However, average deal size has remained roughly stable in 2024 YTD, suggesting dealmakers are putting more money behind a select group of fintech companies.

Download the full report to access comprehensive data and charts on the evolving state of fintech across sectors, geographies, and more.

Below, we cover key takeaways from the report.

• Global fintech funding sinks to $7.3B, a 25% QoQ decline. However, Q2’24 funding was propped up in part by mega-rounds for Stripe and AlphaSense totaling $1.3B. Excluding those rounds, the decline from Q2’24 to Q3’24 would have been 13%.

• Deal volume drops 16%. Total deals for fintechs continued to decline, falling 16% from 892 in Q2’24 to 753 in Q3’24. This marks the lowest quarterly level since 2017. For comparison, fintech deal volume clocked in at nearly 1,500 two years ago, in Q3’22 — roughly double where it stands now.

• Average deal size remains stable at $12.7M. Despite deal volume declining, average deal size has remained roughly flat YTD, at $12.7M, compared to $13.2M for full-year 2023. The decline in deal volume and stable deal size indicates dealmakers narrowed their focus to fewer, higher-dollar bets.

• 52% of the top early-stage deals are in less-crowded fintech markets. Just over half of the top early-stage deals occurred in financial services markets outside the US and UK — in countries like France, India, Italy, and Kenya. Less-crowded markets like these offer more room for early-stage fintechs to find niches and grow their client bases. 

• Wealth tech funding increases by 67%, thanks to 2 $100M+ mega-rounds. Wealth tech funding increased the most of any fintech sector QoQ, from $0.6B in Q2’24 to $1.0B in Q3’24. The increase was fueled by 2 substantial deals: 
  • $242M Series F round for turnkey retirement plan provider Human Interest. 
  • $200M Series B round for Earned Wealth, a digital wealth manager targeting medical professionals.
    

ADDITIONAL FINANCIAL SERVICES RESEARCH FROM CB INSIGHTS:

• State of Venture Q3’24 Report
• The embedded finance market ranking: Where integrated financial services are maturing, emerging, and plateauing
• The financial planning market map
• State of Fintech Q2’24 Report

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Essential resources to understand the future of financial services:

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However, two huge deals — for market intelligence firm AlphaSense and payments juggernaut Stripe — obscured the reality that it was another tepid quarter for the sector as a whole.

Based on our deep dive in the full report, here is the TL;DR on the state of fintech:

• Funding increases by 19% quarter-over-quarter (QoQ), buoyed by 2 blockbuster deals. Quarterly funding rose in Q2’24 to $8.9B. But if it weren’t for 2 late-stage deals for Stripe ($694M) and AlphaSense ($650M), funding would have remained flat QoQ. A 16% decline in deal volume also indicates fintech investors remain cautious.​
• Average deal size decreases to $12.8M, down 4% vs. 2023. The slight decline in average deal size YTD highlights broad stagnation in fintech deal sizes. Yet, when looking at the median, deal size has ticked up from $3.1M in 2023 to $4M this year. The 29% increase could signal strength in the long tail of smaller fintech deals.
• Mid- and late-stage deal share is at 20% YTD, up from 18% in 2023. In a more favorable operating environment, investors are showing greater confidence in later-stage companies than they did in the past 2 years — especially in areas like payments and lending. In payments, mid- and late-stage rounds make up 27% of deals YTD, vs. 21% in 2023. In digital lending, mid- and late-stage deals make up 35% of deals YTD, compared to 20% in 2023. 
• 30% of the biggest early-stage deals are for digital asset companies. Crypto and blockchain-focused fintechs are receiving renewed focus, as the crypto winter thaws. Digital asset companies accounted for nearly one-third of the top 10 seed/angel and top 10 Series A rounds. The two largest early-stage deals in the crypto space went to digital asset infrastructure platforms TradeDog ($75M seed) and Biton ($44M Series A).
• US-based funding increases by 45% QoQ to $4.8B. In addition to the funding increase, the US led the world across a few metrics in Q2’24, including share of equity deals (40%) and exits (36%). Mega-rounds led the way: Nine of the 10 biggest deals in the US were worth $100M or more, the most since Q2’22. LatAm was the only other major global region with a funding increase, up by 22% to $442M.

