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At the onset of FinTech, there was no love from the traditional banks. As on the surface, it looked like they were out to replace banks, but it later emerged that the banking system as it is set up is resilient and necessary. However, it is deplorable when it comes to last-mile reach and convenience for the customers.

It then became apparent that banks and FinTech should work together by synchronizing their activities. The relationship that has proven more often than not, a win-win situation for both parties. Though admittedly, this is a love-hate type of relationship, as there are incidences when each party appear to be undercutting the other.

Nonetheless, there are some innovative entrepreneurs out there who come up with a very promising FinTech solution. Some of these entrepreneurs are driven by the goal of having a secured source of income that is stable and assured, which mostly come from being employed. As with entrepreneurship, the income streams is uneven; some months it is a lot, while some it is little to none.

Such entrepreneurs who come up with FinTech startups might harbor dreams of one day being acquired by a big bank, which will also rope them into the organization as employees. Of course, it could also go the other way; the bank buys the startup and gives the owner a one-off lump sum payment.

Well, market experts say that though that is possible, chances are high it will not happen. Camilla Swart, the ecosystem manager at Rise (now rebranded to Absa) the startup space established by Barclays in Cape Town back in 2015; says though banks could go for acquisition router, it probably will not.

Absa has the capability to do acquisition, but what seems to be working well – a win-win – is the contractor-supplier relationship. We can partner while it makes sense and this gives the startup the autonomy in some situations to diversify the client group,” said Swart as cited by Disrupt Africa.

PS – Barclays bank runs TechStars-powered accelerator program through Absa.

Stuart van der Veen, the disruption lead in Nedbank’s corporate and investment banking team South Africa also shares the same views. He believes when a bank acquires a startup, it will destroy all the advantages the given startup enjoyed while it was operating as a small, uniquely talented and highly focused team.

FinTechs will succeed where banks can’t because they are incredibly adaptable and creative. Attributes that traditionally have not survived in the banking sector,” said Stuart.

In sharp contrast to the views above, a recent Global FinTech report by PwC, reveals that 50% of banking institutions were planning to acquire a FinTech startup within the next three to five years. So the intentions are apparently there, but does it mean banks will go forth to acquire the startups?

Banks still prefer to interact with FinTech startups as vendors, as it is quite difficult to come by a company that can fit in completely to their existing business models and provide returns,” said Gorge Wakari, the VP of cash management at Citibank Kenya.

His views were echoed by Paul Mitchell, a FinTech and blockchain lead at PwC South Africa who says it was difficult for banks to acquire startups as the metrics that make both companies work are entirely different.

A business that is set up to run an existing model – for example a corporate is very different from a startup. The metrics are set up for efficiency, failure is failure, there are dress codes, piles of admin…”

The co-founder and chief investment officer at Startupbootcamp Africa, Zachariah George believes that the level of M&A activity could reduce with time.

Big banks have wisened up to the fact that they cannot run FinTech companies with the mindset of a large organization with its long compliance, legal, and infrastructure checklists. Instead, they are rather partnering commercially with FinTechs through accelerator programs like Startupbootcamp Africa, whereby they do not necessarily own the IP that was created by the particular FinTech venture, but rather commercially benefit through revenue sharing, white labeled solutions, transaction-driven revenues and joint ventures.” Said, George.

Not to discourage you (a FinTech startup founder) but the prospects of a big bank acquiring your startup look not so promising. Though evidence suggests otherwise (that it is possible), experts advise you not to hold your breath.

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