Fintech Companies: Keep An Eye Out For Engine B

Some fintech companies have pure disruption on their minds. They have established cross-border services, they've found business models that seem nearly frictionless, and they don't want to be bought out by large companies. They're here to stay.

Other fintech companies, however, aspire to be acquired. At the ICT Spring 2018 conference in Luxembourg, KPMG's Head of Disruption Shamus Rae urged these fintechs to seek acquisition by Engine B, rather than Engine A.

What does he mean by that?

When the current wave of new technologies began to wash over the financial services sector, established banks and other legacy institutions asked themselves how to react: buy up small startups, develop innovation centres in-house, or sign strategic partnerships? With a little bit of maturity in the fintech realm now, an established model of success has been to rev up an "Engine B" that combines elements of the above options—while being something slightly different.

For a big company, internal change cannot happen between two sunsets: it's limited by the culture of the workforce, the skills its people have, and its risk appetite. This workforce and culture represent the meat of the company, or its Engine A. Engine B is all about starting a second stream on the...

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