Spanish banking giant Santander has teamed up with mobile payment specialist Monitise on a joint venture that will be “investing in, building and scaling fintech businesses with the potential to redefine and support financial services globally.”
As well as investment, chosen startups will get “access to Monitise’s new cloud-based platform which is designed to connect banks to digital innovation for their customers,” as well as the opportunity to partner with Santander, which is estimated by Forbes to be the 10th biggest bank in the world.
The new 50:50 joint venture, funded by £10 million ($US15.6 million) each from Santander and Monitise, is in addition to a $US100 million (£63.8 million) fund Santander set up last year to invest in fintech startups. It shows just how seriously the bank is taking the threat — or some would say opportunity — of fintech.
Banks are facing a huge wave of competition from startups that have found cheaper, quicker and smarter ways to do finance using technology.
As a result, different corners of the sprawling world of banking are being chipped away at — GoCardless is eating away at the direct debit business; startups like TransferWise and Kantox are stealing foreign exchange revenue; and peer-to-peer marketplaces like Funding Circle are reinventing lending.
Santander and Barlcays have been among the most active in embracing these new challenges. Santander’s global head of R&D innovation Julio Faura, who will co-head the new investment joint venture, recently spoke to Business Insider about how the bank is experimenting with bitcoin.
The as-yet-unnamed joint venture will let Santander keep an eye on the fintech world to make sure some plucky startup doesn’t catch it on the back foot. It will also let the bank try and bring any promising startups into its fold rather than face it as competition. Keep your friends close and your enemies closer, as the saying goes.
There’s something of that in the joint venture for Monitise too. The company was once one of Britain’s most promising tech startups — Santander in fact invested when it was a young fintech innovator — but Monitise has struggled to deliver profits and has faced a huge amount of competition in the payments space in recent years.
The London-listed company’s shares have fallen more than 75% over the last year and earlier this year Monitise put itself up for sale, only to pull the plug after failing to get a good enough offer. Founder Alastair Lukies stepped down as co-CEO at the same time.
Monitise, which announced the deal today, doesn’t say specifically what type of financial technology firms the new investment company will target, other than to say they will be consumer facing. But the businesses will likely involve payments given Monitise’s pedigree.
The London-based company runs mobile banking apps for the likes of Santander, RBS and Barclays, and works with the likes of Visa, which is an investor in the company. Like Santander, Monitise is probably hoping that it can recapture its edge by bringing promising young companies under its wing.