What makes a city, state or region branding itself a "fintech hub" a true fintech hub, beyond the name?
The ingredients of a thriving fintech hub — essentially, a
"You always need some marketing to help your efforts," said Ryan Christiansen, executive director of the Stena Center for Financial Technology at the University of Utah. "That said, if the programs or focus or leadership aren't sufficient to support the promise of the marketing message, then all the participants will lose confidence in the message."
Banks are also a key component, as investors in, beta testers of or buyers of these technologies. Actively participating in a fintech hub could be especially fruitful for community banks.
"An earlier connection with a fintech will allow us to consider earlier stage products and then figure how to connect them or whether or not they will connect with our core," said
The components of a hub
Proximity to venture capital is especially important for companies trying to get off the ground. "At the end of the day you need companies that are started by entrepreneurs that receive funding," said
A blend of ingredients rather than a tilt toward one is also crucial.
"There may be some fintech activity but to be a hub you need to have more than one piece," said Gotsch.
The nature of a hub takes on new meaning in the age of remote work.
"We are starting to see seeds for new fintech hubs planted all over the place," said Alex Johnson, author of the Fintech Takes newsletter. Founders may favor cities with a high quality of life.
Consumer demand is also key.
"Are [local] consumers educated in financial services and willing to try new products and services?" said James Siciliano, fintech advisory leader at Deloitte.
Where fintech hubs are hopping
There are more opportunities for banks to participate in fintech hubs as the concept expands beyond San Francisco, Silicon Valley and New York City and industry observers point to more intentional efforts in cities like Atlanta and Salt Lake City.
"People in early-stage fintech would scoff" at the thought of Atlanta as a fintech capital, said Johnson. "But there are a lot of smart bank technology people who work there. As fintech becomes more mature, they will find that not only is proximity to VCs and other tech companies useful, but proximity to banks and bank technology partners might be more useful for building a business."
The American Transaction Processors Coalition and the now-separate NCR units, NCR Atleos and NCR Voyix, are headquartered in Atlanta; other major bank technology providers, including FIS and Fiserv, have a significant presence there. The Georgia Institute of Technology's Advanced Technology Development Center incubator was founded in 1980. The
Charles Potts, the chief innovation officer for the Independent Community Bankers of America, previously led the fintech practice at the ATDC.
Fintechs were already clustered in New York and San Francisco. Now that most startups work with the four largest banks, it's even harder to create new technology in the heartland.
"Atlanta has had this ecosystem of entrepreneurship and capital and resources around fintech for decades," he said. In fact, the ICBA brought its ThinkTech accelerator program in-house in the spring of 2023, rather than continuing to outsource it to the Venture Center in Little Rock, Arkansas, and will open a dedicated center in Atlanta to support year-round programming in 2024.
There are advantages to community banks in Georgia having a thriving fintech scene within reach, including the $1.9 billion-asset Queensborough National Bank and Trust Company.
"It doesn't preclude us from doing business with fintechs not in our geography but it sure is nice because you can get a lot of face time and a better relationship," said Kim Kirk, the chief operations officer of Queensborough in Louisville, Georgia. "It's important for banks to see what is happening in the marketplace and be a part of that."
Kirk serves on the selection committee for the ICBA's ThinkTech accelerator. She has subsequently zeroed in on several startups that she later brought on board, including LemonadeLXP, which trains financial institution staff in digital banking.
"Working with a small company allows you to move much faster than you would with larger players," said Kirk. "Banks will have to do that to be competitive in the future."
Siciliano counts Salt Lake City as an emerging fintech hub.
"You have a lot of investment by the state," he said.
There are several ingredients coalescing in Utah. The National Association of Industrial Bankers is based in Salt Lake City; more than 90% of industrial bank deposits in the U.S. are held in the state as well. "There is a lot of fintech innovation happening at the industrial bank level," said Christiansen. Utah has a regulatory sandbox and is ranked eighth-best in the U.S. by the Tax Foundation in its State Business Tax Climate Index.
The Stena Center for Financial Technology opened at the University of Utah in early 2023 and offers electives, a minor in fintech or a finance major with fintech emphasis, along with an incubator, venture capital funds and more; it graduated its first six students this past September and has 70 students currently enrolled. Bank technology providers and fintechs such as Brex, Finicity (now part of Mastercard), Galileo Financial Technologies (now part of SoFi), Lendio and MX Technologies are all headquartered in Utah. Utah governor Spencer Cox formed a fintech advisory council at the Governor's Office of Economic Opportunity in 2023.
"There is a robust spirit of cooperation with government officials and the industry," said Christiansen.
A similar spirit of cooperation is taking place in Massachusetts. Mass Fintech Hub, which launched in 2021, is an intentional effort to encourage innovation, retain talent and strengthen fintech-bank partnerships in Massachusetts. The Massachusetts Executive Office of Housing and Economic Development started exploring how to ramp up the state's "innovation economy" in 2018 and identified fintech as one of the most promising areas for it to focus on.
"We have the universities, the thought leaders, the innovation," said Thurlow of the $880 million-asset Reading. "The best MBAs in the country are in the Boston area. We have all the ingredients to be a fintech hub. Why is everyone leaving and going to the West Coast?"
EY published an analysis of the fintech ecosystem in Massachusetts in October 2020 at the request of state economic development agency Mass Tech Collaborative. It confirmed that many of the ingredients in a successful hub are already there, including top academic institutions, a reputation as a technology and research and development hub, incumbent financial institutions, capital providers and more. "However, there may be an opportunity to unlock more capital at the local level, particularly for early-stage startups," reads the report. "… While there is significant activity and growth in Massachusetts, the ecosystem may benefit from greater interconnectivity and collaboration amongst stakeholders."
Mass Fintech Hub offers programming for startups and industry members, connects investors to founders and organizes career fairs for students.
"We're building the hub one event at a time, one focus group at a time, one boot camp at a time," said Thurlow. She feels the Hub could also help fintechs learn more about the regulatory side of partnering with banks early in the process.
The Mass Tech Collaborative more recently commissioned a report from KPMG about the state's progress, which was published in November 2023. It found that Massachusetts' fintech ecosystem had seen substantial growth in the past three years but there is still room for improvement, such as considering a
Its involvement has paid off for Reading Cooperative. The bank is in talks with several companies it found through Mass Fintech Hub, including an artificial intelligence-driven assistant for call centers. Prior to Mass Fintech Hub, Thurlow said the same resources existed but were not easy to map.
"I learned as a banker in Massachusetts about [data provider] FinTech Sandbox and [innovator network] MassChallenge, so I introduced myself," said Thurlow, "but I didn't know about the number of accelerators for fintechs that existed in our state until I became involved with Mass Fintech Hub."
