General Observations
- The largest banks in the US are both competing with and collaborating with fintech challengers in payments.
- Looking beyond the challenges posed by their legacy systems and processes, banks possess several key advantages over fintechs:
- Key Payment Assets: banks already have most of the core underlying assets needed to grow licenses, scheme connections, products, brand, customer bases, scale, distribution networks, etc.
- Data: The largest banks have superior credit underwriting capabilities compared to new fintech entrants
- Deposits: Banks enjoy very low cost of funding, providing a huge financial advantage vs. fintechs in the lending space
- While many of the bank-fintech partnerships grab headlines, a significant portion of banking technology innovation happens quietly on a more incremental basis with the US patent office.
- Bank of America, JP Morgan Chase, and Wells Fargo were issued hundreds of technology patents in 2022, surpassing technology companies such as Thermos Fisher Scientific (240), Snowflake Inc (218), and Palantir Technologies (191).
- Notably, a significant portion of Capital One’s patents relate to vehicular technology, indicating a move into mobility payments.
Please do not hesitate to contact Brittany Logan at Brittany@FlagshipAP.com with comments or questions.
