The big banks are throwing money and advice at small IT firms in the digital financial services start-up sector.
While there is a strong argument that investing in start-ups in the digital sector is savvy investment, with just one Facebook enough to pay huge dividends, the benefit for banks in driving the sector is probably more related to technology strategy than investments.
Every other month a bank seems to throw its weight behind a so called fintech IT start-up incubator. They provide capital and other resources such as premises and mentoring. They usually take a stake in the companies they support.
Banks cannot spend money developing digital services. These projects do not guarantee success and are often experimental. It is much better to have suppliers do this work for you.
It is even better if these small developers do it with the knowledge that if they get it right banks will buy it. And because banks are advising and funding these companies surely they will develop what the banks need.
I wrote an article yesterday about this, which you can read here.
There could be numerous benefits from banks such as investing in the future Facebooks and having access to digital know-how and products.
Banks are increasingly outsourcing work as internal resources are tied up with maintaining legacy systems. Banks don’t want to spend a fortune building up digital teams that create hit and miss services, but want third parties to do it.
This could be the perfect way to build a trusted digital IT services community that can cater to the digital needs of banks in the future.