Venture capital investment is just one of the ways banks are rushing to follow the opportunities offered by the explosion of fintech.



As a business and an investment, fintech reached a point of maturation, if not saturation, in 2019. New investments in the subsector reached $34.5 billion globally across 1,913 deals, according to a report by CB Insights.


Fintech startups mature beyond the early stages. CB Insights reports that Series B+ rounds surpassed five-year highs last year, as a percentage of trades; 83 megarounds were completed, an increase of 81% over 2018. Funding and transactions increased in South America, Africa, Southeast Asia and Australia. Southeast Asia saw transactions and financings increase by 143% year-over-year.


With the plethora of new financial technologies and online transactions, the banking industry needs to change the way it approaches them, argues Deloitte in a recent report. Banks will be forced to look to partnerships, increased investment and different business models to make the same capital relationships work better. The good news is that they will have even more choice as to where to place their bets as the fintech trend continues to gain momentum.


The investment banks that have earned a spot in Global Finance’s third annual Best Banks for New FinTech rankings have all met these challenges in one way or another.


Global


Investec took the top spot among banks focusing on new global financial technologies. His venture capital fund, INVC, renamed Outward VC, received a fundamental investment from NIBC Bank. It has already invested in, among other things, Aventus, an operating system for the insurance sector; Bud, a financial ecosystem leveraging open banking; Curve, which allows consumers to spend with all credit cards with one card; Monese, a mobile money account; and PrimaryBid, which connects listed companies with mainstream investors to improve the capital formation process.


“Outward VC’s distinctive advantage is leveraging its investors’ platforms to add real value to portfolio companies,” said Devin Kohli, co-director of Outward VC, last summer at the closing of the inaugural fund. “We have demonstrated this by facilitating follow-on funding from top-tier investors, senior executive hires and business partnerships for our existing portfolio companies.”


During a panel discussion on banking and fintech hosted by Outward VC, Lyndon Subroyen, Global Head of Digital at Investec, discussed how in-house legacy systems and fintech investments can come together. “We never tried to be everything to everyone, so we have fewer legacy issues to deal with,” he said. “New technology helps us do even better what we already do really well, and partnering with fintechs allows us to tailor the offering to customers.”


North America


Citi maintained its position as the leading fintech investment bank in North America. Citi has established innovation centers in Singapore, Dublin, Tel Aviv, London and other places to act as feelers within the fintech sector. CB Insights ranks Citi as the second most active bank in global fintech transactions, having backed four blockchain startups, three capital markets, and three payments startups over the past two years.


Citi has positioned itself to benefit from the broader public access that fintech provides. A successful agreement last year between Google and Citi, as well as Stanford Federal Credit Union, allows Google to offer personal checking accounts linked to Google Pay by accessing Citi’s global network of more than 100 million customers. In turn, Citi has access to millions of Google users by allowing customers to use their bank accounts through the Google Pay app.


“What we’ve seen is coexistence,” Citi CEO Michael Corbat remarked recently during a panel discussion. “We develop a lot of our own stuff. We are partners. We buy. Some of the fintechs are great partners on our platforms. Some of the fintechs are great customers of the company, in terms of the services we provide to them.


Latin America


In Latin America, BBVA extended its support to the venture capital fund Propel Venture Partners. This is one of the reasons why it has earned the position of Global Finance’s top fintech bank in Latin America.


“Category-defining companies can take a decade to mature,” says Propel partner Jay Reinemann in a public statement. “But in our short history, we already have four portfolio companies that have achieved unicorn status, including an IPO, DocuSign.”


Western Europe


Banco Santander, Global Finance’s top pick in Western Europe, bought a majority stake in British fintech Ebury for £350m ($453m at the time) last year. The Spanish lender will take 50.1% of the London-based startup, which provides services such as foreign exchange, cash management and trade finance for small and medium-sized enterprises (SMEs). Ana Botín, executive chairman of Santander, told the Financial Times that the deal was “strategically very important” for the group.


Central and Eastern Europe


VTB Capital, a Russian investment bank, is making inroads into fintech in Central and Eastern Europe. As Global Finance’s first fintech bank in this region, VTB serves all of Russia as well as the Commonwealth of Independent States. “VTB continues the model of partnerships with fintech companies; and thanks to VTB Accelerator, we have selected the most relevant and complementary startups for our business,” says Ekaterina Frolovicheva, Head of Digital Business and Technology at VTB. “There were already two rounds, and we managed to build 37 pilots and proofs of concept with selected companies. The overall influx of businesses has exceeded 500.”


Focusing on regional trends, Frolovicheva notes that hyper-personalization and data savvy make instant payment and credit decision-making possible. “Most players are moving from monolithic applications to microservices architecture if possible.”


Asia Pacific


UBS, the Asia-Pacific winner, has launched its third Future of Finance Challenge, a competition for fintech startups and tech entrepreneurs, and it is providing funding and coaching hours to winning fintech entrepreneurs, most recently including Dathena , based in Hong Kong, which uses artificial technologies. intelligence to organize system-wide documents.


UBS seeks to help startups in the specific areas of customer experience, product, efficiency and security, and was a key presence at the Singapore Fintech Festival.


The bank deepened its investment with a second round of financing in iCapital Network, a fintech that provides access to alternative investments. Speaking earlier this year, Michael Dargan, UBS chief information officer and group chief technology officer, said the bank was also considering launching a venture capital fund to invest more in fintech.


Middle East


Mashreq Bank, Global Finance’s Best Bank for New FinTech for the Middle East, has joined Startupbootcamp FinTech Dubai, an acceleration program that Dubai International Financial Center launched in 2018 in partnership with HSBC and Visa to identify and support startups. Over three years, Startupbootcamp FinTech Dubai plans to accelerate a total of 40 startups recruited and selected from a panel of over 1,000 worldwide.


“Innovation is at the very heart of everything we do,” Subroto Som, executive vice president of Mashreq and head of Retail Banking Group, said in a statement. “We are in the midst of our own digital transformation journey and welcome the opportunity to invest in an initiative that has the potential to deliver incalculable benefits to our business and our customers.”


Africa


This year’s winner for Africa is the Rand Merchant Bank. Its Foundery Innovation Center, “created to accelerate the transformation of RMB into a digital bank”, strives to develop adaptive financial ecosystems and leverage its understanding of digital banking to serve customers. “He designs, builds and experiments with new digital pathways in corporate and investment banking,” Liesl Bebb-McKay, head of the foundation, wrote in February, citing new cryptocurrency technology products and blockchains that have emerged thanks to the lab.


Additionally, through Rand Merchant Investment Holdings, AlphaCode identifies, partners with and supports next-generation financial services entrepreneurs. AlphaCode’s previous investments have included Entersekt, which secures digital transactions in 46 countries; Merchant Capital, which provides SMEs with cash advances in exchange for a percentage of future revenues; and Prodigy Finance, which offers loans to postgraduate students. Last year, AlphaCode took a 25.1% stake in a healthcare startup, Guidepost, which connects people with diabetes with a team of doctors and provides information to help them manage their condition and their treatment.














BEST INVESTMENT BANK FOR NEW FINTECH 2020

Category

Bank

North America Town
Western Europe Santander Bank
Central and Eastern Europe VTB Capital
Asia Pacific UBS
Latin America BBVA
Middle East Mashreq Bank
Africa Rand Merchant Bank