Silicon Valley investors are betting against banks
The news comes just weeks after another London money transfer startup, TransferWise, raised $58 million, with a rumoured valuation of $1 billion. TransferWise's investment involved Andreessen Horowitz, one of the largest and most respect venture capital firms in the world. Andreessen Horowitz partner Ben Horowitz also personally joined TransferWise's board.
And last year, peer-to-peer loan service Funding Circle raised $65 million, bringing its total raised to $123 million. The round was led by Index Ventures, along with participation from Accel Partners and Union Square Ventures.
We're beginning to see a trend: Investors are finally waking up to the possibilities of FinTech.
Compared with other sectors, the financial industry has remained relatively untouched by technology. Media has been turned on its head; the transportation industry is being racked by Uber; the mobile-app economy didn't exist just a few short years ago but is now bigger than the film industry. In contrast, the major players in finance - with the exception of PayPal - are largely the same as they were 20 years ago.
This is beginning to change. TransferWise is a perfect example of how the tech sector can move onto the banks' turf - and with great success. Launched in 2011, the company aims to eliminate the high transfer fees associated with sending money overseas. It's working - the company is growing 15% to 20% month-on-month, and it has transferred more than $3 billion using the platform, saving its customers money in the process. And while it's one of the most prominent FinTech startups, it's far from the only one.
Tech is tackling finance's problems, and now tech's biggest investors are taking notice.
Index Ventures co-founder Neil Rimer said that Funding Circle exemplifies "the new class of fintech entrepreneurs who are combining technology and novel business models to offer much better value than banks and other customers have been offering their customers."
Earlier this year, Andreeseen Horowitz's Ben Horowitz said that TransferWise "could not have come at a better time... we see little to no innovation from the traditional banking sector, which creates a massive opportunity for new financial institutions."
Bitcoin is another example. Even amid hacks and declining prices, unprecedented funding is flowing into the digital currency ecosystem. Bitcoin exchange Coinbase recently raised $75 million in VC funding, with investors including Andreessen Horowitz and the New York Stock Exchange. In the long term, it's an open question as to whether Bitcoin compliments or competes with conventional FinTech. But for now, unprecedented access to the sector is yet more proof of investor interest in new tech-driven financial products.
Silicon Valley investors are betting on FinTech startups over the established banks. And that funding will in turn accelerate the growth of new and innovative financial services - at the established financial industry's expense.
- Saudi Arabia wants China to help fund its struggling $500 billion Neom megaproject. Investors may not be too excited.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- One of the world's only 5-star airlines seems to be considering asking business-class passengers to bring their own cutlery
- Experts warn of rising temperatures in Bengaluru as Phase 2 of Lok Sabha elections draws near
- Axis Bank posts net profit of ₹7,129 cr in March quarter
- 7 Best tourist places to visit in Rishikesh in 2024
- From underdog to Bill Gates-sponsored superfood: Have millets finally managed to make a comeback?
- 7 Things to do on your next trip to Rishikesh