. We’ve seen a lot of mergers and acquisitions in the last few years and economists refer to the ‘kill zone’ around digital platforms, they talk about the threat of acquisition and that this can actually make venture capital investment in startups less likely because they may be acquired before they can build up a large userbase,” said Jon Frost, senior economist, Bank of International Settlements.

Startup acquisitions by bigtech players Google, Amazon, Facebook and Apple have been under fire following a US Congressional antitrust report released earlier this month.

But according to Sheila Kagan, chief executive at payment fintech PayKey, acquisitions do not pose a threat to smaller players. Rather, they create an opportunity for fintechs to work alongside banks as B2B partners as opposed to B2C, she said during the panel.

“Banks are seeking fintechs that can conduct a B2B solution that helps them support this transition they are facing at the moment. Building layers of data segmentation, personalisation – all of this is actually a huge step for all fintechs. If you look at the current situation [with the pandemic], it just expedited the need for this new ecosystem for the banks, so it created a lot of opportunities. A lot of new money is actually driven towards this direction,” she said.

“[Banks] have so much lack of understanding of user need and they are seeking the solution from the fintech companies.”

According to Siri Børsum, global vice president of finance vertical eco-development and partnerships, Huawei, bigtechs will not stifle competition in financial services.

“We will always have competition in this industry for many reasons, but I think mainly because there is a lot of money involved here and that attracts innovation. And then we also have all the demanding customers … we demand things to work more effortlessly now than before. And then you have the fact that this market is dominated by so many different players,” she said on the panel.

“We will see competition in this game around new roots of profitability, we will see it in terms of approaches that are new, approaches to customer engagements, and I think we will see that there will be huge competition in attracting the best and the right talent, and then the strong relationships and the partnerships that everyone now needs to take seriously because no one will manage to do this on their own.”
Kagan agreed.

“The fact that the big four [bigtech companies] can actually play along in a very different way than the bank actually creates a huge opportunity for startups like ourselves to really be part of this evolution and help make the transformation [banks] are eager to do,” she said.

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