In five years time most corporate accelerators and incubators will have disappeared in favour of more nuanced partnerships between banks and startups in a maturing digital ecosystem according to an analysis by Forrester.
At least two dozen accelerators and incubators have been launched in the past two years by banks looking to identify and co-opt future disruptors and engage with innovative startups.
Forrester analyst Oliwia Berdak’s believes that the energy and expense entailed in running a full-scale accelerator programme is misplaced.
“A fully fledged, multi-startup incubator is expensive to run,” she points out. “The cost of searching, selecting, and providing seed investment for startups could easily reach $1 million a year. And yet many incubators aren’t focused enough on customer problems and business objectives to deliver return on that investment.”
Instead, Forester expects digital executives at banks to leave incubation of startups to governments, universities, and venture funds and instead turn to targeted acquisitions and strategic partnerships.
The landscape is already changing, with some high-profile startups, such as Kabbage and TransferWise, beginning to see more value in partnering with banks to extend their reach, shifting their business models away from just direct-to-consumer offerings and white-labelling their technologies to financial services firms.
Making the right decisions – and having the back-end capability to ease integration issues – will be key.
“Executives who think fintech startups are onto something (and many are just smoke and mirrors) have three options to consider: build their own solutions to compete with the disruptor, buy the disruptor, or partner with it,” says Berdak. “The answer to this question is nuanced and depends on whether a disruptor presents a genuine threat or opportunity for your particular firm, what your own capabilities are, and what the technology market phase and the potential of individual startups are.”
Much will depend on the maturity level of the technology assets and markets under scrutiny, adds Berdak, stretching the competencies and responsibilities of most digital strategy executives. “Invest too early and you risk getting an immature technology that fails,” she says. “Invest too late and you face very high price tags and few options to choose from.”