Since the start of the new year, entrepreneurs have been on edge. Venture capital seemed to be dwindling, which made business owners worry that any company they began would struggle to stay afloat. However, the past few months have shown that companies in the financial technology, or Fintech, sphere need not worry. Corporations and banks have been investing so much in Fintech startups that funding for said companies is higher than ever before.
The amount of funding put into Fintech startups has doubled since 2015, reaching 13.8 billion dollars. Investments have stemmed mostly from the corporate sphere. Corporations invest in such startups in hopes to make their operations run more smoothly. Unfortunately, this increase in investments came at a cost. It surged because of stock performance by many Fintech startups that was lower than expected.
Therefore, banks and corporations all took part in deals for startups in order to expand their investment portfolios. One such bank is Citigroup, which is a well-known and established bank, that has thirteen startups in its investment portfolio. Other financial corporations backing several Fintech startups include Goldman Sachs and JPMorgan Chase. The investment in Fintech startups by banks and corporations is not just limited to the United States either. Corporations in Asia, for example, make up almost half of all investors in startups.
Investing in Fintech startups by financial corporations and banks bodes well for the future of finance all over the world. It shows a push in outdated financial institutions to adapt to modern times by incorporating new technology into their business models. It is paying off for customers already. Banks have developed applications for mobile devices that allow easier banking transactions, for example. Also, exchanging money digitally is as seamless as ever. Fintech innovation has even reached a point that stocks can be monitored and traded right from a technological device.
However, there is some uncertainty in Fintech startups, as they have become wary about the nature of the bank investments in their companies. They are, of course, thrilled that banks are dedicated to breaking into the digital age, but there is still a question as to whether or not the financial institutions will be good investors. Bank regulations are very limiting, and many such regulations prevent them from investing in innovative Fintech ventures.
Only time can tell how involved banks will be in Fintech startups in the future, but I hope they continue to take a large investing role. Moving all banking into the digital age is the only logical course of action in this day and age, and it has the ability to help everyone become more money-conscious.