Startups and Banks: It’s Just Easier to Cooperate


Binna Kim


Our office recently caught up with something important that PayPal founder Max Levchin said, which was captured in the Spring issue of Strategy + Business.

Fintechs have what banks want: superior underwriting engines with models and access to troves of big data, modern and relevant front ends aligned to customer expectations and preferences, and software architecture that has been developed from the ground up based on modern technologies and principles.

This quote came in the context of an article that examines how established companies in many fields can join forces with upstart competitors to the mutual benefit of both the incumbent and the startup. But it speaks to the relationship between banks and startups directly.

The point that Levchin and the article’s authors have captured is the simple reason why fintech startups have not and will not destroy traditional banking services: because they have no interest in doing so. A startup replacing a bank would be like a startup replacing the electric grid.

Instead, it’s just easier to for new, innovative companies to cooperate with the established banks. These startups depend on the infrastructure of traditional banks and are perfectly happy to take a cut for bringing business into that ecosystem.

The takeaway here for communicators is that, in order to understand today’s banking challenges full-circle, one must be familiar with the startup scene, particularly in New York, where much of the fintech innovation is occurring. Both culturally and operationally, the startup grind is much, much different from institutional banking, and when the two fields cooperate, telling a unified story is a balancing act that only the best communicators can pull off.