Banks future-proof by investing in fintech competitors, drives up corporate venture capital deals

Banks are leading the charge as corporate venture capital funding hits an all-time high. On Tuesday, CB Insights published an insightful report showing how investments by financial services firms into start-ups are hitting record-high numbers. The said report puts the figures in 2019 at 329 deals and a total value of $8 billion. What’s more? Close to half of that deal activity this year came from banks.The third quarter saw the highest deal activity recorded by financial services venture capital.

Established multinationals like Google, Airbus and American Express already have venture capital arms that help them identify and form early strategic partnerships with start-ups who come up with tech solutions they observe could drive the future. According to CB Insights, they often do this as a way to future-proof.

Today, banks are also taking this type of strategy more seriously. The report termed them as “rapidly accelerating” deal activity, with annual deal activity increasing by 8 times between 2014 and 2018. Investing in fintech start-ups is becoming increasingly important for Wall Street banks who are forced to diversify income streams since their key profit engines are being squeezed by falling interest rates. The pressure to ramp up investment also stems from new and prospering fintech options like Square, PayPal, Wealthfront and Robinhood and their ability to offer many of the same services at zero fees.

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