Sweden’s previous Minister of Finance, Anders Borg, encourages banks to chase fintech startups. At the same time he warns that a fintech bubble will inevitably burst.
That was the clear message from Anders Borg at Wednesdays event Fintech Stockholm, which was arranged by Breakit and the financial industry magazine Finansliv. The first one of the big banks to run with the startupscene is going to be the winner.
“What the banks should do is to set aside some $10-20 million dollars for investments in fintech and consider that money to be lost. In other countries banks are rushing in to the VC role. Swedish banks are way behind in this aspect”, Anders Borg said at the event.
“Spray and pray” was a recurring expression from him, which basically means that you shot wildly and just hope that you don’t miss every single time.
“Of course you have to aim as intelligently as possible, but one has to understand that whenever you try out something new in business, a certain amount of risks are included. I just think that it’s much better to be aware of those risks when you take the leap into something new and position yourself strategically to handle them”, he says to Breakit.
While being adamant in his stance on the need for bolder investments, he thinks that the banks will adjust quickly to the new ways of investing.
“Handling financial risks is what the banks are doing, and they are very good at it. They will adapt to this situation quickly”, he says.
Anders Borg withdrew from politics and Swedens conservative party in 2014 and is now a board member at the investment company Kinnevik, which is the largest owner in the german e-commerce giant Zalando. Borg’s focus is on emerging markets in Africa and South America where Kinnevik has most of it’s 50 companies. They have among others invested in the inscurance intermediary Bima, which Breakit has written about earlier (article in Swedish).
“Our main offer isn’t money. What we bring to the table is governance.”
He says that there is huge growth potential in those markets for the banks as well as his own company. On a lot of African markets there are obstacles and corruption problems, but Anders Borg claims that it doesn’t affect digital companies as much as other companies.
At the same time he says that Sweden’s major corporations can bring vital competence to startups in those regions.
“Our main offer isn’t money. Anyone can provide that. What we bring to the table is governance. We bring experienced board members and can appoint great CFO’s. The companies can achieve 50 percent year over year growth by themselves. We make sure they don’t fall on their nose on the way there. That’s what the banks can offer as well”, he said during the event.
Despite the nice words about fintech and startups. The sector isn’t entirely a land of milk and honey.
The fintech bubble will burst.
“There is a known unknown here. Everything follows the same stages in a cycle. It’s innovation, growth, crash, regulation. It’s been like that for all new sectors for the last 300 years and it’s not different this time around”, Anders Borg said.
However, he went on reasoning that the crash is probably 10-15 years away. If he’s right, the banks should definitely follow his advice and run faster.