Confusion ensues over the impact of HSBC’s purchase of SVB

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Banks and businesses are struggling to work out the impact of HSBC’s purchase of SVB because the deal and the bank’s intentions lacks transparency. Investors and payment experts come together to discuss the matter.

The so-called elephant in the room – the collapse of Silicon Valley Bank (SVB) – was a key topic for discussion at The Payments Association’s flagship conference, PAY360. The developments were debated as part of a wider discussion on the recession and the economic outlook affecting payments.

David Parker, lead ambassador at The Payments Association, addressed the fact that while the UK is “technically” not in a recession, the economic environment is still volatile.

“We’re in a very volatile period,” agrees panellist Kevin Chan, co-head at Outward. “Last year was a challenge. And this year, we’ve already had a few things come out of the woodwork that people weren’t expecting […] and that’s difficult to deal with when you’re an investor.”

But HSCB buying out SVB could be a “fantastic opportunity” for the high street bank, says Chan, and he suggests that the brands should remain separate.

However, fellow panellist Angela Yore, fintech specialist and PR consultant, disagrees, countering that HSBC’s acquisition is just a “stop gap”.

A high street bank is not an “actual home” for a fintech bank, says Yore, adding that this was simply a rescue deal “done over a weekend”.

Laurence Krieger, interim CEO at Stealth Mode, believes there are two parts to consider in this deal: “Who is going to bank and who is going to provide the lending?”

The first thing to look at, according to Kreiger, is what facilities was SVB providing all businesses – and that was bank accounts.

“When you’re starting up a new company and no one has ever heard of you, you’re going to get money from various VCs [venture capitalists], who are very highly structured and very complex organisations,” he explains. “For a traditional bank to sort that out, to get their head around the KYC [know your customer] is a nightmare.

“They [SVB] have their own ecosystem. They understood who the source of funds were and where it was coming from… it was going into a new bank account but within the same ecosystem. That’s what they offered […as well as] debt financing.”

Kreiger agrees that although this is an opportunity for HSBC, it is also an “opportunity for other banks, maybe more nimble banks, to try to take this prize”. He also points out that although SVB was big in the US, in the UK there are many alternatives for fintechs to get funding through VCs.

The fallout from the SVB collapse, coupled with the current economic climate, has spooked many banks and lenders. It has also meant that “money just got a lot more expensive”, says Kreiger, “and it’s a lot harder to raise money in this environment”.

So, what does that mean?

For panellist Ryan Jackson, account director at Modulr, this all doesn’t mean much because “we have no idea” about what the HSBC-SVB deal includes.

Jackson told attendees that while “the industry agrees the deal over the weekend was better than the alternative”, there is “no due diligence in doing something good if there is no transparency” and currently, we do not know if “taxpayers’ money is propping this thing up”.

Therefore, the future of how this will play out, it’s impact on the fintech and banking industry is very much up in the air.

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