In the wake of the Covid-19 pandemic and the more recent geopolitical tensions, the financial world has grappled with unpredictable volatility, leaving corporate treasurers scrambling to navigate treacherous markets. Fluctuating rates, increasingly complex hedging strategies, and growing global uncertainty have complicated the risk management landscape and many corporate and institutional clients find themselves in an uphill battle.
While these challenges are increasingly common in today’s financial world, the rise of fintechs has unlocked a new wave of innovative solutions designed to help corporate and institutional clients navigate complex market conditions and capitalise on new opportunities.
Fintech partnerships
As more companies turn to fintechs for their unconventional, out-of-the box ideas, banks are seizing the opportunity to partner with them to bring digital innovation to their corporate and institutional clients.
The agility of fintechs, combined with the global reach, balance sheet strength and broad client base of banks, creates the right ingredients for forging powerful partnerships. This fusion has the potential to accelerate the implementation of cutting-edge digital solutions across the financial sector.
But while partnerships between banks and fintechs are gaining momentum, success requires careful planning and a strategic approach.
“Partnering with fintechs is a key strategy of Global Markets”, explains Junaid Baig, Co-Head of Strategy and Strategic Investments for Global Markets at BNP Paribas. He emphasises that the Strategic Investments team’s mission is to identify innovative companies that can enhance the bank’s digital offering to clients in line with the Group’s Growth, Technology, and Sustainability (GTS) 2025 plan.
He explains that Global Markets’ Strategic Investments team has identified four key areas of opportunity.
1. Market structure: a new era of opportunity
The advent of blockchain and digital assets has ushered in a new wave of opportunities for the financial industry.
Investment banks are increasingly exploring the potential of these technologies to enhance processes across pre and post trade. By considering fintech partnerships with blockchain-based companies, BNP Paribas, through its Global Markets division, hopes to find new ways to streamline work flows, reduce settlement times, and minimise transaction costs.
For example, digital cash equivalent and tokenisation can potentially provide a seamless and secure way to instantly settle payments. This concept has the potential to transform the post-trade work flow and enhance the full end-to-end value chain across the whole trade life cycle.
In 2023, BNP Paribas invested in Fnality International, a banking consortium, creating a series of blockchain-based payment systems to enable real-time wholesale payments in central bank digital currency.
2. Generative AI: Discovering the art of possibility
Generative AI is poised to revolutionise the way businesses operate. Collaborating with generative AI companies and fintechs offer banks the ability to harness vast amounts of data, to transform internal processes and deliver more efficient and tailored services to clients.
BNP Paribas already uses several AI based tools to automate its business offering. For example, institutional and hedge fund clients have access to AI-powered algorithms, to optimise their trading strategies in FX and Equities markets.
BNP Paribas Global Markets is exploring further collaborations with fintechs to leverage generative AI’s capabilities. This would help enhance decision making, minimise operational risk and maximise operational efficiency. Recently Global Markets invested in Mistral, a French AI start-up that has emerged as one of Europe’s leading challengers to the US-based AI start-ups.
3. Unlocking capital markets for all through fintech partnerships
As capital market products become more standardised and cost-effective, a wider array of clients can benefit from them. However, smaller businesses still encounter significant barriers to transact with large banks, such as high costs and complex engagement models more suited for larger institutions.
Global Markets aims to close this gap by partnering with fintechs specialising in capital market product distribution. Through advanced digital platforms, the bank seeks to connect these smaller businesses with innovative risk management solutions and investors, facilitating opportunities.
An example of such a partnership is BNP Paribas’ collaboration with Kantox, a fintech that has developed a solution to automate risk management, allowing corporate treasurers to embed FX risk management into their own tailored workflows.
“We recognised the immense value Kantox could bring to our corporate client base,” comments Baig. “Instead of developing a solution organically, which would have taken years, we decided to partner with Kantox, integrating their offering into our services to accelerate delivery to our clients.”
In 2022, BNP Paribas fully acquired Kantox, following a successful three-year partnership.
“Since the acquisition, we have deployed the platform to a wide range of corporate clients through BNP Paribas,” comments Philippe Giles, CEO at Kantox. “The acquisition is enabling rapid development on all fronts, and we are already looking at how we can improve FX automation and drive further product development.” (Read more about the platform’s developments here.)
4. Accelerating sustainable finance solutions
Investment banks are increasingly focusing on sustainable finance solutions and partnerships to develop innovative products. For example, working with ESG data providers enables banks to stay relevant to their corporate and institutional clients as companies look to integrate ESG into their investment strategies and operations.
BNP Paribas is a leader in sustainable finance product innovation and is also partnering with companies specialising in carbon credits or facilitating the development of carbon markets. Voluntary Emissions Reduction (VER) carbon credits are part of a broader toolkit to support decarbonisation efforts.
For example, in 2019, BNP Paribas invested in Everland LLC, a specialised company representing an established group of high-impact forest conservation projects active in the voluntary carbon markets space.
These partnerships allow investment banks to actively contribute to environmental conservation and support clients towards achieving their sustainability goals.
The power of partnerships
These strategic alliances hold the potential to reshape the way banks serve their clients, positioning them to benefit significantly from these evolving models.
By combining the bank’s core capabilities with modern infrastructure companies, generative AI innovators, ESG pioneers, and capital market disruptors, BNP Paribas is positioning itself as a digital leader in a rapidly changing financial sector landscape.
As the industry continues to evolve, these partnerships will play a crucial role in shaping the future of investment banking, driving growth, sustainability, and innovation.
