Fintech US
The United States of America (USA) is one of the most vibrant Fintech markets in the world. Although in recent years, it has lost its leading position in terms of value and volume of the deals, against South East Asia, its Fintech ecosystem has a steady and healthy growth. Since the early 2010, the total VC type investments exceeded 100 billion USD (according to CB Insights), growing at 25% on average.
Despite the scepticism created by the Trump’s administration in 2016 recognising less the importance of Fintech and slowing down in the regulatory efforts, the total investments in 2017 reached 14 billion in Q3, a little higher than 16% compared to last year at the same period.
For sure, in US, the financial technologies have both the customer and the investors’ interest and appetite to grow in that space which is shifting the entire industry in terms of doing business, serving customers, creating value, transparency, compliance and increasing financial inclusion. Multiple players co-exist in a network of platforms, technologies, bridges of exchange of data and value. The successful start-ups born and raised in USA have been expanding their footprint globally paving the way to the new comers by leading as examples and also investing in them.
The most promising start-ups, also the best-funded ones since their initiation are now considered as unicorns.
Their innovative business models have been disruptive and scalable at the same time. To give some examples among the best known ones:
Stripe, an online payment processing company raised 440 M USD since their foundation in 2009 and is worth more than 5 b USD. The company has entered 6 new European countries in June 2017, invested in Monzo Challenger Bank in November 2017 with an amount of 71 m USD
Oscar, a “millennial-beckoning” health insurance company raised around 730 m USD since 2013 and has a value of 2,7 b USD now. Co-founded by Jared Kushner’s younger brother Joshua, the company offers concierge care teams and direct scheduling from smartphones and makes great use of big data including patient data, insurance claims, physicians directories and profiles and medical reports.
Avant, a personal loan start-up that raised 655 m USD so far is now worth around 2 b USD. The company operates an online marketplace through the use of big data and machine learning.
Kabbage, a fully automated platform powered to lend directly and for its partners is backed by 1,6 b USD of funding and is worth around 2 b USD. The company has recently got 200 m USD from Credit Suisse after picking 250 m USD from Softbank earlier this year to increase its number of loans targeting now larger companies in US. Kabbage does underwriting through algorithms and machine learning, enabling the company to qualify and quantify risk, and as a result to be more accurate in finding loan-worthy companies and individuals and to minimise default rates.
Behind these start-ups are deep pocket international investors that we can list some of them:
Softbank, fixed line, mobile telephony, Internet, telecommunications and digital television products provider, invests in early stage, late stage and seed ventures. The Company has invested among many others, in SoFi (1 b USD), Kabbage (250 m USD), Solaris Bank (26,3 m USD),
Goldman Sachs, a multinational financial services firm providing securities, investment banking and management services, one of the 3 most active investors in USA, has invested so far in 31 rounds to 25 Fintech companies focusing mostly on payments. The investment bank has also its portfolio of start-ups in the verticals such as blockchain, data analytics, insurance, personal finance, wealth management, financial services software, lending, real estate and RegTech
General Catalyst, a VC firm that makes early-stage and growth equity investments funded among others, Funding Circle, Lemonade, Gusto and Stripe
Sequoia Capital, a VC firm mainly focusing on energy, financial, enterprise, health care, internet and mobile start-ups in early stage, late stage and seed funding rounds, invested so far among others in Stripe, Nubank, Clover Health
Khosla Ventures a VC firm mostly investing in tech companies across the most typical VC investment means, founded among others Oscar Health, Affirm, Zenefits
and other strategic active investors such as as Visa, American Express, Master Card, etc.
The future looks equally hot, especially with the growing interest and investments towards AI, machine learning and blockchain as key technologies to enable the expansion of Fintech, as well as InsurTech and RegTech as high growth Fintech clusters.
Fintech is shaping the industry with its experienced, young and young at heart talent, connecting the world, creating new currencies, new ways of doing business while building efficiencies, speed and action by removing intermediaries, creating value out of data and tapping into the core of the evolving digital technologies.
The transparency reducing human greed, the efficiency lowering cost of capital, and accessibility to financial services creating access to capital and financial inclusion are the key drivers behind the success of Fintech.
In US, the customer acquisition and the profitability remain still the major issues to rethink and adjust the business models. However the learning curve has been steep. The growth of Fintech in US is expected to resonate back on the rest of the world.
