New BearingPoint Institute research reveals start-ups as key to banks’ ongoing profitability

Frankfurt/Zurich, May 28, 2015 - In an environment of increased public pressure, tightening regulation and limited revenue opportunities, start-ups could be the key to sustainable growth for banks. For organizations quick to adapt to the agile nature of the ’new economy’ of technology, software, e-commerce, data management and digital platforms, start-ups could be just the revenue stream they’ve been looking for.

Becoming ‘start-up compatible’ is the key challenge standing in the way of banks looking to enter the sector. With their characteristic rapid growth and scalability, start-ups’ needs change rapidly, while their demand for sophisticated products, faster delivery and exceptional service can prove difficult to meet for many organizations.

Major banks are reappraising the traditional approach and making sophisticated products available to entrepreneurs. To that end, Credit Agricole and Commerzbank, for example, have launched their own private business incubators in Paris and Frankfurt, respectively, to support the potential nascent developments and secure future strategic advantages.

Engaging with a new ecosystem

For banks looking to attract interest from start-ups, engagement with an ecosystem of investors, sponsors and other start-ups should be a priority.

Iris Grewe, Partner at BearingPoint Zurich and co-author of the report

German online platform, Rocket Internet, is the perfect example of such an ecosystem in practice, making use of an extremely efficient network to identify business models and provide capital, know-how and expertise.

Banks must remember that start-ups are streamlined for performance and efficiency: bank services need to fit this ethos.

Michael Arndt, Partner at BearingPoint Berlin and co-author of the report

According to the authors, providing simple, standardized products such as current accounts and electronic banking to start-ups in their seed phase is the essential first stage for banks. Those that become commercially viable then grow to have more complex requirements, creating profitable, long-term business for banks.

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