The “fintech” revolution has surged through the financial services sector and has increasingly captured the attention of the MBA talent pipeline with promises of disruptive innovation.
Now even the world’s biggest investment banks are pouring resources into the blossoming market, and are offering associate-level jobs in their fast-expanding fintech teams.
“It’s a small, growing team. But it’s something up and coming on the radar,” says Sam Price, who recruits investment banking MBA associates at Nomura, the Japanese bank. “In future you can expect to see positions in those teams allocated to MBAs.”
Elle Connor, MBA recruiter for Morgan Stanley’s London investment banking division, says the bank’s technology team, which encompasses fintech, has grown so big it’s been split into sub-categories. Investment banks traditionally group tech with media and telecoms — TMT.
“Tech is obviously a very popular area,” she says. “Those specific areas are as popular as M&A.”
She singles out the high volume of deal flows in 2015. There were 427 fintech mergers and acquisitions last year, worth a combined $64 billion, double the value of deals a year before, according to Berkery Noyes, a boutique investment bank.
Steve Davies, fintech leader for EMEA at PwC, the professional services firm, says that within the next three-five years, global fintech investment could exceed $150 billion.
“Financial institutions and tech companies are stepping over one another for a chance to get into the game. As the lines between traditional finance, technology firms and telecoms companies are blurring, many innovative solutions are emerging,” he says.
While most MBAs are enthusiastic about working with financial technologies, says David Yermack, chair of NYU Stern’s finance department, the opportunities at the biggest investment banks remain small.
As an example Deirdre O’Donnell, associate director of career development at the Tuck School of Business, estimates nine in 10 of her MBAs who want to work in investment banks are eyeing tech teams.
“There’s a lot of innovation and deal flow in this sector. It’s the sexy business right now. But there’s a huge logjam,” she says. However, she is not downbeat on fintech: “The industry is in its early stages. Opportunities will grow over the years,” she says.
Matthew Applegate, a student at Wharton who worked as chief of staff for a JPMorgan Chase executive, says there are many fintech job opportunities for MBAs.
“There are opportunities to pursue careers within the innovation arms of financial services incumbents. Alternatively, MBAs can enter the industry in an investing role,” he says.
The trend for investment banks to buy into fintech began as a defence mechanism to ward off troublesome start-ups such as cash transfer business Transferwise or crowdfunding platform Prosper. Goldman Sachs and JPMorgan are among those getting into bed with fintech start-ups in areas like financial planning and digital currencies.
“Existing players are really interested in this space,” says Antoinette Schoar, professor of entrepreneurial finance at MIT Sloan School of Management.
But now they are exploring other topics such as bitcoin’s blockchain technology, which Accenture estimates could cut banks’ costs by more than $20 billion annually by 2021. “Blockchain-enabled technologies are poised to bring huge benefits to the financial services sector over the next decade,” says Owen Jelf, managing director of Accenture’s global capital markets practice.
Campbell Harvey, professor of finance at Duke’s Fuqua School of Business, says banks are looking for blockchain tsars: “Someone who can coordinate a multi-disciplinary effort so their firm comes out on the winning side rather than the losing side of disruption,” he says.