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To meet this demand, businesses across industries are embedding financial tools — from buy now, pay later (BNPL) to insurance distribution — into their platforms. Integrating these financial services can help not only improve customer engagement, but also drive new revenue streams and loyalty in the process. 

To help strategy teams prioritize embedded finance markets in their planning decisions, we plotted markets using CB Insights’ TECH framework, which scores markets across 2 dimensions:

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Broadly, these solutions integrate financial tools into non-financial services. Building them into digital experiences ensures consumers and partners remain there for every part of the customer journey.  

The benefits are drawing businesses across industries to integrate financial tools into their platforms. For instance, banking-as-a-service (BaaS) platforms, which help companies offer features including account opening and deposits, will draw $36B in global revenue in 2024 from account and card fees. That figure is set to grow 2.5x by 2028 to reach $94B, per Juniper Research.

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Salesforce CEO Marc Benioff called AI “the single most important moment in the history of the technology industry” in the company’s most recent earnings call. JPMorgan CEO Jamie Dimon said, in his April 2024 letter, “we are completely convinced the consequences [of AI] will be extraordinary.” 

Others are hyper-focused on AI’s potential to drive new efficiencies and product development. Big pharma companies are pushing ahead with AI-powered drug discovery collaborations, with the goal of accelerating drug development timelines. Payments giants, meanwhile, are leveraging AI to fight back against a wave of fraud.  

Much of the hype around recent advances has yet to translate to revenue. No AI-discovered drug has been approved yet for sale (though Insilico Medicine brought the first drug fully generated by AI into human trials in 2023), and Salesforce acknowledged its latest AI push would not have a material impact on its revenue this year. 

But the promise of future opportunities — and the perceived risk of inaction — is driving leaders to make moves now that could eventually reshape some of the world’s biggest industries. Our 70-slide report surveys the AI strategies of the following companies:

• Financial services & insurance: JPMorgan, Visa, Mastercard, UnitedHealth Group
• Enterprise tech: Oracle, Salesforce
• Pharma: Eli Lilly, Novo Nordisk, Johnson & Johnson
• Industrials: Toyota, Siemens

Using the CB Insights technology intelligence platform, we analyzed signals like investment & partnership activity, executive chatter in earnings transcripts, patents, and more to understand their efforts. Download the full report to see them all. 

Largest companies based on market cap (as of 4/15/2024). Our analysis excludes big tech, semiconductor developers, and state-owned companies.

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Fintech deal volume, on the other hand, increased for the first time since Q1’23.

Based on our deep dive below, here is the TL;DR on the state of fintech:

• Fintech funding falls 16% QoQ to its lowest quarterly level since 2017. Quarterly funding declined to $7.3B in Q1’24, counter to the 11% rebound in the broader venture market. That said, fintech deals increased by 15% QoQ as investors focus on writing smaller checks.
  
