US banks are placing strategic bets across lending, payments, capital markets, data analytics, and blockchain.
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US banks are are actively investing in fintech startups.
In 2018 (YTD 11/21), the top 11 US banks by assets participated in a total of 49 equity rounds to fintech startups. This compares to 19 in 2017 and 33 in 2016.
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Today, US banks are involved in more fintech rounds for two main reasons: high-upside returns and strategic partnerships.
In some cases, a bank or corporate venture capital group will invest in a startup strictly for the purpose of future returns.
In others, a bank will invest strategically — it invests and partners with a fintech startup to further its internal strategic goals. For example, JPMorgan invested in restaurant payments startup LevelUp and then integrated LevelUp’s order-ahead software into Chase Pay.
Strategic investing is a growing trend among banks in 2018, as many US banks have solidified their internal digital strategies and are now looking to execute.
Below, we take a look at the top US banks and their fintech startups investments.
Gray boxes indicate that the company is a new addition (since the start of 2017) to that investor’s portfolio. Light blue boxes indicate that the portfolio company has been acquired, and patterned blue boxes indicate that the investor acquired the portfolio company.
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Goldman Sachs invests in tech to scale Marcus: Goldman Sachs is investing in consumer-facing tech that will help the company scale its digital bank, Marcus. These investments span various categories including lending, payments, real estate, blockchain, and insurance.
Goldman’s strategic investments have been largely focused on alternative lending. For example, Goldman took a corporate majority in Financeit at the end of 2017, and has since added home remodeling loans to its Marcus platform. Additionally, Goldman invested in consumer mortgage startups Better Mortgage and Mortgage Financial Solutions, which could foreshadow a Marcus mortgage product in the future.
Goldman is also investing in fintech startups that help consumers find and repay debt. For example, Goldman invested in Trussle, a free online mortgage broker, and Even Financial, an API that connects consumers to personalized products. These investments may soon be integrated into Goldman’s recent acquisition of Clarity Money, a personal financial management app.
Other recent consumer-oriented investments are Prima Assicurazioni, BitGo, Uala, Marqeta, and Neyber.
Banks are beginning to invest in process automation: US banks are beginning to invest in automation software for both internal and external processes.
Goldman Sachs and PNC recently invested in robotic process automation (RPA) software Automation Anywhere and Workfusion, respectively. RPA is the automation of repetitive workplace tasks like document review, data entry, and customer service. It’s part of the trend toward white-collar automation.
Additionally, Citi, JPMorgan, Goldman Sachs, Wells Fargo, and Bank of America have all invested in startups that help small businesses automate back office processes. These startups — Billtrust, ScaleFactor, C2FO, Bill.com, and Canopy Tax — help businesses simplify the role of CFO by automating accounts receivables, accounting, taxes, and payments.
Real estate tech is an emerging investment category: Consumer real estate tech is helping simplify consumer real estate operations. In 2018, Goldman, Citi, and JPM all invested in real estate tech startups.
In June, Citi invested in Unison, a startup that allows homeowners to easily leverage their homes equity for cash. Home equity is a growing market, and one that can help banks strengthen their consumer real estate offerings.
US banks are increasing activity in the UK: In 2018 (YTD 11/21), the top 11 US banks by assets have participated in a record 9 equity rounds in fintech startups that are headquartered in the UK. This is a significant jump from 1 investment in both 2017 and 2016.