Barclays is teaming up with a startup online lender - and it points to a growing trend for banks

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The signage of a branch of Barclays bank in central London.

• Barclays has taken a stake in and partnered with UK SME lender MarketInvoice.
• It is one of a number of recent partnerships between established banks and fintech startups.
• Banks used to either buy or build new products and services but are increasingly favouring partnerships, realising they can't be experts at everything.

LONDON - Not so long ago, most banks took one of two approaches when launching new products and services: build or buy.

Increasingly, however, there's a third way: partner.

Barclays announced on Thursday that it has taken a stake in online small business lender MarketInvoice and is partnering with the startup to offer MarketInvoice's lending capabilities to its small business clients.

London-headquartered MarketInvoice, founded in 2011, offers invoice factoring and lines of credit to small and medium-sized businesses. It has lent over £2.7 billion to date.

Barclays said in a release that the tie-up is part of its "plans to invest in new business models for growth, and MarketInvoice's ambition to broaden its reach across the UK." Crucially, Barclays has only taken what it calls a "significant minority" stake, rather than a controlling ownership holding. It means MarketInvoice should continue to operate at somewhat of an arm's length.

Barclays isn't the first to turn to an innovative startup to help them power growth through partnerships. Spanish bank Santander signed a deal with online lender Kabbage in 2016, and JPMorgan has had a small business lending tie-up with OnDeck Capital since 2015, for example.

Banks are embracing the old maxim: if you can't beat them, join them. Rather than spend millions building out new business lines to compete with these upstarts, banks are deciding instead that it's easier to simply use the resources that these companies have developed.

In the past, this has generally led to acquisitions of the most promising challengers. But there's a growing sense that this approach can often stifle the very innovation that made a startup so compelling. In some cases, it can also turn out to be a costly mistake. Spanish bank BBVA last year had to take a $60 million write-down on its $117 million 2014 acquisition of US digital bank Simple, for example.

Partnership offers a "best of both worlds" approach - access to the innovative products and services without taking on as much of the risk (there is of course still a reputational risk associated with a partnership). These deals also benefit the startups by potentially kicking their growth up a gear.

More broadly, this trend speaks to the post-financial crisis mood within banking. Lenders that once sort to be financial goliaths now accept that they can't be all things to all people. HSBC is focusing on international trade and UBS is going back to its focus on wealth management, for example.

By partnering with startups that can fill the gaps, banks can keep their clients happy by referring them on and potentially earning a small commission. Better than simply saying, sorry, can't help.