The financial industry is poised for massive disruption. It could be argued that the last technological advance in banking was the ATM. That was in the 80’s, almost forty years ago. A new uprising called FinTech—short for Financial Tech—has grown wildly from a mutation of the innovative spirit on the financial backbone and it’s growing faster than the mighty Silicon Valley. That’s no joke.
According to Accenture, who co-manages FinTech Innovation Lab the with the Partnership Fund for New York City, global investment in financial tech ventures has increased more than four times the rate of overall VC investments in the past three years.
“Global fintech investment tripled between 2008 and 2013 from $928 million to $2.97 billion and is expected to double again to between $6 billion and $8 billion by 2018. The first quarter of 2014 was the most active on record, with $1.7 billion invested globally.”
FinTech Innovation Labs is a mentorship program that pairs budding tech entrepreneurs with senior IT executives from the world’s leading banks. It has done so well that it’s actually cloned itself across the globe, expanding from its first base in New York established in 2011, and opening hubs in London and Hong Kong. This interconnected hive of activity runs a bit like a matchmaking service, assigning FinTech companies to participating partners—a who’s who of banking today—including Bank of America, Barclays, Capital One, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, UBS and more.
Two recent and notable graduates of the program, LMRKTS and RevolutionCredit were both mentored by BofA, whose ex-chief wealth management officer Sallie Krawcheck—perhaps not uncoincidentally—just ran off to join the fun with Motif Investing, another FinTech startup in San Mateo, CA. And now even the SEC is getting in on the game, as the former chairman Arthur Levitt Jr has also joined Motif as well.
And even the stodgy old banks themselves aren’t shying away from directly approaching the arena. Many U.S. banks and global players like HSBC are developing in-house VC funds with anywhere from $50M to $250M in resources to shop, and they’re looking to invest as any VC would: for an ROI, and a big one. And not to be outdone by anyone in this uncharted realm, BofA is even holding their own yearly innovation summit in the Silicon Valley.
Phew! Is it getting hot in here or are there some major plays being made?
Well, whatever the case may be, the questions all of this brings up focus on the big picture:
- Where is this all leading?
- What will the overall impact be to the average consumer?
- And how will the landscape of finance change as a result?
Time can only tell. I’ll be watching eagerly as it unfolds.