Big Banks Poised to Scoop Up Fintech Startups, Report Finds

(Bloomberg) -- Big banks may have scoffed when a gaggle of financial technology upstarts promised to reinvent their business. Now they want to buy them.

Almost 50 percent of financial services firms around the world plan to acquire fintech startups in the three to five years, according to a report Thursday by PricewaterhouseCoopers LLP. And eight out of 10 institutions foresee making strategic partnerships with peer-to-peer lenders, digital money transfer platforms, and myriad other firms that are reshaping the business of money.

The findings show that fintech is shifting into a new deal-making phase, said Steve Davies, the head of PwC's fintech practice in Europe, the Middle East and Africa.

"Fintech collaboration is not about jumping on the latest bandwagon -- it's about finding the best, most efficient way to deliver your business strategy and ultimately better serve your customers," Davies said in a statement. "The financial services industry has embraced fintech."

Fear may be motivating finance leaders as much as the desire for innovation. The 20-page report, titled “Redrawing the Lines: FinTech's Growing Influence on Financial Services,” found that four of five banking executives worry they will lose revenues to independent fintech firms. PwC polled 1,308 financial services managers worldwide for the study.

A groundbreaking deal in France this week may be a sign of things to come. BNP Paribas agreed to buy French digital bank Compte-Nickel for 200 million euros ($213 million). That's the biggest fintech acquisition ever in France, said Maia Thomine Desmazures, a spokeswoman with La French Tech, a government-backed group to promote French startups.

"We expect to see bigger deals in 2017 as the sector matures," Desmazures said.

If banks do embark on a fintech shopping spree, that could be a windfall for venture capitalists. Investors plowed more than $132 billion into fintech startups globally between 2010 and 2016, according to KPMG International and CB Insights, a New York research firm. Last year, there were 51 acquisitions or initial public offerings of fintech firms in deals worth $1.1 billion.

To contact the reporter on this story: Edward Robinson in London at edrobinson@bloomberg.net.

To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net, Cindy Roberts, Paul Armstrong