The movement to fund FinTech is gathering steam, at least on Wall Street, where traditional, and traditionally rather buttoned-up, banks are joining the party.
Bloomberg reported Thursday (Dec. 17) that “Wall Street is finally willing to take risks on high-tech lenders,” citing successes by companies such as OnDeck in securing votes of confidence from the Street — in OnDeck’s case, via a partnership with JPMorgan.
It hasn’t been an easy, or fast, road, however. As OnDeck CEO Noah Breslow told the newswire, “We had to lend $3 billion and prove we could do it really well before the banks felt comfortable with us.”
Separately, Lending Club, according to Bloomberg, had to show security and regulatory compliance to satisfy Citigroup and MUFG Union Bank before forming partnerships with those giants.
But the tide has been changing so that the lending space is no longer the sole purview of venture capitalists, which have, through the first three quarters of 2015, invested $10.5 billion into FinTech startups around the globe, up from $6 billion through the same period last year. As has been noted, some traditional lenders have gotten in on the game, such as Santander Innoventures putting funding behind Kabbage, an online lender recently valued at $1 billion.
But, as Bloomberg noted, it is not always smooth sailing in FinTech land. In Russia, for example, Sberbank shuttered its SBT Venture Capital operation after a relatively quick three years, after committing $100 million for startups and investing $47 million through 2015.
[bctt tweet=”It is not always smooth sailing in FinTech land.”]
One standby will likely maintain traction: the FinTech accelerator, which offers up partnerships in tandem with banks, such as Barclays and Bank of America, in which cash is given and small equity stakes parceled out. One success story here was between Wells Fargo and EyeVerify, where the latter’s technology is now being incorporated into certain security aspects of Wells Fargo operations.