Fintech Trends & Disruption in Financial Services CB Insight

7/23/2019 Fintech Trends & Disruption in Financial Services CB Insight

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Research Briefs

Fin Tech,Q1’14 to Q2’15 A data-driven look at n tech trends anddisruption in nancial services



Table of Contents

Fin Tech Overview

The Future of FinTech and Banking: Global Fin Tech 1Investment Triples in 2014

Where is the Smart VC Money Going in Fin Tech? 4Follow the Unicorns

Early-Stage Fin Tech Funding is on Pace for the 7

Biggest Quarter of the Last Three Years

The Periodic Table of Fin Tech 10

Banks and Corporates

Here’s Where 6 Banking Giants are Placing their 14Bets on Fin Tech Startups

Disrupting Banking: The Fin Tech Startups that are 17

Unbundling Wells Fargo, Citi and Bank of America

Google, Intel, and Other Tech Companies Attack 19Fin Tech as Corporate Interest in Space Jumps 176%

Fin Tech Focus: Mobile and Millennials

The Mobile Fin Tech Landscape 23

Millennial Personal Finance - The Fin Tech 26Startups Targeting Millennials



March 26, 2015Fin Tech Overview

The Future of FinTech and Bank-

ing: Global Fin Tech InvestmentTriples In 2014 Accenture’s new report ‘The Future of FinTech and Banking’ uses CB In-

sights data to highlight trends in global nancial technology and the mar -kets that are seeing the most growth.

Global investment in financial technology or ‘FinTech’ spiked in 2014 reach-ing more than $12B in investment, demonstrating that the digital revolutionin the sector is well underway. As fintech companies continue to grow andunbundle banks like Citi, Wells Fargo and Bank of America, established fi-nancial players are taking steps to make sure they stay ahead of the trend.

Those are among the many highlights of Accenture’s new report “The Fu-ture of Fintech and Banking: Digitally disrupted or reimagined?” which isbased on CB Insights data.

The report offers insightful commentary and analysis around Fin Tech’sgrowth trajectory and how banks can stay competitive against their smallertech incumbents. Below are some highlights in the Accenture report. Theentire 12-page report can be downloaded for free by logging into CB In-sights and visiting the Research tab. If you don’t have an account, you cancreate one for free here (note: if you’ve already hit free trial limits, you won’tbe able to get the report).

https://www.cbinsights.com/signup.php





Global Fintech Investment explodes in 2014

Global ntech investment jumped 201% between 2013 and 2014, breakingthe $12B mark across more than 730 deals. The US makes up the lion’s

share, but Europe experienced the highest level of growth, with an increaseof 215% (year-on-year).

UK and Ireland Continue to Dominate EU Fintech

Whilst the UK and Ireland dominate Europe’s ntech investment, the rest ofEurope is showing promise: the most signicant levels of investments werein the Nordic countries ($345 million), the Netherlands ($306 million) andGermany ($82 million).



Silicon Valley Increases Their Fintech Investment Pace

While UK Slows Down

Fintech investment growth in the UK and Ireland was slightly slower (up

136% to $623 million) although the region accounted for 42% of Europeaninvestment. Following a relatively slow 2013, ntech investment in SiliconValley more than doubled (117%), pushing the start-up hotspot over the $2billion mark, more than the total investment in Europe ($1.48 billion).



July 26, 2014Fin Tech Overview

Where is the Smart VC Money

Going in Fin Tech? Follow theUnicornsFin Tech deal activity by 12 top VC rms ranging from Sequoia Capital to

Andreessen Horowitz has grown 61% from 2010 to 2013.

If trying to understand the emerging business models, technologies and

disruption in Fin Tech, one of the smart ways we are seeing nancial ser -vices rms do this is by following deals and investor money owing into FinTech companies. But instead of tracking all investors, let’s follow the smartVC money since as we all know, not all VCs are created equal.

