Last year Dr. Richard Swart suggested banks might want to start thinking about acquiring or partnering with their altfin competitors. Today the wisdom of that advice is clear, and there isn’t a bank that isn’t seeking the right opportunity. In his keynote at the Banking Growth Forum, Swart will discuss the market forces turning disruptive competition into collaborative opportunity, and examine the dynamics behind recent deals. He’ll also talk about what could go wrong and what banks and altfins need to be thinking about as they plunge ahead into this new era of cooperation and assimilation.
As Alternative Finance Scholar at UC Berkeley’s Haas School of Business, and one of the foremost authorities in fintech and crowdfunding models, Richard is receiving plenty of requests for his time. Nevertheless, he freed up a few minutes recently to talk with me about why this is such a golden moment for banks. Here’s some of what he had to say:
“The recent troubles altfins have encountered in funding markets and on Wall Street are symptoms of the fundamental business model and process issues driving these companies into the arms of banks. Acquiring and keeping good-quality customers is a big challenge—much more difficult than most altfins had expected. It turns out, millennials, who may be lured to come on board by a cool new fintech app, are quick to jump ship when your competitor offers a better price or better app. They’re loyal to technology, not to institutions.”
In this light, partnering or being acquired looks attractive to altfins, says Richard. Banks have customers, customer data and low-cost funding from deposits. And altfins have what banks need to thrive in markets shaped by customer empowerment and regulatory scrutiny.
“In many cases, altfins have emerged as an entrepreneurial response to structural market problems caused or exacerbated by regulations—student lending and SME lending are prime examples. The altfins have figured out how to use technology and big data analytics to address some of these problems. They bring innovations that may help banks reduce risk while dramatically compressing application processing and decision cycles. ”