FinTechs Find VC Favor Amid Collaborative Efforts

If money is a vote of confidence, via investments, then confidence is strong in the tech sector, and specifically for FinTechs. But there can be a sea change afoot that can mix things up a bit. The way it will go? Nobody knows, not really.

KPMG reports that investment in technology overall has touched a new high of as much as $8 billion in the second quarter of this year, and through the first half of the year, FinTech investments touched more than $14 billion from $12.2 billion over the same timeframe last year.

As noted in American Banker, the deal count came to 371 deals for the first half of the year, with a few triple-digit investment rounds. The shift has been one where banks are, of course, enlisting the aid of these smaller firms to broaden services and make them nimbler.

“Unlike the broader VC market, early-stage FinTech companies have continued to attract a solid flow of capital in the U.S., with the several top deals in Q2 going to seed or early stage companies,” stated a KPMG executive, Brian Hughes, U.S. national co-lead partner, venture capital practice. “At the same time, those able to attract later-stage funding likely reflects investor confidence in their ability to become market leaders, if they aren’t already.”

Amid a bit more granular detail, of course, banks ramped up their investment activity. As many as 20 “blank check” companies came into being in the latest half.

KPMG has also found that there have been 70 mergers within the FinTech space, which in turn was worth $3.4 billion as measured in the first quarter alone. The deal count was relatively smaller at 60 in the second quarter, but worth more at $5.8 billion.

And yet might all of these trends be unsettled in short order? The stage is being set for a whole new regulatory landscape for FinTech, as noted at the beginning of this month. The Office of the Comptroller of the Currency has said in the past week that it has invited FinTechs to seek national charters. That invitation comes after the Treasury Department has recommended that very same framework be out in place.

But that means some of the upstarts could operate without having to tie up with traditional financial firms. The Treasury has stated there should be national charters granted if the FinTechs do not in fact have a leg up, in a disadvantageous way, over “banks that have operated within the existing regulatory system for years.”

Beyond the larger picture of regulatory changes, and a so far sanguine investment picture, and in individual company news: In Ireland, eCurrency Mint Limited has brought its application programming interface (API) to the International Telecommunication Union’s Focus Group on Digital Currency including Digital Fiat Currency. That API, the company said in a release at the end of last week, will help boost standardization efforts for “integration with existing payments systems for interoperability.”

The firm noted in its release that the API is a synchronous exchange of messages over a secure connection that can let those disparate payment systems transact digital fiat currency.

Separately and also in evidence of new partnerships spanning borders, Europe’s Billion said last week that it has signed a letter of intent with financial technology provider FIS, which operates within banking software and payments processing. That combined effort will explore joint product development and sales opportunities for its corporate blockchain solutions. As stated by the pair in tandem with the announcement, Billon and FIS said they would also seek to explore potential collaboration on corporate and SME payments, as well as micropayments for digital and smartphone devices.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.