And within the Fin Tech universe today, the smart money VCs are investingin technologies ranging from peer-to-peer loan marketplaces to mobile pay-ments to big data tools for capital markets.

As new innovation rapidly makes its way through the nancial servicessector, Fin Tech investments across the entire ecosystem have exploded inrecent years. Of note, a recent report released by Accenture and the NewYork City Investment Fund using CB Insights data found global Fin Techinvestments reached nearly $3B in 2013 from under $930M in 2008.

This research brief highlights the Fin Tech investment activity of 12 of thetop venture rms as identied by our tech unicorn VC analysis. The VCrms whose Fin Tech investments are analyzed include:

• Greylock Partners• Kleiner Perkins Caueld & Byers• New Enterprise Associates• Redpoint Ventures• Sequoia Capital• Union Square Ventures

• Accel Partners• Andreessen Horowitz• Battery Ventures• Benchmark Capital• Bessemer Venture Partners• CRV



2014 will be a record year for smart VC investment in

Fin Tech

Looking at deal activity within the Fin Tech market since 2007 by these 12VC rms, we see a signicant surge in deal activity since 2009. In fact, totalFin Tech deals by the 12 rms in 2013 grew 61% compared to 2010 and anotable 309% compared to 2009. The growth in Fin Tech deals accountsfor both new investments as well as follow-on bets to Fin Tech startupsranging from Stripe to Wonga to Betterment to Level Money.

Which areas within Fin Tech are top VCs bullish on?

Using the CB Insights’ Business Social Graph, we visualized the universeof Fin Tech companies that the 12 VC rms have invested in since 2007and nd hundreds of deals within Fin Tech that the top rms have partici-pated in.



While Fin Tech investments span a diverse array of companies rangingfrom payments to asset management to personal nancial management,there appear to be several themes that these brand-name venture rmssee opportunities in. When we use the Business Social Graph inputs and

cluster companies by focus area, four markets emerge as being consistentareas of focus among the top 12 venture rms. These include:

• Lending• Personal nance management• Payments technology• Bitcoin

With hundreds of investments, there are many edgling as well as manymore established private companies on the list. Some of the startupswhich feature investment from multiple investors include Square (backedby Sequoia and Kleiner Perkins), Boku (Benchmark, NEA, A16Z), Stripe(Sequoia, Redpoint, A16Z), Coinbase (A16Z, Union Square Ventures) andFunding Circle (Accel, Union Square Ventures).

As nancial services institutions increasingly begin to monitor the changinglandscape before them, following the smart money is perhaps one of thebest ways to understand the trends they should stay ahead of and the com-panies they may want to watch from a competitive, acquisition, partnershipor procurement perspective.



June 4, 2015Fin Tech Overview

Early-Stage Fin Tech Funding Is

On Pace For The Biggest Quar-ter Of The Last Three YearsEarly-stage n tech funding this quarter could surpass the previous high bymore than $200M.

in the number of deals and up 23% versus the same quarter a year prior.

Things don’t look to be slowing down as Q2’15 is on pace for largestamount invested since the start of 2012. So far, the Q2’15 deals includeover ten $10M+ Series A nancings, among them Ripple Labs’ $28M andPatch of Land’s $23.8M nancings. Q2’14 holds the previous quarterlyhigh, with early-stage Fin Tech funding reaching $437M in that quarter.



Top early-stage Fin Tech companies

We used CB Insights Company Mosaic to analyze some of today’s topearly-stage n tech startups globally. Mosaic takes into account variousquantitative factors to rank startups, including fundraising, web trac, socialmedia trac, and job listings, among other things.

Ireland-based money-transfer company CurrencyFair topped our list. Thecompany most recently raised a $10.7M Series A in April 2015 from Octo-pus Investments and Frontline Ventures. Germany-based modern-bankingstartup Number26 was second, as the company’s web trac has increaseddrastically in the months leading up to its $10.6M Series A in April 2015.