  
• Average deal size YTD in fintech is $11.1M, down 18% vs. $13.6M in full-year 2023. A dearth of blockbuster deals is driving the decline: In Q1’24, there were just 12 mega-rounds (deals worth $100M or more) representing 26% of total funding — the lowest share since Q2’23, when it hit 23%. Nevertheless, these rare deals can reach a massive scale: the biggest fintech round in the quarter was UK-based challenger bank Monzo‘s $431M Series I deal — worth 6% of the global funding total. 
• Mid- and late-stage deals make up 20% of deals YTD, up from 18% in full-year 2023, as investors look to startups with more established track records. So far this year, investors are favoring later-stage companies to a greater degree than the past 2 years. The shift is most pronounced within specific sectors. In payments, for instance, mid- and late-stage deals make up 29% of deals YTD, vs. 21% in 2023. In digital lending, mid- and late-stage deals make up 40% of deals YTD, nearly double the 2023 total.
• Banking startups have a billion-dollar quarter. Banking funding doubled in Q1’24 to reach $1B across 38 deals. Five of the top 10 banking deals in the quarter were late-stage, and 2 were mega-rounds of $100M+. Besides the Series I deal for Monzo, Germany-based banking-as-a-service company Solaris raised a $104M Series F round.
• Europe fintech funding increases 22% QoQ to $2.2B. Europe was the only major global region to see fintech funding increase in Q1’24. The continent also led all regions with 37% of exits in the quarter. Meanwhile, funding declined 11% QoQ to $3.3B in the US, which still led all regions in total fundraising.

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Combating fraud to protect customers and complying with regulatory mandates are critical goals for retail banks.

Market descriptions

Bot management

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Based on our deep dive below, here is the TLDR on the state of fintech:

• Global fintech funding nosedived to $39.2B in 2023 (down 50% YoY), while deal volume slipped 38% to 3,801 — the lowest levels since 2017. On a quarterly basis, Q4’23 saw the fewest fintech deals in 7 years.
• The US increased its dominance of fintech, drawing 41% of deals in 2023 — its highest share since 2016. Meanwhile, Asia’s deal share fell to a recent low of 20%. The uptick in US deal share came as investors shifted toward early-stage companies: early-stage deal share in the US climbed to its highest level in more than a decade.
• At 612 deals, annual M&A exit volume remains higher than it was any year prior to 2021. Quarterly M&A deals saw a modest gain in Q4’23, rising to 149. Europe saw 34% of these deals — more than any other global region — but the top 3 M&A exits in Q4’23 all went to US fintechs.
• Eight fintech unicorns were born in Q4’23 — a 6-quarter high, but far below 2021’s quarterly average. Asia contributed half of the new unicorns — 3 of which are based in Gulf States. This was the first time since 2019 that more fintech unicorns were born in Asia than in the US in a given quarter.
• Investment to banking startups has evaporated, with funding falling 72% in 2023 — the biggest YoY decrease across fintech sectors. Payments startups saw funding decline just 30% YoY — the least of any fintech sector — though the annual funding total was propped up by 2 massive rounds to Stripe ($6.5B) and Metropolis ($1B). Payments remains the most well-funded fintech sector by a wide margin.

Below, we’ll explore these themes across 7 charts.

Globally, funding to fintech startups fell 50% YoY, slipping below $40B for the first time since 2017. Fintech fared worse than the broader venture market, which saw funding decline 42% YoY in 2023.

The average and median deal sizes in fintech continued to decrease from 2021’s highs, falling to $13.8M and $3.2M, respectively, in 2023.

Among global regions, LatAm and Europe saw the largest drops in fintech funding in 2023:

• LatAm funding slid 68% to $1.2B
• Europe funding fell 64% to $6.5B

Q4’23 was a particularly harsh quarter for fintech in terms of deal activity.

The quarter saw fintech startups secure just 740 deals — the fewest in a quarter since Q4’16, and the third straight quarter of declines. 

Among the top deals of the quarter, payments solutions for online and in-person shopping were prominent. These included SumUp ($307M Series F), as well as buy now, pay later players Tamara ($340M Series C) and Tabby ($200M Series D). Notably, payments leaders Checkout.com and PayPal invested in the deals to Tamara and Tabby, respectively.

Despite global declines in deal volume, the US picked up a greater share of deals in 2023 at 41%. The 4-percentage-point increase came at the expense of Asia, which lost 3 percentage points in share YoY. The US’ share was the highest for the country since 2016.

Fintech dealmaking in the US has shifted toward the early stages (seed/angel and Series A), which now claim 70% of all US deals — the highest annual share in more than a decade.

