"Silicon Valley is approaching!"
In the 2017 annual mail to shareholders, Jamie Dimon, CEO of JPMorgan Chase, was worried. “The online lending financial technology startups are very good at eliminating the 'pain point' and completing the loan that the bank may take several weeks to process in a few minutes. ."
Goldman Sachs has a lot of concerns. "In the next five years, non-bank entities may be able to steal 7% of the profits originally owned by banks."
When Wall Street banks are unable to cope or be wary of the impact of financial technology companies, they will directly send a check to invest or acquire.
According to the latest data, since 2017, Goldman Sachs has invested in about 15 financial technology companies focusing on capital market business, and JPMorgan Chase has invested in nine.
In addition to the acquisition, Wall Street Bank also increased its investment in financial technology internally. One of the most common words of Goldman Sachs CEO Lloyd Blankfein is: In fact, we are a technology company.
COIN, a financial contract analysis software from JPMorgan Chase, can complete the work done by the original lawyers and loan staff in an estimated two thousand hours per year.
So, the question is, why does Wall Street think of financial technology as a dominant school? What are the segments that these big investment banks have invested in? Which companies have you bet?
KFTX index rose 20% a year
As of press time, the KFTX index was 1245.41 points, up about 20% compared to 1031.44 points on August 18, 2016.
What is the KFTX index?
According to the reporter, the KFTX index is a financial technology (Fintech) index jointly established by investment banks Keefe Bruyette & Woods (KBW) and Nasdaq (Nasdaq), covering 49 financial technology stocks.
The term “financial technology†originated in the United States and was synthesized by “financial technologyâ€. The literal understanding is: “technology applied to financeâ€, mainly using Internet innovation technologies such as big data and blockchain for risk control and platform. Management can be divided into eight themes: payment, insurance, planning, lending/crowdfunding, blockchain, trading & investment, data & analysis, and security. Since 2008, it has come to the forefront. As of now, there are more than 8,000 global technology finance companies.
As early as 2015, McKinsey & Company called on financial institutions to seize the opportunities of financial technology development, otherwise it will lose more than 40% of traditional financial business revenue and lose more than 60% of traditional financial business profits.
Up to now, financial technology companies such as PayPal and Lending Club have made a name for themselves in the US market. The UK is engaged in transnational remittances of TransferWise, and China's ant jinfu, which specializes in e-commerce micro-credit, is also a competitive financial technology enterprise.
In a report released in April, PricewaterhouseCoopers said that nearly 50% of global financial services companies plan to acquire financial technology startups in the next three to five years.
Citigroup Goldman Sachs
Wall Street is the leader of the financial world. Faced with the prosperity of financial technology, Wall Street is naturally unwilling to be behind.
According to a report by management consultancy Opimas, big banks led by Goldman Sachs and JPMorgan Chase are investing in financial technology companies on a scale that has never been seen before.
According to the report, since 2017, Goldman Sachs has invested in about 15 financial technology companies that focus on capital market business. JPMorgan Chase has invested in 9 companies. “Wall Street Bank and other mature financial companies may pass 44 transactions in 2017. The field invested a record $1.7 billion."
This investment direction has actually emerged several years ago and has gradually become a climate. According to CB Insights' annual data, since 2012, the top ten banks in the United States (by management assets) have made 72 total investments of $3.6 billion to 56 financial technology companies.
According to the ranking of bank investment financial technology companies, CB Insights data shows that the three most active investors are Citigroup, Goldman Sachs and JPMorgan Chase. Among them, Citigroup (including Citi Ventures) participated in 30 rounds of investment involving 22 companies; Goldman Sachs participated in 31 rounds of investment involving 25 companies; JP Morgan Chase participated in 14 rounds of investment involving 13 companies.
Blockchain and payment are the most popular
The top ten banks in the United States have invested in blockchain, and several banks have joined the bank blockchain alliance R3.
A business case can show the heat of the blockchain. Blythe Masters, the former JP Morgan female investment banker and the "mother of CDS", joined Digital Asset Holdings in the absence of Barclays investment banking executives. The latter, a New York-based startup, is trying to use the blockchain technology behind Bitcoin to reduce the back-office costs of the banking industry. JPMorgan Chase has invested heavily in the blockchain. In 2016, it also launched a test project with blockchain startup Digital Asset Holdings, which received $50 million in investment from Wall Street last year.
Another business that Wall Street Bank is concerned about is payment.
In the field of mobile payments, US mobile mobile payments will reach $75 billion in 2017. It is expected that by 2020, the transaction volume will increase substantially, reaching $503 billion, and the annual growth rate will reach 80%. In this area, in the US market, the giants are Apple and Google from Silicon Valley.
