New York is the fastest growing market for financial-technology ventures in the US; investment is set to double by 2018
NEW YORK; June 26, 2014 – New York’s most promising opportunity for technology leadership could lie in financial services, according to a new report by Accenture (NYSE: ACN) and the Partnership Fund for New York City. Deals and investments in New York’s financial technology, or so-called “fintech”, venture sector have been growing at twice the rate of Silicon Valley since 2008. The report says the trend is accelerating innovation among New York’s global financial institutions.
Global fintech investment tripled between 2008 and 2013 from $928 million to $2.97 billion and is expected to double again to between $6 billion and $8 billion by 2018. The first quarter of 2014 was the most active on record, with $1.7 billion invested globally.
Silicon Valley is still by far the world’s biggest recipient of fintech investment, but it is facing growing competition from New York. Banks, capital markets firms and insurers are increasingly aware of the benefit of having a fintech cluster close to home.
Maria Gotsch CEO of the Partnership Fund and co-author of the report, said: “New York with its huge financial center has a strong gravitational pull for the fintech sector. Proximity between entrepreneurs and financial institutions allows them to work more closely at a time when demand for innovation is high.”
New York has been steadily closing the gap on Silicon Valley in terms of fintech deal-volumes. It had one-third as many fintech deals as Silicon Valley in 2011, two-thirds as many in 2013, and a near-equal number in the first quarter of 2014 (17 in New York compared to 19 in Silicon Valley).
Between 2008 and 2013, New York has had $1.1 billion in fintech investment, including $430 million last year, making it the world’s second largest fintech center. In the first quarter of 2014 it had $151 million in investment – its third-highest quarter on record. New York fintech investment could grow to $950 million by 2018, according to the study.
The growth trend in fintech is largely being driven by rising demand from the industry, its clients and customers, for mobile, analytic, cloud regulatory compliance, and data security solutions.
“As entrepreneurial costs go down, more and more institutions are focusing on how venture innovations can help them be more competitive and efficient,” said Bob Gach, global industry managing director of Accenture’s Capital markets practice and co-author of the report. “This is why many financial services companies are ramping up accelerators and innovation labs, and sometimes investing in fintech ventures directly.”
In recent years, a growing number of global institutions have launched in-house fintech VC funds, some valued at hundreds of millions of dollars. Meanwhile programs like the FinTech Innovation Lab, supported by 15 major financial institutions, have gained momentum. Founded in 2010 by Accenture and the Partnership Fund for New York City, the Lab fosters fintech growth through a mentoring program that brings together the brightest entrepreneurs with top executives from the financial services industry. Its 18 alumni companies have raised $76 million since participating in the program; one participant was recently acquired for $175 million.
- Global investment in fintech ventures has increased at more than four times the rate of overall VC investment during the past three years;
- Silicon Valley accounted for 32 percent of all global fintech financing and one-fifth of all deals in 2013. In the first quarter of 2014, the region saw $376 million in total fintech investment;
- The US is the world’s largest fintech market, receiving 83 percent of global fintech investment, or $2.4 billion, last year. US fintech investment is expected to increase to up to $4.7 billion by 2018.
“New York has every chance of being the prime beneficiary of the fintech boom in the coming years,” concluded Gotsch. “It offers entrepreneurs proximity to perhaps the largest potential customer base of financial institutions in the world. It has a burgeoning venture ecosystem, and one of the world’s largest financial technology workforces. But New York needs to build on its momentum and advantages, foster programs like the Lab, and create new champions by capturing the attention of entrepreneurs and VCs from all regions.”
The study, entitled “The Rise of Fintech; New York’s opportunity for tech leadership,” was released for the FinTech Innovation Lab’s fourth annual “Demo Day” event in New York.
The study is based on Accenture and The Partnership Fund for New York City’s analysis of fintech investment-data from CB Insights, a global venture finance-data and analytics firm. The analysis included global financing activity from venture capital and private equity firms, corporations and corporate venture-capital divisions, hedge funds, accelerators, and government-backed funds from 2008 through the first quarter of 2014. Fintech companies are defined as those that offer technologies for banking and corporate finance, capital markets, financial data analytics, payments and personal financial management. Forecasts are based on a linear projection adjusted for historical volatility and through correlations to external forecasts of financial industry investment in mobile, cloud, Big Data / analytics, cybersecurity, and regulatory compliance by leading global industry and equity analyst researchers.
About the Partnership Fund for New York City
The Partnership Fundfor New York City is the $110 million investment arm of the Partnership for New York City (www.pfnyc.org). The Fund’s mission is to engage the City’s business leaders to identify and support promising NYC-based entrepreneurs in both the for-profit and non-profit sectors to create jobs, spur new business and expand opportunities for New Yorkers to participate in the City’s economy. The Fund is governed by a Board of Directors co-chaired by Richard M. Cashin, Managing Partner of One Equity Partners, and Charles “Chip” Kaye, co-president of Warburg Pincus LLC. Maria Gotsch serves as President and CEO of the Fund.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 289,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.
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