Corporate strategies to accelerate innovation through partnership, collaboration and competition

In today’s fast-moving digital era, corporates can keep up with emerging and rapidly growing startups through partnership, collaboration or competition. Corporates are adapting their strategies to groom and accelerate innovation according to market and technology trends, especially to support big regulatory changes such as open banking and PSD2. If corporates have sufficient budget and capability to execute multiple strategies, many have found great success through a hybrid approach by implementing a mix of strategies to acquire and utilize emerging technology. Different types of relationship and implementation strategies common adopted in the open banking era are summarized in the table below.

The implementation of open banking standards is popularizing new ways of partnership such as marketplace or platform approach, which involve building a walled garden style of marketplace per bank using open APIs and any fintech can register their service to be branded as part of the bank. To build strategic partnership with startups through partial investment, some incumbent banks have set up corporate venture capital (CVC) arm to provide capital support in exchange for 5 to 15 percent equity stakes. This approach can be effective if properly implemented because equity stakes give banks more incentives to support and groom startups. However, new ways of raising capital such as Initial Coin Offerings (ICO) and Security Token Offerings (STO) are emerging with wider adoption of blockchain technology and cryptocurrency, which may change the investment mechanism of many CVCs. While ICO allows corporates to participate in equity crowdfunding of startups through purchasing tokens or coins, STO operates more like IPO mechanism which allow corporates to purchase security tokens of startups during their offerings and trade these tokens to other investors. Investing in companies through STO is more secure and less prone to fraud than through ICO because security tokens are financial assets backed by companies’ tangible assets or revenues.

Incumbent banks can also engage in the fintech industry by facilitating relationships through co-working space, accelerator programs and colab programs. Many banks have sponsored or partnered with co-working spaces to foster the fintech community, making it easier to curate or reach out to potential fintechs. Some banks have gone a step further by running incubator or accelerator programs at these co-working spaces to provide startups working space, mentorship, professional network and resources for growth. However, corporates ha

ve encountered various flaws when working with startups through their accelerator programs as not all investment in early-stage startups turn out to be successful. Man