While down from a peak in Q1’22, M&A activity remains relatively steady for fintech startups. Financial services incumbents, larger fintech firms, and PE buyers continue to seek out undervalued assets. In Q4’23, global M&A volume ticked up to 149 deals.

While Europe led in M&A deal share in Q4’23 at 34%, the top 3 M&A deals that quarter all went to US-based firms:

• In capital markets, TMX Group acquired VettaFi for $1.1B
• In insurance, Travelers purchased Corvus Insurance for $435M
• In business payments, WEX acquired Payzer for $261M

Eight fintech companies reached unicorn status (valued at $1B+) in Q4’23. Among global regions, Asia led with 4 of these new unicorns, followed by the US with 2. LatAm and Oceania each accounted for 1.

This was the first time since 2019 that Asia outpaced the US in the number of new fintech unicorns in a single quarter.

Within Asia, the Gulf States saw especially strong representation. Two unicorns (Tabby and Tamara) came out of Saudi Arabia, while the United Arab Emirates contributed one (Andalusia Labs).

Within fintech, banking startups’ access to capital has been restricted substantially. In 2023, they raised $2.2B in equity funding, down 72% from $7.8B the year prior.

Wealth tech funding wasn’t far behind, with a decline of 61% YoY in 2023. 

Funding to payments startups, on the other hand, remains relatively strong, down just 30% in 2023. The top equity deal in Q4’23 went to parking management and payment platform Metropolis, which raised over $1B.

While fintech funding fell across every global region in 2023, Africa was the least affected by the downturn. Africa-based startups drew $0.8B in funding in 2023, down just 27% from 2022.

Meanwhile, the continent’s early-stage deal share declined to a recent low of 83% in 2023. While the vast majority of deals are still early-stage, this trend suggests a growing contingent of companies are maturing into later stages of funding.

Across the whole year, the top 2 deals in Africa went to North Africa-based startups: Egypt-based MNT Halan ($260M Series D) and Morocco-based Cash Plus ($60M round). The third-largest round went to Kenya’s M-Kopa ($55M round).

The post State of Fintech 2023 Report appeared first on CB Insights Research.

To maintain a competitive edge, banking incumbents are turning to technologies that can help digitize their existing processes and offerings in ways that drive efficiencies, cut costs, and add new revenue streams.

In the back- and middle-office, this includes replacing or improving legacy systems with SaaS offerings, as well as leveraging APIs and AI/machine learning (ML) solutions to automate repetitive tasks like know your customer (KYC) approvals and mortgage application reviews.

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Fintech deal activity also continued to trend down in Q3’23. Deal count slid back to 2017 levels, falling by 18% QoQ to hit 754.

Using CB Insights data, we highlight key takeaways from our State of Fintech Q3’23 Report, including:

1. Global fintech funding falls 3% QoQ to hit $7.4B.
2. US fintech funding experiences a 5% drop in Q3’23.
3. Unicorn births remain at 3 in Q3’23.
4. Fintech mega-round funding climbs 50% QoQ.
5. Digital lending funding jumps 70% while deals fall 56% QoQ.

Let’s dive in.

Global fintech dollars dipped 3% QoQ to hit $7.4B in Q3’23, leveling off after seeing sharp declines in most quarters since the end of 2021. Meanwhile, deal count fell by 18% QoQ.

This fintech funding stabilization was supported by $100M+ mega-rounds, which accounted for 33% of total fintech funding ($2.4B) in Q3’23.

The top 3 deals of the quarter went to:

• Hong Kong-based microfinance platform Micro Connect ($458M Series C)
• US-based spend management company Ramp ($300M Series D)
• India-based digital lending solution Perfios ($229M Series D)

While US-based fintechs saw a 5% drop in funding QoQ, they continued to drive a significant chunk of global fintech funding. The US accounted for almost half (47%) of all quarterly fintech funding in Q3’23 — the highest share among global regions.

