Banks & FIs Double Up Investments In FinTech Startups As We Predicted

At MEDICI, we have been tracking the FinTech industry for over five years, analyzing its trends and insights. As you might recall, in December 2017, we predicted that banks would start buying FinTechs, invest more, and learn to benchmark innovation in 2018. We also predicted that in 2018, you would see new venture arms/funds of FIs/banks cropping up and that you would see more action from the existing venture arms of banks – and it came true.

We are witnessing that slowly (but steadily) banks are buying into the new paradigm of partnering with FinTechs in different ways – it makes sense, considering the investments in the FinTech industry reached $58 billion in value in 2018. Incumbents on both sides (banks and FinTechs) are working towards coming together to meet growing customer expectations and stay relevant in a technologically growing world (concerning banking).

In 2018, when we published an article on banks partnering with FinTech, we saw that 159 deals were made by FIs/banks in FinTech companies ($5 billion was the total amount invested in those rounds in the startups). Let’s see how we fare in our predictions on the investments made by FIs/banks in 2019.

Note: The above-mentioned investors might have partially invested in the deals.

In 2019 (January to July), the total value of investments deal (total in all the rounds by all the investors) was 5.52 billion USD compared to 5.0 billion in 2018 (January to November). There were 204 deals where 84 banks invested in 127 FinTechs, 46 insurance companies invested in 56 FinTechs/InsurTechs, and 31 asset management companies/investment management companies invested in 40 FinTechs.

Here are the top investment deals that took place in 2019 (January to July):

  • Goldman Sachs was one of the investors which invested in the $300-million Series E round in Carta
  • Allianz was one of the investors which invested in the $300-million Series D round in Lemonade
  • Goldman Sachs was one of the investors which invested in the $250-million Series E round in Marqueta
  • New Investment Solutions, an asset management company, invested $230-million in DMI Finance

It’s interesting to note that a lot of capital has indeed come from incumbents’ venture capital arms which include – but aren’t necessarily limited to – Barclays Venture, Santander Innoventures, Allianz Life Ventures, ABN AMRO Digital Impact Fund, and CommerzVentures.

Furthermore, to explore and utilize emerging technologies, older financial institutions are now organizing to innovate by developing labs to foster innovation and actively partnering with FinTechs offering expertise in areas beyond their strengths. We predict that by the end of this year, the amount invested by banks and FIs could quite possibly double from where it stood last year.