Notably, 3 of the top 5 early-stage n tech companies per Mosaic are basedoutside of the US.



Most active early-stage VCs

The usual suspects topped the list of most active early-stage VCs in FinTech since 2012, with 500 Startups, Google Ventures, and SV Angel round-

ing out the top 3. 500 Startups’ more notable investments include Chain, atool for developers to build apps related to the blockchain, as well as Let-tuce, a small business nance-management tool that was acquired by Intuitin May 2014.

Google Ventures, the most active corporate venture investor overall in FinTech, also has made many early-stage bets in the space since 2012. Theirnotable investments include ZenPayroll, which recently raised a $60M Se-ries B at a $560M valuation and Robinhood which raised a $50M Series B

in May 2015. Google Ventures is a seed investor in both companies.

See below for the full ranking.



December 12, 2014Fin Tech Overview

The Periodic Table of Fin TechThe 177 companies, VCs, corporate investors, angels, accelerators, andacquirers engaged in the Fin Tech space that you should know.

Financial services is under assault. From wealth management to remittanc-es to payments processing, the landscape of private companies, investorsand corporate strategics investing and acquiring in nancial technology,otherwise known as Fin Tech, has grown immensely.

So after putting out the Periodic Table of IoT, we’re excited to introduceour second industry cut — the Periodic Table of Fin Tech – a resource tohelp illuminate the key players in Fin Tech ecosystem. The 177 companies,investors and acquirers on the table were pulled from analysis using CBInsights data around nancial health, company momentum, investor qualityand M&A/IPO activity.

We expect that this list of 177 will change over time as new entrantsemerge and gain prominence and others falter, exit and/or get removed.



Navigating the Periodic Table of Fin Tech

The table focuses on seven dierent types of organizations as follows (fromleft to right).

• The left side of the Periodic Table of Fin Tech includes companiesacross several key Fin Tech verticals. Additional details on these sub-ar-eas of Fin Tech are below.

• On the far right, the table shifts to venture capital rms (both multi-stageand micro VCs), corporate investors, angels, accelerators/incubatorsselected based primarily on total portfolio investments into Fin Tech andrecency of investment in Fin Tech (since 2009). Not surprisingly, severalFin Tech-specic funds and accelerators made it on to the table.

• The bottom section below is acquirers and notable Fin Tech exits.

As disruptive startups look to tackle dierent segments of traditional nan-cial services, we analyzed Fin Tech companies within seven sub-industriesdetailed below:

Lending

Private lending companies on the list includes primarily peer-to-peer lend-

ing platforms as well as underwriter and lending platforms using machinelearning technologies and algorithms to assess creditworthiness.

Payments/Billing Tech

Private payments and billing tech companies span from solutions to facili-tate payments processing to payment card developers to subscription bill-ing software tools.

Personal Finance/Asset Management

Private tech companies that help individuals manage their personal bills,accounts and/or credit as well as manage their personal assets and invest-ments.



Money Transfer/Remittance

Private money transfer companies include primarily peer-to-peer platformsto transfer money between individuals across countries.

Digital currency

Companies here span key software or technology rms in the digital cur -rency space ranging from bitcoin wallets to security providers to sidechains.

Institutional tools

Companies either providing tools to nancial institutions such as banks,hedge funds, mutual funds or other institutional investors. These rangefrom alternative trading systems to nancial modeling and analysis soft-ware.

Equity crowdfunding

Platforms that allow a collection of individuals to provide monetary contribu-tions for projects or companies provisioned in the form of equity.

Venture Capital Firms

Venture capital rms included make venture equity investments across thestage spectrum and geographies focusing on Fin Tech companies. The VCrm category spans both micro VCs and large multi-stage rms with LPcommitments ranging from $25M to well over $1B+.

Corporate Investors

Corporate investors into Fin Tech include both corporations making direct

investments and separately identiable corporate venture units such as CitiVentures or BBVA Ventures.