Asia, on the other hand, secured a smaller share of the funding total but saw funding rise substantially. Companies in the region experienced an 82% increase in funding QoQ.

This jump was supported by deal-making activity among digital lending companies — 6 of Asia’s top 10 deals in Q3’23 went to companies in this category.

Unicorn births also showed signs of stabilizing in Q3’23. Like the previous quarter, 3 unicorns (private companies valued at $1B+) were born in Q3’23, bringing the total unicorn count to 312.

Viewing unicorn births through an annual lens shows just how pronounced the unicorn slowdown is in the fintech arena. Just 8 unicorns have been born in 2023 so far, down from 163 in 2021 and 73 in 2022.

The US accounted for 2 new unicorns in Q3’23: crypto custody platform BitGo ($1.8B valuation) and insurtech Kin ($1B). The only other unicorn born in Q3’23 was Hong Kong-based microfinance platform Micro Connect ($1.7B).

Fintech mega-round funding rose 50% QoQ to hit $2.4B across 14 deals in Q3’23. Despite the upward trajectory, this marked fintech’s second lowest quarter for mega-round funding since 2016.

Asia surpassed the US in mega-round funding, securing $1.1B across 5 deals. The US raised $1B across 7 mega-rounds.

Despite a drop in deals, digital lending secured the most funding among fintech sectors in Q3’23 — funding to the space rose by 70% QoQ to hit $1.7B.

Digital lending’s funding boost was driven in part by mega-rounds, which brought in more than half of the sector’s quarterly funding.

Payments and insurtech tied for second in total fintech funding, raising $1.1B each. While this marked a 22% increase for insurtech QoQ, it represented a 39% drop for payments.

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Three-quarters of this year’s winners are B2B fintechs, including business spend management platforms, cross-border and real-time payment providers, and core banking and infrastructure platforms.

Additionally, 24 companies in this year’s cohort are B2C, including challenger banks, mobile wallets, and retail investing platforms. 

Using the CB Insights platform, our research team picked these 100 private market companies from a pool of over 19K companies, including applicants and nominees. They were chosen based on CB Insights datasets — including equity funding, investor profiles, business relationships, R&D activity, news sentiment analysis, competitive landscape, proprietary Mosaic scores, and Yardstiq transcripts — and criteria such as tech novelty and market potential. The research team also reviewed thousands of Analyst Briefings submitted by applicants.

CB Insights clients can access the entire Fintech 100 list and interactive Expert Collection here.

If you are not already a CB Insights client, sign up for a free trial to analyze each winner’s funding and valuation history, headcount growth, key competitors, and more.

Want to be considered for future rankings? Fill out this initial application form (it’ll take no more than a few minutes). If selected, you’ll be asked to complete our Analyst Briefing Survey so that our analysts can better understand your products, customers, and market traction.

Companies are categorized by their primary focus area and client base. Categories in the market map are not mutually exclusive.

Please click to enlarge.

TOP FINTECH COMPANIES 2023: FINTECH 100 COHORT HIGHLIGHTS

Overall funding and valuation trends: The Fintech 100 includes a mix of companies at different stages of maturity, product development, and funding. The cohort has raised nearly $22B in equity funding across 381 deals since 2019 (as of 9/22/23). This year’s list includes 31 unicorns (private companies with a $1B+ valuation).

Early-stage innovation: Twenty companies in this year’s winning cohort are in early fundraising stages (seed/angel or Series A). Solutions from early innovators are being developed across categories, including B2B BNPL (Mondu and Two), account-to-account (A2A) payments (Banked and kevin.), and mobile wallets and remittances (DANA and LemFi).

Most represented categories: The cohort is broken down into 20 categories. “Spend management” and “insurance” are tied for the largest portion of this year’s winners (9 companies each).

The spend management category is led by later-stage market leaders Brex and Ramp, which both launched generative AI product features this year. The category also includes two new winners in non-US markets: Singapore-based Aspire and Mexico-based Clara.

