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As much as FinTech entrepreneurs would like to attribute their success to groundbreaking solutions and talented teams, it is rarely a single journey. Substantial role in growth and development of FinTech plays the ecosystem — competition, regulators, financial institutions, consumer market, supporting ventures like accelerators and incubators, VCs and dedicated funds. For FinTech in particular, traditional financial institutions have been of immense support regardless of the fact that they often represent direct competition.
The largest FinTech investors are banks
By some estimations, ~$4.7 trillion out of $13.7 trillion of the traditional financial services’ revenue is at risk of being displaced by new technology-enabled entrants. Whether the estimations are exaggerated or not, there is still a general consensus that FinTech has a substantial impact on the financial services industry and its traditional players.
Although some FinTech players would position themselves as rivals to traditional banks, those very banks are at the foundation of growth and development of the global FinTech ecosystem. Some of the most forward-thinking institutions have turned to building beautiful friendships with FinTech startups and passionate support of the community of bright entrepreneurs that may result in mutually beneficial outcomes.
In fact, according to some estimations, three of the largest FinTech investors are international financial institutions — Citi Ventures by Citi, followed by Goldman Sachs and JP Morgan.
As Overbond reported in mid-July, Citi Ventures made 42 investments in 33 companies. Since 2009, Citi has invested over $1.2 billion through its venture arm. Citi along with JPMorgan is among the most active financial institutions patenting solutions across segments. Citibank has also set up three separate systems within the bank that deploy blockchain-based distributed technologies. They developed an equivalent to bitcoin called Citicoin, which is being used internally to understand the digital currency trading system better.
As for Goldman Sachs, the total investments since 2008 are reported to reach over $800 million. The bank has been at the forefront of innovation and at the end of last year filed a patent application with the US Patent & Trademark Office titled “Cryptographic Currency For Securities Settlement” for a cryptocurrency called SETLcoin, which is supposed to enable P2P transfers with cryptographic tokens representing securities with instant settlement.
Not to be left behind, each year JPMorgan is reported to be dedicating ~$3 billion in technology with a large portion of that funding going towards FinTechs.
It is also worth mentioning Bank of America, which at the beginning of this year, was reported to be setting aside $3 billion from its annual budget for investing in technology and innovation.
Banks are developing the accelerator/incubator ecosystem to support FinTech startups
Aside from direct investments in FinTech startups, banks have been actively developing the accelerator/incubator ecosystem around the world. The largest financial institutions are involved in some sort of accelerator/incubator one way or another — whether in partnerships or by launching one of their own. Here are some examples of FinTech-related initiatives by the largest banks.
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