Angel Investors

Fin Tech angel investors listed are individual angel investors who oer ear -ly-stage capital, advice and networks to startups in exchange for equity or

convertible debt.

Accelerators/Incubators

Accelerators and startup incubators typically oer some combination of eq-uity investment, mentorship and resources around company development.Those on the Fin Tech periodic table have either funded a number of FinTech portfolio companies or have a specic focus on Fin Tech i.e. Boost.vc,FinTech Innovation Lab.

Fin Tech Acquirers

Key public corporations that have acquired private FinTech companies inthe last ve years.

Notable exits

Key Fin Tech companies that have been acquired or went public in thelast 5 years ranging from lending and money transfer rms (Lending Club,Xoom) to personal nance and bill paying tools (Check, Mint.com).



July 14, 2015Banks and Corporates

Here’s Where 6 Banking Giants

Are Placing Their Bets On Fin-

Tech StartupsMajor banks including Goldman Sachs, Morgan Stanley, Citi, and Bank of

America share overlapping investments in nancial tech startups.

Funding to nancial technology is thriving as startups in the space harnessmajor trends like big data, mobile, and social networks.

Major banking giants aren’t sitting on the sidelines as they see some ofthese startups attack traditional banking segments, including payments,wealth management, and billing.

Six major banks — Bank of America, Citigroup, Goldman Sachs, JPMorgan

Chase, Morgan Stanley, and Wells Fargo — have made strategic invest-ments in 30 nancial tech (ntech) companies since 2009, according to CBInsights data.

Of the six banks, Citigroup has been most active — primarily through itsstrategic venture arm Citi Ventures — which has invested in ntech startupsranging from Betterment to Jumio to Square. Goldman Sachs, as we’vepreviously detailed, has increasingly ventured into ntech startup investing,with thematic investments across payments tech and big data nance.



The chart below shows total ntech deals (new and follow-on) by the sixbanks since 2009. Note: Debt and lines of credit were not included in theanalysis.

One useful way to visualize investor strategies in ntech is to use CB In-sights’ Business Social Graph, which shows how the banks’ investmentsintersect and diverge. Interestingly, the six banks’ investments overlap in anumber of cases, as the visualization below highlights.

JPMorgan and Goldman Sachs for example, have both backed Motif In-vesting, a San Mateo, California-based online brokerage allowing users tobuy baskets of stocks. Morgan Stanley, Bank of America, and Citi (as wellas UBS and Jeeries) have all invested in Visible Alpha, a startup oering aplatform for aggregating and interpreting stock analyst models and forecastdata. Perhaps most notably, mobile payments company Square has gar-nered investments from four separate bulge-bracket investment banks asits valuation climbed to $6B: Goldman Sachs, Citi Ventures, JPMorgan, andMorgan Stanley.



More thematically, several categories have been prominent for bank invest-ments in ntech:

Payments tech: A number of the banks have invested in various paymentsstartups ranging from Square and Obopay in mobile payments, to busi-ness-payments network BIlls.com, and online transaction company Revolu-tion Money. The latter was acquired by American Express in 2010.

Data analytics: Another hot area is big data analysis as it pertains to nan-cial services. Goldman Sachs and Bank of America share an investment inContext Relevant, which oers an advanced analytics platform for nancialservices. Goldman has also invested in Kensho Technologies, Dataminr,and Antuit in this category. Citi Ventures counts big data analytics rm

Ayasdi as a portfolio rm.

Two other areas that saw multiple bank investments include personal -nance tech (Betterment, Motif) and P2P lending (Prosper Marketplace andLufax).



March 22, 2015Banks and Corporates

Disrupting Banking: The Fin-

Tech Startups That Are Unbun-

dling Wells Fargo, Citi, and Bank

of AmericaTraditional banks are under attack from a number of emerging specialiststartups. Here are the FinTech startups unbundling banking.

