Report details where leading US banks are investing in Fintech

Goldman Sachs and Citigroup have participated in 59 and 38 fintech deals from Q1’18 through Q2’20

US banks have already made 40 deals with fintech companies this year despite economic uncertainty surrounding COVID-19, according to a new report.

CB Insights analysed equity investments made by US banks to private fintech companies since 2010, revealing the most active US banks to be Goldman Sachs, Citigroup and JP Morgan Chase & Co.

In May 2019, Goldman Sachs invested $750m in wealth management firm United Capital and also acquired boutique wealth management custodian and technology provider Folio Investing in May 2020, through its investment arm Goldman Sachs Strategic Investments.

Meanwhile, through its investment arm Citi Ventures, Citigroup has invested in 10 capital markets startups since 2018, and has also made deals with 5 real estate startups, 5 small business-focused startups, and 5 wealth & asset management startups over the same period.

CB Insights said Citi’s activities fit in with its strategy to enhance its Institutional Clients Group business, specifically the investment banking and Markets & Securities Services functions, responsible for the majority of the bank’s revenue growth through the first half of 2020.

Between their two investment arms, Goldman Sachs and Citigroup have participated in 59 and 38 fintech deals from Q1’18 through Q2’20.

JP Morgan, on the other hand, has chosen to invest in fintech companies that support its capital markets and small business offerings, CB Insights said.

The bank has invested in 10 companies in capital markets and 5 in small- and medium-sized business (SMB) solutions between 2018 and Q2 2020. JP Morgan also made 4 investments in wealth & asset management and 3 in payments over the same period.

Morgan Stanley, Fifth Third Bank, Bank of America, Capital One, and Wells Fargo are also among US Banks that have backed at least 10 fintech deals since 2012, the report said.

“US banks are often involved in fintech rounds for 2 main reasons: the potential for high returns, and strategic partnerships. In the first case, banks, corporate venture capital groups, and strategic bank funds will invest in a startup for the purpose of future returns, as well as to gain exposure to emerging sub-industries,” explained CB Insights.

“In the second case, a bank will invest strategically, partnering with a fintech startup to further its own internal goals. For example, in Q3’20, JP Morgan participated in Taulia’s $60M strategic funding round. On top of the investment, JP Morgan announced a partnership with Taulia to create a trade finance solution for corporate clients.”