According to the reporter, Goldman Sachs has invested heavily in the payment industry, investing in six companies in this field. Since 2012, Goldman Sachs has participated in eight rounds of financing, totaling approximately $570 million. This includes funding for MoMo in Vietnam, a mobile wallet and banking service provider with no bank accounts, and MoMo raised nearly $34 million in two rounds with the participation of Standard Chartered Bank and Goldman Sachs Group.
JPMorgan Chase released its new product in the payment sector, Chase Pay, in September last year, but both time and size have lagged behind its two rivals, Apple Pay and Pay Pal.
In order to catch up, JP Morgan Chase announced an in-depth cooperation with LevelUp earlier this year. The Boston-based software company has released an app that allows customers to order discounts before entering the restaurant, without having to pay for the card before leaving. In March, JP Morgan once again acquired MCX to help Chase Pay expand its user base. As the largest merchant network in the United States, MCX can help Chase enter the downstream large-scale retail enterprises as soon as possible, such as Wal-Mart and Shell.
If ranked by the number of exclusive investment companies, the Bank of America, the second largest asset management company, ranked sixth. However, it was the only bank that invested in Bill.com and participated in the company's E round of $38 million in financing. The payment processing platform has a valuation of $268 million and has received $123 million in financing.
It is worth noting that Goldman Sachs is the only bank among the top ten US banks that has invested in real estate fintech (Cadre and Better Mortgage).
In addition, six banks participated in Kensho's B round of $50 million financing, and after the financing, Kensho was valued at $500 million. Kensho is unique in applying data analysis and machine learning to financial research.
How far is it from technology companies?
In the face of overwhelming financial technology, Wall Street has not only waved checks to buy startups, but also tapped the potential to increase investment in technology.
Recently, Goldman Sachs CEO Lloyd Blankfein said one of his favorite words: In fact, we are a technology company. The data shows that of the 36,000 employees employed by Goldman Sachs, 9,000 are programmers and technical engineers.
Goldman Sachs combined with Google’s big data intelligence analysis processing engine Kensho has begun to be lethal. The investment model it has built introduces some quantification of external events, such as “Which stock of Tennessee will affect which stockâ€, “iPhone 6 released Which stocks will go up later, thus providing a new data dimension and defining quantitative transactions from a new perspective. The engine can immediately find answers to these questions by scanning for drug approvals, economic reports, monetary policy changes, political events, and the impact of these events on almost all of the planet's financial assets.
COIN, a financial contract analysis software that JP Morgan Chase launched in July last year, is responsible for processing smart contracts and parsing commercial loan agreements through machine learning and encryption cloud network technology, and can bring original lawyers and loan personnel annually in a matter of seconds. The completed work of 360,000 hours is completed, and the error rate is greatly reduced while ensuring the year-round. JPMorgan Chase revealed that it will invest $9.6 billion in the near future and hire a professional technical team to specialize in big data, robotics and cloud infrastructure.
How long does this dance have to dance?
Chuck Prince, former chairman and CEO of Citigroup, once said, "If the music is still playing, you have to continue dancing."
Driven by Wall Street, investment in the US financial technology sector has picked up.
Warren Mead, a partner at KPMG and a global leader in financial technology, said: “In 2014 and 2015, financial technology investment grew at an extremely rapid rate. At that time, investors could invest in a team’s creativity and subvert the traditional business model, but With the intensification of geopolitical and macroeconomic uncertainties, investors began to become cautious in 2016."
According to a report from KPMG, in 2016, global financial technology investment totaled 24.7 billion US dollars, compared with 47 billion US dollars in 2015, down nearly 50% year-on-year.
In the US market, in 2016, VC investment in financial technology also became more rational.
Opimas CEO Octavio Marenzi told the International Finance News reporter that "in view of the potential profitability of financial technology companies, venture capital and private equity investment should exceed their fair share. However, the actual situation is exactly the opposite, venture capital for financial technology companies Investment is generally inadequate, especially in the United States, which accounted for only 2.6% of venture capital investment in 2016. Many venture capital firms have avoided these markets because they often need to be highly specialized in the market and its microstructure and competitive dynamics. To understanding."
However, in 2017, the investment boomed.
The data shows that in the first quarter of 2017, global venture capital-backed financial technology start-ups raised $2.7 billion through 226 transactions. In the second quarter of 2017, there were 251 financial technology venture investments with an investment of US$5.2 billion.
According to current trends, the amount of investment in 2017 increased by 19% compared to last year. The CB Insights report shows that global venture capital and corporate venture capital (CVC) investment in the capital market FinTech is increasing, with 256 transactions expected in 2017, with a total investment of $3.3 billion, a record.
KPMG pointed out that in the more mature areas of metering technology such as payment and lending, investment in some regions has gradually saturated, and emerging areas such as insurance technology, regulatory technology, AI, big data analysis will shine, KPMG believes the future These emerging fields will maintain a very good growth momentum in one year.
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