scorecardBig banks, please stop trying to be fintechs
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Big banks, please stop trying to be fintechs

Dan DeFrancesco   

Big banks, please stop trying to be fintechs
Finance2 min read
  • The Information recently reported on issues JPMorgan had integrating a fintech it acquired.
  • Big banks often try to pitch themselves as being just as innovative as buzzy finance startups.

Dear big banks,

We need to talk.

I've been chatting with the rest of Wall Street, and we think it's time you stop pretending you can be a fintech.

Before you jump down my throat, understand we're coming from a place of love. We're not diminishing what you do. You have massive balance sheets! You have millions of customers. You hold incredible power!

But being a fintech just isn't in the cards.

It's like when the hedge funds tried to be VCs in 2022. It just doesn't work.

How many times do we have to go down this road with you guys? You've struggled to create your own "startups" internally. And acquiring fintechs you don't plan on changing usually doesn't end well either.

It's a tale as old as time. Big bank acquires startup but promises it autonomy. Big bank then makes XYZ changes to startup to make sure it is a good "fit" within the organization. Startup no longer looks anything like what big bank originally acquired.

And before you even try to say it, no. It's not them. It's you.

You're fundamentally not a fintech. There's the red tape and regulations. There's the comp and making technologists feel like second-class citizens. There's the in-office mandates. There's the work that isn't exciting. We've been over all this before.

Look, things aren't even that good on that side of the grass. Have you seen fintech valuations? It's rough out there. Do you really want to play that game?

Which gets me to why I wanted to talk to you. A lot of these fintechs are going to be looking for homes soon enough. Funding has dried up. Cash isn't cheap. And the public markets, don't even get me started on it. (I don't want the VCs and bankers to start crying again.)

So if you decide to go shopping for some of these startups, be upfront with them. Maybe you want them for their customers. Maybe it's a specific tool. Maybe it's just to kill the competition. Whatever the case, don't act like it's going to be business as usual after the deal. We both know that's not the case.

And if the management team doesn't love the sound of that, remember that money talks. Surely, you know that better than anyone. Nothing cures sadness like being able to cash out your equity.

As for all those buzzy AI startups, tread lightly. There's probably a major gap between the stuff they're going to want to do and the stuff you'll actually be able to do.

So good luck out there. I hope this letter helps. And remember, it could be much worse.

You could be crypto.