Would Big Boyz (Banks) be hunting for deep tech skin?
The neo-normal is likely to bring many changes on the traditional turf of big banks and big technology companies. Why do we say so? Are these large banks going to acquire new-age deep-tech companies?
Why not? They are anyway prime partners for collaboration. The smaller and niche-genre of deep tech & fintech firms need the right platform to showcase their competencies and create larger use cases supported with the right financial resources to further fuel their innovation. That’s where both deep pockets and big muscle will jump in.
The larger banks, too, are looking at extending their banking services to the under-banked segment – especially SMB’s. They would like to resolve the issues of access and reach to these unbanked constituents through digital technologies while ensuring a superior level of customer experience, intimacy and engagement. The deep-tech firms will play different roles to across the spectrum for the larger banks like as an enabler, bringing value addition for their customers to creating a competitive edge. Better and deeper outreach, data edge, analytics, faster customer service, frictionless transactions, sleek UI and personalisation capabilities are just some dimensions where the new-age players fill in big gaps for the incumbent banks.
The roadmaps could fork in many directions – from on-boarding and adoption of the deep tech solution providers and then extending these partnerships into a stake partnership through investments. Or maybe acquiring them to keep the innovation engine well-pumped up or activated. For instance, a large bank and its IT systems’ backbone of core banking will need regular updates in their transformational journey.
The major area of these collaborations, alliances and investment-synergies will be to expedite the big track of open banking and APIfication. That is what will drive, and bolster, additional value-added services for their customers.
As we can easily observe and surmise, many big technology firms have been acquiring a lot of such small and nimble deep-tech firms for their innovations and disruptive technology-edge. Going forward, however, we may witness large banks showing more inclination to acquire the niche players and they are competing with the big technology providers in that context. The biggest advantage these large banks are riding on is their understanding and of functional capabilities and the depth of competencies developed over the decades of business.
In the reckoning of some industry experts and investment analysts, we will see such trends emerge sharply and densely in the mature markets. Goldman Sachs has invested in 58 fintech companies and Citibank has its investment-arms stretched into 44 organisations. In the year 2020 itself, we have seen technology big players like Amazon acquiring notable stakes in Bank Bazaar and Capital Float, while Google was seen doing the same in Aye Finance. This sets the tone for the future acquisition of cross-vertical mergers and acquisitions. The good news for new deep tech start-ups is that they can leverage the industry expertise of large and might banks. As to the big-bracket banks, they will surely find the right suitor for their innovation drives, to expand their addressable market and extend value-added services to their existing customer with fabulous customer experience.
It is hard to say who is hunting who, but the campfire, certainly, looks cozy and interesting. More marshmallows, please!