In November, Tom Loverro of RRE Ventures wrote that “banks are underattack” and showed a few of the major players leading this trend. Inspiredby his post and Alexander Pease’s, we wanted to dig in and see how banksare being unbundled by startups. The graphic below details companiesattacking bank services ranging from robo-advisers wealth managementservices like Wealthfront and Betterment to small business loan companieslike OnDeck Capital and Kabbage to small business service providers like

Zenets and ZenPayroll, and many other areas.

As we detailed in our analysis of the startups disrupting FedEx, theseemerging companies attacking Wells Fargo, Bank of America, Citi andbanking more generally are not attacking them head on across multipleproducts. Instead, they’re attacking individual services & products (hencethe term “unbundling”). Said another way, are banks going to be out-inno-vated and lose their edge not because of their incumbent, large compet-itors, but because emerging startups inict upon them a death by a thou-

sand cuts?



While many international players are also unbundling banks, this infograph-ic focuses on US-based companies. We’ll separately analyze the interna-tional players going after banks.



May 31, 2015Banks and Corporates

Google, Intel, and Other Tech

Companies Attack Fin Tech asCorporate Interest in Space

Jumps 176% As corporations ramp up investment activity into fintech, what sectors arecompanies like Google and Intel focusing in on?

Investment dollars into Financial Technology (“Fin Tech”) tripled in 2014.Strategic or corporate investors are one of the key drivers of the increaseas the emergence of Fin Tech has corporates ranging from Google to Mas-terCard to Citigroup actively investing in the space. This research briefhighlights investing trends by corporates in the Fin Tech space, includingthe rising number of corporate investors, the most active corporates andwhere the top non-nancial services corporations are looking in Fin Tech.One of the most interesting facets of the recent n tech boom is the emer -

gence of these “unusual suspect” investors who see massive opportunity indisrupting traditional nancial services.

Corporate investors in Fin Tech rise 176%

Fin Tech is top of mind for many of the largest corporations in the world. In2014, more than 90 unique corporations invested in Fin Tech startups, a176% increase from 2010.



Fin Tech funding with corporate participation set to

double

Deals and investment dollars involving corporates are also on the rise, with2015 set to double 2014′s funding levels. $1.4B was invested across morethan 110 deals last year, which included twelve $50M deals including Moz-ido, Credit Karma, and OnDeck Capital. 2015 has already seen more than$700M invested, including large deals in Coinbase and LendingHome.

The most active corporates in Fin Tech

While large nancial players like banks and insurance providers are invest-ing at a higher rate, the chart of most active corporate investors in Fin Techis topped by tech companies. The top investor is Google Ventures, who hasmade 25 unique company investments into Fin Tech since 2010, followedby Intel Capital who was the only other investor with more than 10 invest-ments into the space.



Where the ‘unusual suspects’ are investing

Of the top 3 non-nancial players (Google, Intel, and eBay), Intel and Ebayhave more specic investment focuses. While Intel is very focused on pay-ments tech/mobile payments, Ebay is more focused on mobile commerceand ecommerce enablement.

Intel has notably made a large number of investments outside of the US,including companies like iZettle (Sweden), Elike (Brazil), and UUCun (Chi-na). While Ebay has not made as many investments as the other techgiants, it has acquired two of its investments (Magento and BillSafe).



Google on the other hand has made investments across a widerspectrum of fin tech spaces ranging from small business loans (OnDeckCapital) to personal savings (Hello Digit). Four of the spaces Google seemsparticularly interested in are crowdfunding, digital currency, trading tools,

and back office software with at least three investments in each. Below aresome of the select areas these non-financial investors are focusing on.



May 28, 2015Fin Tech Focus: Mobile and Millennials

The Mobile Fin Tech LandscapeMobile Fin Tech companies are garnering signicant interest from inves-

tors. We looked at the nancing trends, biggest deals, and top companies.