Insurance is one of the biggest categories for the second straight year. Eight out of the 9 insurtechs are B2B, including two insurance distribution platforms: repeat winner bolttech and new winner Cover Genius. 

Global reach: This year’s winners represent 24 different countries across the globe. Forty-three percent of the selected companies are headquartered in the US — down from 53% last year. The UK comes in second with 12 winners, followed by Singapore with 7.

Additionally, some emerging markets stand out with multiple winners this year. For example, India has 3 winners, while Indonesia and Egypt each have 2.

Novel applications: Two of this year’s winners are developing large language models purpose-built for financial services: conversational AI provider and returning winner Kasisto and financial document processing platform Cognaize.

Two winners in the wealth and asset management category, AlphaSense and SESAMm, have integrated generative AI into their market intelligence platforms for document summarization and extraction. 

Finally, within core banking and infrastructure, embedded finance platforms — like repeat winner Unit and an early-stage new winner Synctera — are growing quickly in the United States.

THE FINTECH 250 CLASS OF 2022: WHERE ARE THEY NOW?

The Fintech 250 2022 cohort has posted some notable accomplishments since October 4, 2022. Collectively, this cohort has seen:

• $10B in equity funding across 64 deals — including Stripe’s $6.5B round in March 2023.
• 14 mega-rounds (deals worth $100M+).
• 2 acquisitions: Uplift was acquired by another Fintech 250 winner, Upgrade, for $100M, and PolicyGenius was acquired by Zinnia.
• 4 new entrants to the unicorn club: eToro, Kin, Liquidity, and Quantexa all hit $1B+ valuations for the first time.

The post Fintech 100: The most promising fintech startups of 2023 appeared first on CB Insights Research.

Nubank isn’t the only challenger seeing tailwinds in Latin America, which offers fertile ground for these digital-first banks. The banking penetration is considerably low in the continent, with around 70% of the population unbanked or underbanked. In contrast, 3 in 4 people have mobile phones, suggesting that a significant portion of Latin America is digitally connected, but excluded from the traditional banking system.

Nevertheless, the region’s challenger banks face a stiff competitive landscape and have seen funding dry up in 2023 so far.

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The industry — which relies on APIs to access and share banking data with other financial institutions — has also attracted billions of dollars in funding in the last few years.

Payments-focused open banking startup Volt raised a $60M Series B led by IVP in June, one of the top mid-stage fintech deals of Q2.

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Using CB Insights data, we dig into key takeaways from our State of Fintech Q2’23 Report, including:

1. Global fintech funding falls by nearly half to $7.8B, its lowest level since 2017.
2. Funding from $100M+ mega-rounds totals $2B — a 6-year low.
3. Payments funding falls 75% QoQ, the biggest decrease across all fintech sectors.
4. LatAm & the Caribbean funding more than doubles, making it the only region to see funding grow QoQ.
5. All 5 of the quarter’s IPO exits come from fintechs based outside of the US.

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Beyond this deal, UBS has also turned to technology to strengthen its leadership position. In fact, it spent roughly $4B on tech in 2022 alone.

Its commitment to technology can be broken down into 2 main objectives. The first is the digitization and expansion of its existing services to enhance the client experience. The second is diversifying its investment and trading products through the use of novel technologies like blockchain, cloud, and alternative investment platforms.

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The index is calculated based on CB Insights datasets including patent applications, partnership & licensing agreements, dealmaking activity, acquisitions, key people, product launches, and earnings transcripts.

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This technology category uses conversational AI to automate bank-customer interactions, allowing customers to find quick answers to their questions while providing banks with a potentially valuable source of customer data.

However, they’ve historically faced limitations such as misinterpreting complex questions by relying too heavily on keywords, as well as providing responses that can sound too robotic and be off-putting to customers.

