Bank interest in fintech investment expands

by CDW Financial Services|Sep 6, 2016

As the fintech movement continues to gain interest and attention, the funding picture for these startups is changing. In the past, investment from venture capital firms was very strong. A new report highlights that now these investors are becoming more selective and banks are becoming larger investors in fintech startups. This week’s FIN News Alert looks at the American Banker article, “Banks Play Growing Role in Funding Fintech,” which discusses the latest on fintech investment and where the industry is headed. Here are the highlights:

  • A new report from KPMG and CB Insights, “The Pulse of Fintech,” points out that fintech and the money backing it are reaching a new level of maturity.
  • The $2.5 billion in venture capital investments in the second quarter were only half of what they were in the first quarter and a year earlier.
  • Reasons such as Brexit results, the upcoming U.S. presidential election, summer vacations and other economic worries are causing VC investors to take a break from fintech investing.
  • VC investors are also strengthening their criteria for fintech investing and putting more scrutiny on their possible deals.
  • Despite declining investment from VC firms, fintech companies are seeing an increase in investment from corporate venture capital sources, including those funded by banks.
  • The report found that corporate investments have increased to their highest point since CB Insights began tracking them.
  • Experts point to more banks investing money in fintech companies as they look for potential strategic advantages.
  • With 11 fintech investments between the second quarter of last year and this year, Goldman Sachs is the most active bank investor. Santander and Citigroup follow, with seven investments each.

Want to read more about the latest trends for banks, credit unions and capital markets? Read the summer issue of the FinTalk Report for helpful insights.