Fintech 2014 wrap up

Fintech love

Innovation in the fintech sector has real potential to upset the status quo in the world’s financial markets. This has prompted a range of responses from the World’s major banks and financial institutions, ranging from real attempts at engaging with innovations and opportunities through to marketing-only affairs. Who will be better placed to cope with changing market conditions in 2015?

We profile some of the different initiatives that European financial services institutions were taking in 2014. This does not pretend to provide a definitive list as some institutions are still playing their cards close to their chest but it does provide an indication of the good, the bad and the ugly in fintech innovation plays.

VENTURE CAPITAL/INVESTMENTS

Some financial institutions have taken the approach of taking a stake in startups through venture capital funds. This provides the opportunity for banks and other organisations to be part of the action, although it doesn’t necessarily solve the problem of integrating these offerings into the heart and soul of the organisation’s operations.

Santander has launched the $100m Innoventures fintech venture capital fund based in London with a global remit and headed by former ex-McKinsey man Mariano Belinky.

HSBC has created a $200m fund aimed at the fintech sector focusing on both retail and wholesale banking markets with the aim of improving its technology systems.

Sberbank set up SBT Venture Capital with a $100m fund to target the fintech sector, providing finance and support. Announced investments include Red Zebra Analytics, Walkbase, Sequent, Startupbootcamp FinTech, Moven and NetGuardians.

Citibank created Citi Ventures as a venture capital operation with the aim of investing in businesses that have the potential to transform the financial services industry although offices have so far only opened in New York and Silicon Valley. Announced investments include Ayasdi, Betterment, Chef, Click Security, Datameer, InvestLab, Jumio, M-DAQ, Platfora, Pindrop Security, Ready for Zero, Shopkick and Square.

Travelex has created a £25 million digital growth fund to make seed investments and acquisitions in the mobile, payments, e-wallet, cryptocurrency and location technology space. Bankinter setup Fundacion Innovacion Bankinter in Madrid to explore innovations in the fintech space and has made various investments in fintech startups including Captio and Coinffeine.

Life.SREDA is a Russian venture capital firm that has launched a $100m fintech fund with original funding coming from Russian bank-holding company Life Group. Investments include SumUp, Scorista, Settle, Anthemis Group, Fidor Bank, Instabank, LifePAD, LifePay and Moven.

Wells Fargo is making venture capital investments via Norwest Venture Partners with a focus on investments in Silicon Valley, India and Israel. Fintech investments have included 1010data, 41st Parameter, Nadex, Lending Club, motif Investing and mPower.

CME Group has set up strategic investment group to invest in fintech startups with investments of between $500,000 and $5m with investments so far focusing on North America. Investments so far have included Wickr, 1Qbit, Powerlytics and Dwolla.

EUROPEAN INCUBATOR PROGRAMMES AND CENTRES

The Europe and Middle East Region has an expanding range of specialist fintech accelerators where the relationship with financial institutions ranges from partner/sponsor through to more active ownership/management where startups are expected to integrate into sponsor’s systems.

FinTech Innovation Lab provides 12 week mentorship programme and looks to foster working relationships between startups and major banks. The scheme is in its third year and is managed by Accenture but the programme also has partnership arrangements with Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J. P. Morgan, Lloyds Banking Group, Morgan Stanley, RBS Group, UBS and Nationwide. Participants in the 2014 round included Erudine, FinGenius, Logical Glue, PixelPin, PhotoPay, Squirro and uTrade.

Startupbootcamp Fintech provides funding, mentorship, office space and access to investors and venture capitalists for 10 participating fintech startups from around the world. Lloyds Bank, Rabobank and Mastercard were all sponsors of this year’s edition in London. Participants in the last round included Creditable, dutch, Epiphyte, Friendly Score, Insly, investUP, Invoice Sharing, M-Changa and Millipay.

Barclays collaborated with Techstars on the creation of the Barclays Accelerator providing 13 week incubator programme for fintech startups in London with funding, space with participants having access to Barclays’ APIs and data. Participants in the last round included Aire, ClauseMatch, Crowdestates, DoPay, Gust Pay, Katalysator, Market IQ, NoviCap, Tryum, Virtual View App and Wagevance.

Citi’s global corporate venturing arm, Citi Ventures is partnering with Californian accelerator Plug and Play to launch the Plug and Play Fintech Programme, with locations in the US, Germany, Singapore, Brazil and Spain. The bank has also created Citi Accelerator Program in Tel Aviv providing four month incubation programme with mentoring, product development support and access to senior executives at Citibank.

