Getting some fuel from incumbents: bank-FinTech relationships and effects on newcomers’ performance

This study investigates the differences existing between the effects of majority and minority equity investments and partnership (non-equity) agreements on FinTechs’ performance. It also explores different effects among strategic alliances with banks and Other Financial Institutions (OFIs). Analysing a panel of 122 FinTechs operating in Italy over the period 2007–2019, this study shows that equity agreements positively influence performance measured through revenue growth. The effect of banks’ majority equity investments is delayed compared to minority stakes, while partnership agreements are less relevant. Only banks’ minority equity investments signal FinTechs’ quality and enhance their ability to secure subsequent funds, while majority equity investments are strongly manned by banks, excluding new investors entry. Similar effects characterise relationships with OFIs, but with weaker intensity and persistence. Corporate control by OFIs negatively influences revenue growth. For FinTechs’ managers, this study underscores the critical role of equity agreements with banks in boosting growth. Likewise, banks’ managers could create supportive environments for FinTechs to maximise innovation and the benefits of strategic alliances. These findings also hold social implications, since successful bank-FinTech relationships can improve efficiency and innovation in customer servicing.