The global fintech market has accelerated in investment and exit activity, with new entrants emerging to bite at the fringes of established financial institutions’ business models.
Accenture research published last month showed US fintech investment tripled last year to $9.89 billion. The rate of growth was highest in Europe, according to separate research from March, where the UK accounted for more than $4 of every $10 invested in fintech in 2014.
“This past year marked a paradigm shift in how financial services companies approach and embrace fintech innovation,” said Robert Gach, managing director of Accenture Strategy Capital Markets. “They recognize the vast potential that this strong network provides.”
MBAs are setting their sights on the emerging industry.
Students are showing an interest in digital innovation, “and a growth area over the past year has been the fintech sector”, said Sarah Juillet, director of postgraduate careers at London’s Cass Business School.
At Columbia Business School there are a number of students banking on the intersection of finance and technology, according to Regina Resnick, associate dean for the Career Management Center.
New York, Columbia’s base, accounted for 21% of global fintech investment last year, according to Accenture research, also conducted with the Partnership Fund for New York City.
Maria Gotsch, chief executive of the Partnership Fund, which invests in local ventures, said: “For fintech entrepreneurs, New York provides key advantages that no other city can match — notably close access to potential customers, and a deep talent pool of individuals with an intricate understanding of the financial services industry.”
Among Columbia’s fintech fanatics are recent graduates Jon Stein, founder and CEO of Betterment, an automated investing service, and Dan Webber, co-founder and managing director at FXcompared.com, a money transfer comparison site that has facilitated $1 billion of international transactions.
They may be motivated by the growing pool of successful fintech businesses. There were 18 fintech IPOs last year and in the first quarter of 2015, according to Mercer Capital research. These include the IPO of LendingClub, the peer-to-peer lender founded by a graduate of HEC Paris.
London in particular has emerged as a fintech hub. Silicon Valley Bank values London fintech at £20 billion.
Mark Davies, employer relations manager at the city’s Imperial College Business School, said: “There has been a very recent increase in interest amongst MBA students in fintech.” Imperial College has a partnered with Innovate Finance, the membership organisation for UK fintech, whose members include IBM and Visa.
London fintech successes include Transferwise, founded by an INSEAD MBA and valued at $1 billion; WorldRemit, incubated at London Business School and valued at $500 million; and Nutmeg, founded by Stanford GSB graduate Nick Hungerford, which in June raised $32 million in venture capital.
Tim Bunting, partner at Balderton Capital, a Nutmeg investor, said: “Nick Hungerford and the Nutmeg team are passionate about making top quality wealth management available to everyone, not just the wealthy. They are the first mover in this area and have grown very fast over the last 12 months.”
Many fintech companies see themselves as disruptive forces in the marketplace.
Yet banks, including Barclays and Banco Santander, have established in-house venture capital funds to invest in fintech start-ups. Spanish Bank BBVA this month said it would “dramatically” boost investment into European fintech, and launch a dedicated team in London. The bank launched a $100 million venture fund focused on the US in 2013.
For a growing number of MBAs, the free flow of capital into fintech coupled with the rapid growth of fintech ventures makes the sector a tempting prospect.
David Lask, an Imperial MBA student and former investment banker with Santander, came to London from Mexico for just such innovation. Seeing fintech grow in the UK capital has persuaded him to export a fintech business back to the North American country when he graduates this year.
“After learning how the finance sector is changing in a fintech hub like London, I wish to apply those ideas in a country where more people need access to financial services,” David said.