Blog / 07.06.2018

Big financial corporations need startups more than ever

Antti Kosunen, Chairman of the Board, Nestholma

My Skype profile says, “Saving the globe or at least the banks”. I think that this is a time when banks and insurance companies need to join forces with startups in order to survive. Cooperation with startups is a way for the traditional financial world to respond to changing market conditions and stay competitive. It’s not the small startups and fintech that are going to take business away from the banks and insurance companies – the real disruption, aided by the arrival of PSD2 (Payment Services Directive), will more than likely come from technology giants like Google, Apple, Facebook and Samsung.

Also, it’s not just about survival. I’m convinced that the future growth of the financial sector will come from cooperation with startups. Often startups don’t have ready-to-use solutions but they do bring interesting raw innovations to the table. By working together with the banks and insurance companies, these bright startup ideas can be developed into killer products that the customers actually want. Both parties have their strengths: the corporations know how to scale business whereas startups are better at iterating things together with the big players and their customers.

Learning to work together

All the ingredients are there to for a win-win collaboration. The only problem is that startups and big financial companies are rarely compatible. This is where a business accelerator like Nestholma comes in; we have created a model that does make them compatible in three intensive months. So far Nestholma has organised 26 accelerators for big financial organisations and we have ongoing partnership activities in the Nordic countries, Hungary, Turkey, India and the United States. Most of the major banks and insurance companies in Europe are discussing with us.

The results of our accelerator model have been very encouraging, with 40-75% of the participating startups continuing to collaborate with the bank, insurance company or corporation after the process, whereas the industry standard is 25%. Nestholma is now Finland’s biggest fintech investor and we have 25 fintech startups in our portfolio.

Transforming processes and efficiency

Startups are great for renewing the organisational culture of big corporations. Through the accelerator process, the banks and insurance companies learn not just to work with startups but also to operate more like startups. This cultural change also enables the transformation of corporate processes. As a result, we have seen significant efficiency improvements. With one corporate partner, we calculated that the efficiency of certain activities had increased by 800% compared to the situation before the cooperation with startups.


“What is the secret of Finland’s Fintech miracle?"

The startups in Nestholma’s portfolio have created a wide range of fintech products, including data security solutions and new payment methods, that can be used by bank or insurance company customers or within the internal processes of a corporation. Cool tools like Fjuul, a fitness and health mobile app that monitors the user’s daily activities, enabling an insurance company to segment its customers and offer rewards to those with a healthy lifestyle. Fjuul also provides a direct communication channel with the customer.

Let Finnish fintech help with PSD2

The arrival of PSD2 enables the more effective use of data, resulting in new payment methods. With the help of startups, PSD2 offers a big opportunity for the banks and insurance companies to expand their activities and to create new services and business models. At the same time, PSD2 is clearly a threat to the corporations that are lagging behind in innovation. My advice to those concerned about PSD2 is to explore the potential of cooperation with startups for gaining competitive advantage and differentiation from the competition.

Finnish banks and startups are already doing this. I was recently at a press event in Turkey which was attended by Forbes, The Economist and about 20 other publications. They asked me, “What is the secret of Finland’s Fintech miracle?” Finland’s world-class technology know-how and the operational excellence of our banks is the obvious answer. But there is also another crucial factor at play: the attitude of the big financial companies towards cooperation with startups. Based on my travels around the world, I have discovered that the logic and effectiveness of this Finnish cooperation model is a rare strength indeed.

Nestholma’s business accelerator is of course not limited to Finnish startups or even fintech as long as they add value to financial institutions. We have received applications from 62 countries and our portfolio includes companies from 14 countries. Cooperation is the key to successful innovation in this competitive world.


About the Author

Antti Kosunen is Chairman of the Board at Nestholma. A serial entrepreneur who turned into an investor and after being a professional VC he created an active investing model with a strong collaboration component.