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BaaS providers use application programming interfaces (APIs) to enable banks, fintechs, and companies outside of financial services to offer banking and payment products to end users. BaaS is also referred to as embedded finance or embedded fintech.

The financial technology behemoth FIS — which provides core banking, payments acceptance, and other services to banks and retailers around the world — recently acquired BaaS provider Bond for an undisclosed amount. 

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There are mixed reports on ESG demand and performance. However, several prominent data providers still suggest a relatively healthy market and appetite for ESG among investors. 

For example, despite negative returns for Morningstar’s US Sustainability Index in 2022, it still outperformed the overall market. And according to Refinitiv Lipper, ESG equity funds saw net inflows in Q1’23, while non-ESG equity funds suffered more withdrawals than inflows. 

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Business-to-business (B2B) fintechs were central to its strategy — in fact, 85% of the fintechs accepted in W23 cater to businesses.

While 77% of the fintech companies in the W23 cohort are based in the United States, Y Combinator also turned to emerging markets. The accelerator invested in 5 emerging-market fintechs, most of which cater to businesses. A couple of examples include Colombia-based treasury automation platform Milio and account-to-account (A2A) payments solution Palomma.

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This wasn’t the first time Apple has sent waves across the fintech landscape. Since Apple’s foray into the space almost a decade ago, the company has been gradually shaping itself into a fintech giant. 

While products like Apple Pay and Apple Card laid the foundation for Apple’s fintech strategy, it has relied heavily on partnerships to drive growth in the adoption and scope of its offerings. The company has inked deals with banks, buy now, pay later (BNPL) players, card issuers, payment gateways, and spend management platforms to reach further into the sector.

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Over the last few years, the company has turned to fintech startups to help meet customer demand for secure, seamless, and customized banking experiences. Its recent investments and partnerships have targeted solutions that enhance its offerings to business banking and wealth management clients. 

For example, Wells Fargo and its primary investment arm, Wells Fargo Strategic Capital, have backed several cash and spend management automation fintechs to better address the needs of business clients. On the wealth management side, Wells Fargo’s partnerships have allowed it to embed AI and natural language processing (NLP) into its back-end processes, such as market intelligence research and user onboarding. 

The banking giant is also investing to amp up its core processes, focusing on quick cross-border transfers and virtual card offerings. 

Using CB Insights data, we uncovered 5 of Wells Fargo’s most important strategic priorities highlighted by its investments and partnerships since 2018. We then categorized companies by their business relationships with Wells Fargo across these priorities:

• Wealth management
• Fraud, risk, & compliance
• Payments
• Accounting & cash management automation
• Open finance & data aggregation

These designations are not exhaustive of Wells Fargo’s investment and partnership activity in the analyzed period.

Accounting & cash management automation

Wells Fargo has leveraged investments and partnerships to ramp up its cash management and automation offerings for its business banking clients.

After leading a $20M Series A round to US-based cash automation software startup Trovata in 2021, Wells Fargo rolled out Trovata as its strategic cash positioning and forecasting tool, making the solution available to its business and corporate clients. The bank’s other investments in this category include the accounts receivable (AR) automation software DadeSystems in 2020, and the accounting practice solution Canopy in 2018.

On the AR/AP side, Wells Fargo partnered with Bill.com in 2020 to launch Bill Manager, an automation solution that integrates into the bank’s digital banking platform and streamlines back-office financial operations for Wells Fargo’s SMB clients. 

Fraud, risk, & compliance

Wells Fargo has primarily backed companies that leverage AI to ensure fraud prevention and compliance. These include AI/ML-powered supervision and threat detection solutions ThetaLake and H2O.ai, and regulatory text-scanning solution Ascent AI. The deals reinforced Wells Fargo’s current fraud prevention strategy, which leverages FICO’s AI/ML-powered Falcon Fraud Manager solution.  

