Deal value in New York City reached new high of
$768 million in 2014
Investments in financial technology (fintech) continued at a
remarkable pace last year, nearly tripling in the United States in
2014, according to a new report by Accenture (NYSE:ACN) and the
Partnership Fund for New York City.
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The value of fintech investments in the United States soared to
$9.89 billion in 2014, up from $3.39 billion in 2013. This
191 percent increase dwarfs the increase in 2013, when fintech
deal values in the United States climbed 68 percent. In New York,
fintech deal values grew by 32 percent in 2014, to a new high of
$768 million.
The report, “Fintech New York: Partnerships, Platforms and Open
Innovation,” was released today at the FinTech Innovation Lab’s
fifth annual Demo Day event in New York. According to the report,
global fintech investment tripled in 2014, to $12.2 billion, from
$4.05 billion in 2013. By comparison, the overall market for
venture-capital investing increased only 63 percent during that
period.
“This past year marked a paradigm shift in how financial
services companies approach and embrace fintech innovation, as they
recognize the vast potential that this strong network provides,”
said Robert Gach, managing director of Accenture Strategy Capital
Markets. “An increasing number of banks and insurers are investing
in connecting into the fintech ecosystem, whether through
accelerator or incubator labs, venture investments or in other
ways. We believe this explosive growth in fintech will help drive
innovation within some of the world’s largest financial
institutions.”
Where the Money is Going
The report notes that hot areas for fintech investment in 2014
included payments, lending, trading technologies and wealth
management. Payments accounted for the largest number of fintech
deals in the United States in 2014, 29 percent. In New York,
however, the total number of fintech deals in payment companies has
trended downward, from 33 percent of all fintech deals in 2012 to
21 percent in 2014. Lending was the second-biggest investment area
for U.S. fintech investments in 2014, accounting for
16 percent of such investments.
The report also highlights that New York is attracting more
venture investments into wealth management and markets (which
includes trading platforms) segments on a percentage basis than the
rest of the United States. More than four of every 10 (42 percent)
fintech deals in New York in 2014 were in one of the segments
highlighted above. These same fintech segments, however,
represented just 21 percent of deal volume in the United
States.
Maria Gotsch, President and CEO of the Partnership Fund for New
York City and co-author of the report, said, “For fintech
entrepreneurs, New York provides key advantages that no other city
can match – notably close access to potential customers, and a deep
talent pool of individuals with an intricate understanding of the
financial services industry. With each passing year, New York
City’s fintech industry becomes more established and a larger force
in the city’s entrepreneurial and financial services
ecosystem.”
Next Big Trends
A key driver of the increase in investment in fintech is coming
from the needs within financial services for innovation. Financial
services firms are looking for new technology that can help them
cut costs, comply with changing regulations, and, importantly,
allow them to compete more effectively with new competitors.
Emerging technologies are providing companies with the tools to
meet these challenges, for instance with cloud technology. Banks
will likely consider increasing their investment in this area;
particularly as they continue to work with regulators to identify
which data can be hosted in the public cloud and as they look to
transform their data centers with private clouds.
The report also notes that strong growth is expected over the
next 18 months in blockchain, the underlying distributed-ledger
technology that currently supports bitcoin. As a stand-alone
technology, blockchain has the potential to help banks, credit card
companies and clearinghouses collaborate to create safer, faster
accounting and optimize use of capital by reducing counterparty
risk and transaction latency. Investment in cyber security is also
likely to increase significantly in the coming year, especially in
light of broad media attention surrounding recent large-scale data
breaches.
Facing digital disruption, the report highlights examples of
innovative startup companies working with insurers to help
transform their operations. According to the report, U.S. insurers
lose $5.8 billion annually as a result of consumers switching
carriers. To address a challenging customer base, insurers have
started to tap the innovations within the fintech community. The
report notes that more than four in 10 insurers (43 percent) are
either planning to buy, or already have bought, a fintech
startup.
In its fifth year, the New York FinTech Innovation Lab,
co-founded by Accenture and the Partnership Fund for New York City,
continues to help early- and growth-stage fintech companies
accelerate product and business development by bringing together
entrepreneurs and top bank and venture capital executives. The
FinTech Lab has paired 31 startup businesses with mentors, giving
them a fast track to access bank customers and win business. So
far, the FinTech Lab’s 24 alumni companies have raised a total of
$176 million in financing after participating in the program.
InkTank, an alum from 2013, was acquired in May 2014 for $175
million.
Methodology
The study is based on Accenture and The Partnership Fund for New
York City’s analysis of fintech investment-data from CB Insights, a
global venture finance-data and analytics firm. The analysis
included global financing activity from venture capital and private
equity firms, corporations and corporate venture capital divisions,
hedge funds, accelerators, and government-backed funds from 2010
through 2014. Fintech companies are defined as those that offer
technologies for retail, commercial and investment banks, insurers,
asset managers and payment services providers as well as
alternative providers of financial services (e.g. P2P platforms and
digital currencies exchanges). Accenture Research has reclassified
CB Insights deals through its proprietary methodology, identifying
seven different product categories (lending, payments, markets,
wealth management, insurance, risk & security and other) to
evaluate the level of investment change in these segments of the
financial services sector.
About the Partnership Fund for New York City
The Partnership Fund for New York City is the $115 million
investment arm of the Partnership for New York City
(www.pfnyc.org). The Fund’s mission is to engage the City’s
business leaders to identify and support promising NYC-based
entrepreneurs in both the for-profit and non-profit sectors to
create jobs, spur new business and expand opportunities for New
Yorkers to participate in the City’s economy. The Fund is governed
by a Board of Directors co-chaired by Charles “Chip” Kaye, co-chief
executive officer of Warburg Pincus, and Tarek Sherif, Chairman and
CEO of Medidata. Maria Gotsch serves as President and CEO of the
Fund.
About Accenture
Accenture is a global management consulting, technology services
and outsourcing company, with more than 336,000 people serving
clients in more than 120 countries. Combining unparalleled
experience, comprehensive capabilities across all industries and
business functions, and extensive research on the world’s most
successful companies, Accenture collaborates with clients to help
them become high-performance businesses and governments. The
company generated net revenues of US$30.0 billion for the fiscal
year ended Aug. 31, 2014. Its home page is www.accenture.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20150625005146/en/
AccentureMelissa Volin, + 1
267-216-1815melissa.volin@accenture.comorPartnership Fund for NYC /
Rubenstein CommunicationsFarrell Sklerov, + 1
212-843-8289fsklerov@rubenstein.com
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