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Felicia Rosenzweig, partner at Prophet

For all of the attendant excitement, FinTech continues to strike fear into the hearts of financial services firm leaders around the world. This is particularly true at those firms saddled with clunky legacy systems that keep them from being as nimble and integrated as they’d like. Not content to let start-ups have all the fun with new spaces and services, various firms are pushing beyond their own organisations, playing an “incubation game” with start-ups and other early-stage companies. Two prominent UK examples are Barclays Accelerator with Techstars and Santander InnoVentures

The “incubation game” is the creation of funds and/or incubator-type operations to provide active support to FinTech startups and young companies; the support can take many forms, including financing, office space, network access, proprietary technology, technical expertise, and mentorship. The intent is to help promising FinTech companies to find their feet and become viable businesses, and potentially bring them into the larger institution. Here they may become offerings (owned or partnered) or lines of business vs competitors. While there are many clear reasons why financial services firms might take this tack from a commercial perspective, what’s less obvious is what it could mean in terms of intangible value for their customers, their employees and their brands.

Many industries have learned over the last 15+ years that they ignore start-ups at their peril, and the financial services firms pursuing the incubation path are adapting a page from the pharmaceutical industry’s book. Many pharma firms had realised that rather than solely race against biotech start-ups to develop new therapies, they would be well-served to partner with those companies they deemed promising, and potentially buy them outright, if and when criteria were met. The pharma firms were able to support and market attractive new therapies that customers and stakeholders (e.g., patients, doctors, pharmacists, insurance providers) wanted and were willing to pay for; their employees were often proud to be part of a business visibly at the cutting edge of science and technology. Brand perceptions often improved in areas related to innovation, agility and progressiveness.

There have been two critical parts (and they’re linked) to realising the intangible value of these partnerships and acquisitions for the pharmaceutical companies, and both of these are highly relevant in financial services. First is the relevance of the pharma firm in the therapeutic area – the pharma firm already needs to be established in and have some credibility in the therapeutic area for the halo effect from the biotech company to apply and the positive brand equity to transfer. Second is the strength of association itself – customers, employees and other stakeholders must perceive a real connection between the pharma company and the biotech startup. For example, passive investments, however large, and arms’ length distribution relationships, are usually not sufficient to create the desired level of connection.

So how does all of this apply in our FinTech incubation space and the realisation of intangible value? On the relevance dimension, financial service firms incubating FinTech startups seem to maintain a fairly wide aperture which may make it hard to realise intangible value if relevance is not actively established and cultivated. For example, Vieweet ( is a property technology startup that was part of the first graduating cohort from the Barclays Accelerator in 2014. Vieweet provides an array of property-related digital tools, including one which generates fully interactive 360 virtual tours / videos. While Barclays has natural interest in the property space via its mortgage business, the link between Vieweet’s tools and financial services products is quite tenuous. At present, there doesn’t seem to be any effort from Barclays, beyond the Accelerator logo on Vieweet’s site, to link to the product, so intangible value for Barclays is not likely to be particularly high.

On the strength of association dimension, financial service firms incubating FinTech startups must consider how to market relationships and acquisitions to best effect. For example, iZettle, a Stockholm-based solution enabling businesses to take card payments, is one of Santander InnoVentures’ portfolio companies. While there is no visible reference to Santander on iZettle’s website, Santander’s business banking site explicitly references the partnership with iZettle in providing card and payment services for business customers. This definitive association is likely to help create intangible value for customers and contribute to Santander’s brand being seen as progressive; it is unlikely to create particular intangible value with employees.

As financial services firms consider how to make FinTech an area of opportunity for themselves versus something to fear, many will think about incubation as an avenue for exploration. When taking this path, they should keep in mind the two key dimensions of creating intangible value – relevance and strength of association. Maximising both of these will help firms to realise the full potential of their FinTech partnerships and investments.

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