Digital ID verification and authentication is also a focus area for the bank. For example, Wells Fargo has invested in Arkose Labs, which offers a user authentication solution, and ID verification startup Socure. Wells Fargo also partnered with Socure to fight synthetic identity fraud, in which a made-up name, date of birth, mailing address, email account, and phone number are applied to a real person’s Social Security number.

Finally, while Wells Fargo doesn’t offer any crypto-based products, it made two repeat investments into the UK-based Elliptic, a crypto transaction monitoring software that aims to accelerate the institutional adoption of crypto.

Payments 

Most of Wells Fargo’s activity in this space focused on faster cross-border payment processing, followed by virtual card solutions.

In 2021, Wells Fargo made a $10M growth equity investment in the cross-border payment processing and financial messaging fintech Volante. Later in 2022, the bank partnered with Volante to modernize its payments strategy, and migrate to the new ISO 20022 financial messaging standards.

Within card payments, Wells Fargo made two investments in the virtual card issuer and virtual card-platform-as-service provider Extend, including an incubator/accelerator round in 2020. The same year, the bank launched its own one-time virtual card payment offering, called WellsOne, to ensure safe transactions for its commercial clients.

The banking giant also entered strategic partnerships with payments providers TransferMate and Bilt Rewards. In 2019, Wells Fargo partnered with TransferMate to speed up international payments for its business customers. Later in March 2022, the bank partnered with Bilt Rewards and Mastercard to issue the first credit card that helped users earn points on their rent payments. 

Overall, the bank’s investments and partnerships here focused on ensuring regulatory compliance, and high customer satisfaction.

Open finance & data aggregation 

As the broader banking industry shifted toward API-based data aggregation, Wells Fargo followed suit. In 2021, it joined the open finance platform Akoya’s Data Access Network, which allowed fintechs and data aggregators to access Wells Fargo’s data for mutual customers. As of 2020, Wells Fargo also became one of the joint owners of Akoya —  along with Fidelity, The Clearing House Payments Co, and 10 other banks.

The bank has also entered a number of data-sharing agreements with fintechs such as Expensify, Envestnet Yodlee, and Plaid in an effort to enhance Wells Fargo customers’ control over their financial data, and streamline their access to services offered by fintech companies. In 2020, the bank launched its own open API channel, Wells Fargo Gateway, which allowed corporate clients and partners to embed Wells Fargo products and services into their own digital experiences and offerings. 

Wealth management

Wells Fargo has invested heavily in wealth management solutions, targeting both alternative and traditional asset trading, as well as analytics and customer experience. CEO Charlie Sharf says that wealth management is a significant source of growth for the bank, and he aims to increase digital engagement for Wells Fargo’s 2.6M wealth management clients.

The bank invested in the institutional-grade digital asset trading solution Talos, along with alternative investment platforms Forge Global and iCapital. On the market intelligence side, Wells Fargo invested in the AI-powered research and insight engine AlphaSense in 2021, and the financial market analysis software Visible Alpha in 2018. Wells Fargo’s investments here signaled the banks’ prioritization of AI and NLP in equity research and insight generation

Following these investments, the banking giant has also expanded its own wealth management offerings. In early 2023, Wells Fargo announced the rollout of its net-worth management and financial planning mobile app tool LifeSync. The year before, in an effort to appeal to the new generation of investors, the bank redesigned its robo-advisor Intuitive Investor to be more intuitive, and lowered its required minimum deposit to $500, down from $5,000.

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ESG in investing is the general approach of putting money into companies, funds, and projects that adopt environmental, social, and governance (ESG) principles. It’s a framework for investors to identify opportunities and mitigate financial risks, with the ultimate goal of generating higher returns.

Asset and investment managers now feel mounting pressures concerning the accuracy, biases, performance, and even political motivations of ESG. The dramatic rise and fall of corporate interest in ESG can be seen in recent company earnings call mentions of the term.

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Along the same lines, Schroders recently wrote down its investment in Revolut, another top-funded challenger bank, by 46%.

It’s not a great look for the sector. 

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