BBVA founded BBVA Open Talent to provide a Barcelona based accelerator programme (with parallel programmes in Bogota and Mexico City) for six participating startups with funding, support and a week long session in New York. The bank also funds the BBVA Innovation Center in Madrid providing a centre to work on new initiatives for the Spanish based bank, with other centres in Mexico and Colombia.

Commerzbank founded main incubator in Frankfurt providing an incubator and investor in fintech startups. Announced investments include Traxpay.

Deutsche Börse launched Open Innovation offering partnerships and support to fintech startups leading potentially to investments and is seen as an extension of its long running YouNovate programme (see below) to external organisations.

UniCredit created the UniCredit Start Lab in Milan to provides physical space and support for startups specialising in fintech and aims to encourage synergies with the Italian bank.

Bank of Ireland has partnered with NDRC, Enterprise Ireland, EY, Mediolanum International Funds and State Street to create a ‘pre-accelerator programme’ in Dublin for startups in the fintech sector.

Bank Leumi has partnered with Israeli based Elevator Fund to provide a Tel Aviv based incubator programme for fintech startups and is now looking for applicants for its second intake. Organisations that participated in the first round include LynxGuard, Pythia, Morovus and Myze.

Le Village by Credit Agricole in Paris provides an incubator space for startups (includes fintech but not fintech specialist).

ABN Amro launched the Dialogues Incubator in 2007 in Amsterdam with the aim of facilitating entrepreneurship and innovative practices at ABN AMRO Bank, but the programme is also open to individuals from outside the bank.

EY has partnered with Pivotal innovation with the EY Startup Challenge, looking to foster startups addressing EU General Data Protection Regulation (“Right to be Forgotten”). The accelerator offered the six participating startups a six week incubator programme in which they are provided with office space, training, mentoring and access to EY’s client base.

It is also worth mentioning Level39 in Canary Wharf which whilst not having direct relations with financial institutions, does provide Europe’s most high profile fintech acceleration spaces.

OTHER EUROPEAN INITIATIVES

There are plenty of initiatives that don’t fit into the venture capital or accelerator sponsorship of the aforementioned organisations. These programmes range from large scale internally directed innovation programmes through to standalone hackathon type initiatives with limited impact on the internal workings of the sponsoring organisation. We are also seeing banks more actively competing for talent in an increasingly busy fintech space.

BNP Paribas has run L’Atelier as its technology and innovation tracking unit for over 30 years as its with services for its parent company as well as to consulting clients. The service offering includes L’Atelier Lab which to match startups with large corporate clients. The organisation also launched the Wave exhibition, positioning the bank as an innovator to the general public.

Erste Group created BeeOne with the aim of fostering innovation within the banking group with the development and implementation of different ideas and prototypes.

Deutsche Börse set up YouNovate to provide a platform where employees can pitch ideas to improve the company’s business areas, in anything from new products to cost efficiency savings and has been running for the last 5 years.

UBS is using internal innovation teams as well as partnering with startups in Zurich as well as working with FinTech Innovation Lab in London.

Barclays ran the the #Openminds hackathon in November with the aims of supporting Barclays’ charity partner UNICEF.

Rabobank sponsored the Dutch Fintech Hackathon in Utrecht.

Deloitte hosted the Capital Markets Hackathon in London, with the aim of focusing greater attention on fintech innovations in the capital markets sector.

Bank Leumi, LeumiTech and Salesforce launched a 36 hour hackathon in Tel Aviv with the aim of developing applications within the fintech space.

Aviva partnered with fintech meetup NewFinance, startup networking organisations 3Beards and StartUp Weekend and also run their own hackathons and their own InsuranceTech meetup group.

Lloyds Banking Group was launched this year with the aim of providing digital training to staff.

Travelex launched a recruitment campaign aimed at building a team with experience across a range of digital disciplines, including engineering, product, UI, UX, design, marketing and testing with the sponsorship of this year’s Silicon Milkroundabout.

Anthemis Fellowship looks to develop selected individuals who want to pursue a career in the fintech sector with training, experience and mentorship with Credit Suisse being among the partner organisations.

Santander partnered with Funding Circle, which will see the peer to peer lending startup offer products via Santander’s branch network.

CONCLUSION

Ignitr offers financial services institutions the opportunity to innovate in a safe environment that can effect real change and deliver more than “window dressing”. We do this through defining fintech innovation strategies, innovation workshops, designing and building fintech products and enabling ‘safe to fail’ experiments, providing participating organisations the opportunity to embed innovation within their organisation. We’re working with five out of the top fifteen European banks and several young fintech startups.

Whilst acquisitions and accelerators can do great things for sparking innovation, if these initiatives are not ‘owned’ and integrated, they run the risk of leaving their sponsors little better off than they were before.

We’ll let you judge which approach you think is most likely to future-proof financial institutions.