For all the talk about how well FinTech start-ups are doing, I hear two regular laments from bank CEOs. First, why aren’t we valued like FinTechs? and second, why aren’t FinTechs regulated like us.
On the first point, it’s quite clear that FinTech start-ups are being valued on potential and not reality. When a Stripe is worth more than three Commerzbanks or an Ant Financial is seen to be worth more than ten Deutsche Banks, then sure, bank CEOs are a bit pissed off. As Goldman Sachs CEO David Solomon put it, the bank is “getting absolutely no credit from anybody else in the investing community” on the firm’s digital banking efforts. Monzo gets two million customers in the UK and gains a $1.3 billion valuation; Goldman Sachs launch Marcus, get four million customers, $1 billion in deposits a month, launch a credit card with Apple, and its share price falls almost 20%. As Solomon states it: “If we were out in Silicon Valley and made 20% of the progress that we’ve made, we would get a lot of credit and people would be throwing money at us to own a piece of this business. But nestled inside little old Goldman Sachs, we’re just going to have to prove it over time.”
Yea, yea, yea, yada, yada, yada.
This first point is indicative of the fact that the banking sector is measured by real returns whilst the start-ups are measured by hope. Banks have shareholder return, return on equity, return on investment and so on and so forth. Real measures against real results. A start-up has a million customers, some of whom are active. It’s all about how you dress it up.
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