Where Top US Banks Are Betting On Fintech

CB Insights | Aug 20, 2019

where US banks are investing in fintech - Where Top US Banks Are Betting On FintechWe visualize where US banks are placing strategic bets on fintech startups across payments, capital markets, blockchain, data, and more.

US banks are future-proofing by actively investing in fintech startups.In 2019 YTD, US banks have participated in 24 equity deals to fintech companies. This follows a record 2018, where US banks backed 45 equity deals to fintech startups — a 180% increase from 2017.

Below, we take a closer look at where leading US banks are focusing their fintech investments.

Investor strategy trends

The most active US bank investors in fintech (by number of portfolio companies) are Goldman Sachs, Citigroup, and JP Morgan Chase & Co. While all three have ramped up their fintech investment activity in recent years, they’ve taken different strategic approaches.

Goldman Sachs and Citigroup are the most active investors largely because of their investment arms — Goldman Sachs Strategic Investments and Citi Ventures — which have participated in 21 and 11 fintech deals since 2018, respectively. As a result, the two banks continue to invest in a wide range of fintech sectors.

Since 2017, Goldman Sachs has focused its fintech investments on real estate, data analytics, and payments & settlement. Betting on these subindustries aligns with Goldman’s digital strategy of scaling its consumer offering, Marcus.

Citi has backed 4 blockchain, 3 capital markets, and 3 payments & settlement startups since 2017. Generally, these investments fit into the banks’ larger strategy of building open banking infrastructure. In March, Citi announced plans to build a “digital consumer payments business for institutions,” and there are rumors Citi may launch a Banking-as-a-Service platform.

See:  PNC Launches A Fintech Startup Inside The Bank

JPM meanwhile remains focused on strengthening its capital market solutions and scaling its payments business. The bank has backed 4 capital markets startups and 4 accounting startups (including startups focused on accounts payable/accounts receivable) since 2017. Over the same time period, JPM also made bets on 2 companies in each of the payments & settlement, regtech, and lending categories.

Other banks that have backed at least 5 fintech startups since 2012 include Morgan Stanley, Wells Fargo, Bank of America, and PNC Financial Services Group.

US banks are often involved in fintech rounds for two main reasons: the potential for high returns and strategic partnerships.In the first case, banks, corporate venture capital groups, and strategic bank funds will invest in a startup strictly for the purpose of future returns, as well as to gain exposure to emerging subindustries.

In other cases, a bank will invest strategically, partnering with a fintech startup to further its own internal goals. For example, in May 2019, Wells Fargo led Openfin’s $17M Series C. Now, Wells Fargo (and other bank investors) leverages the platform internally to help modernize its software for front- and back-office functions.

Another example is Goldman Sachs’ 2018 investment in Even Financial, an API that helps funnel qualified customers directly to financial institutions’ product offerings. Goldman’s consumer brand Marcus currently uses Even Financial’s platform for lead generation.

Investment trends by category

Banks’ areas of focus have shifted over the years as new technologies emerge and consumer tastes evolve.

See:  Will Novel Fintech Models Thrive in Canada?

In 2018, banks backed a record number of deals to fintech startups, diversifying their bets across a wider range of fintech spaces. Payments & settlement, capital markets, and data analytics have been longstanding frontrunners in terms of deals. Blockchain, meanwhile, has cooled since garnering a high level of investor interest in 2015.

So far in 2019, the most popular investment categories have been real estate, capital markets, and wealth management.

Continue to the full article --> here

 


NCFA Jan 2018 resize - Where Top US Banks Are Betting On Fintech The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - Where Top US Banks Are Betting On FintechFF Logo 400 v3 - Where Top US Banks Are Betting On Fintechcommunity social impact - Where Top US Banks Are Betting On Fintech
NCFA Newsletter subscribe600 - Where Top US Banks Are Betting On Fintech

NCFA Fintech Confidential Issue 2 FINAL COVER - Where Top US Banks Are Betting On Fintech