Mobile Fin Tech investment activity has picked up drastically thus far thisyear, with over $1.1B raised in equity nancings globally across 58 nanc-ings. This is part of a larger trend, which has seen mobile Fin Tech fundingtop $300M in 4 of the last 5 quarters, including Q2’15, which already isthe biggest quarter since 2012 behind multiple nine-gure investments to

One97 Communications (Paytm) and Max Levchin’s Arm.

Overall Q1’15 funding, which reached $372M, was up 238% versus thesame quarter a year prior.

One97 Communications, the maker of Paytm, India’s largest mobile com-merce platform, has accounted for 2 of the 3 largest deals to Mobile FinTech thus far this year, having raised a cumulative $575M from Alibaba andtheir nancial arm Ant Financial Services Group. The company is now val-ued at upwards of $1.8B.



Overall, 4 of the 10 largest deals went to Asian companies, with EnniuInternet Technology, maker of u51, a mobile credit card management andanalytics platform raising $50M, and India’s MobiKwik, a mobile walletcompany, raising a $25M Series B. Cumulatively the top 10 deals thus farin 2015 have raised over $1B.

We used CB Insights Company Mosaic to assess the health and momen-tum of some of today’s top Mobile Fin Tech companies. Mobile paymentscompany Square scored the highest, with a 960 (out of 1000) overall Mosa-ic score. Square most recently raised a second tranche of Series E invest-ment from Victory Park Capital and Colchis Capital for an undisclosed sum.The company was last valued at $6B.

Robinhood, the commission free investment platform ranked second, with a

940 Mosaic score. The company just raised a $50M Series B in early May,which drove a jump in news mentions and social media trac.

India-based MobiKwik rounded out the top three, as the mobile wallet com-pany has a Mosaic score of 920. Mobikwik raised a $25M Series A in April2015 from investors such as Sequoia Capital India, American Express Ven-tures, and Cisco Investments.



The top 10 Mobile Fin Tech companies by Mosaic below:



May 24, 2015Fin Tech Focus: Mobile and Millennials

Millennial Personal Finance –

The Fin Tech Startups Targeting

MillennialsFin Tech startups targeting the millennial demographic have raised over$2.29B across 126 deals. They range from ‘robo-advisors’ oering low-cost alternatives to brokerages to lending rms innovating in credit risk tostock-picking and automated savings apps.

Spanning a cohort born between 1980 to 2000, millennials broadly makeup one of the largest generations in history (bigger than the baby boomgeneration). Millennials are also investing, lending and sharing moneymuch dierently than their parents, and they are assisted by a growing setof tech-driven tools to do so.

The changing ways in how millennials manage their money is top of mind

for many of the largest nancial institutions in the world. In February, Gold -man Sachs released an infographic on how millennial habits in health, mar-riage, housing and more are impacting the economy.

Now, a host of Fin Tech startups, and the investors backing them, are bank-ing on millennials as a key demographic for their success. Fin Tech startupsprominent in the millennial demographic range from ‘robo-advisors’ oeringlow-cost alternatives to brokerages to lending rms innovating in credit riskto stock-picking and automated savings apps.

Many of the Fin Tech startups are leveraging existing technologies alreadypopular among young adults such as social networks and mobile mes-saging. Project crowdfunding sites GoFundMe and Andreessen Horow-itz-backed Tilt, for example, mirror or take advantage of social networksand are largely popular among college audiences. Google Ventures andGeneral Catalyst-backed HelloDigit transfers money directly via text mes-sage.



The graphic below breaks down the set of Fin Tech companies appealing tothe millennial generation including Robinhood, Acorns, Wealthfront, Earnestand more. In aggregate, millennial Fin Tech startups below have raisedover $2.29B across 126 deals. Click the graphic to expand.

Below is a full list of the companies on the graphic broken down by targetarea. If there are other emerging companies that you think should be high-lighted, leave them in the comments as well.

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