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An Analysis of Leading Banks' Venture Capital Arms

Prove
January 31, 2022

We have been tracking the FinTech industry for quite some time, analyzing various trends and drawing conclusions. Most of our forecasts have come true over the past few years. We have discussed how FinTechs are making an impact, the soaring valuation of FinTechs, bank-FinTech collaborations, and emerging venture arms of banks which are investing in FinTechs. In this article, we’ll focus on some leading banks and their venture capital arms.

Over the years, banks have, slowly but steadily, partnered with FinTechs in multiple ways. Investments in the FinTech industry stood at $54.05 billion in 2018, $46.03 billion in 2019, and $45.03 billion in 2020. Incumbents in the banking and FinTech domains are coming together to meet growing customer expectations and stay relevant in an ever-evolving technology-driven world.

Some of our recent articles highlight investments made by leading banks across geographies. Our analysis shows that most of the venture arms have emerged over the past five years, and banks have actively pumped money into their venture arms. For example, in 2016, National Australia Bank launched NAB Ventures, its venture capital firm, and pledged a $100 million fund to invest in FinTech startups. In 2014, the bank allocated $50 million for investments in FinTech startups. In the following three years, it invested this amount in 12 startups in FinTech and other industries. In 2018, the bank allocated another $50 million to NAB Ventures, bringing the total funding to $100 million. Since then, NAB Ventures has invested in nine FinTech startups across the Americas and Oceania. 

Westpac, a leading Australian bank that has been actively investing in FinTech startups for the past three years, is the first Australian bank that launched its corporate venture capital firm, Reinventure. Reinventure raised a $150 million fund to support and invest in startups in the FinTech ecosystem and adjacent industries. The bank invested $50 million in Reinventure in 2014 and followed it up with two funds worth $50 million each in 2016 and 2018, respectively. 

MUFG Innovation Partners, MUFG’s venture arm launched in 2019, has raised over $185 million to date. According to our analysis, Santander’s Innovation Lab and BBVA Ventures are the largest venture arms; each raising $400 million. SBI Group’s SBI Investment leads the venture capital arms race in Asia, with a $300 million fund. In Europe, Societe Generale Ventures has raised $243 million. The chart given below highlights the leading venture arms of banks and the number of investments.

 

Most leading banks with vast AUM have realized that investing in FinTech is the future, another reason why FinTech startup valuations are so high. Investors will gauge how well these investments are received by incumbents, and this will lead to more investments from venture funds or other banks that will open their own venture funds. In contrast, older financial institutions are developing labs and accelerators to leverage emerging technologies in order to foster innovation. By partnering with FinTechs, they gain expertise in fields outside of their areas of specialization. Our investment trend analysis predicts that financial institutions will continue to invest in emerging technologies, such as big data analytics and AI/ML. The number of investments made by banks and FIs is likely to double by the end of 2021.

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