The FinTech Ecosystem Assessment Report has been released by the Fintech Working Group, a collection of 24 distinguished leaders from across the Massachusetts Fintech ecosystem, chaired by Secretary Mike Kennealy and MassMutual’s Head of U.S. Mike Fanning.
This Report was commissioned in spring 2020 to inform the Fintech Working Group’s strategic framework and action agenda to further grow FinTech in the next 3-5 years. The Group’s mission is to “accelerate the convergence of Financial Services with Fintech to cultivate a robust and collaborative ecosystem in Massachusetts”.
Developed by Ernst & Young, the Report is based on 40+ stakeholder interviews, a 25-plus response startup survey, Fintech Working Group contributions, and thorough desk research, EY assessed the depth and breadth of FinTech activity in Massachusetts, and compared it to other FinTech hubs. The Report provides a series of recommendations for state, industry, academia, finance, startups, and nonprofit leaders of the Fintech Working Group to further grow FinTech, the ecosystem, and financial services in Massachusetts more broadly.
EY Report Key Findings
- Summary of Strengths & Opportunities in Massachusetts:
- Increasing number of FinTech Startups - We have over 350 Fintech startups headquartered in Massachusetts with the number of new startups increasing year over year.
- Established financial service sector – Headquarters to top financial institutions that are willing to collaborate.
- Intermediary organizations – Incubators, accelerators and non-profits shape this well rounded ecosystem.
- Best Academic Institutions – We are home to some of the top Universities and Colleges in the World.
- Top Talent – Whether it is talent in Academia or in the Corporate or Startup space, we have great talent we need to tap into and retain.
- Massachusetts is known as a Tech R&D hub.
- Capital – Especially early stage startups are having difficulty accessing funding. This is the #1 recommendation provided by EY (Unlock new and varied sources of capital, with an emphasis on early stage financing).
- Unifying brand – We need to raise the profile of Massachusetts FinTech by creating a strong unifying brand to establish Massachusetts as the global leader. We also need to better promote the many strengths that we have, making Massachusetts more attractive for FinTechs, talent and startups to locate. (EY Recommendation #4 - Create a unifying brand around Massachusetts as a destination for FinTechs and raise the profile in the US and internationally)
- Interconnectivity/coordination – While there is lots of FinTech activity occurring in Massachusetts, more focused and coordinated efforts need to be put in place to execute on plans. There’s a need for increased collaboration amongst stakeholders. Due to the competitive nature of the businesses industry members are often reluctant to collaborate. This barrier is being overcome through the excellent participation and engagement with the Fintech Working Group. (EY Recommendation #6 - Elevate the FinTech Working Group to be the permanent driver of the Commonwealth's next phase of FinTech growth)
- Additional Points:
- Generic Growth of FinTech:
- Over the past decade FinTech has taken center stage as a key driver of innovative growth within the financial services sector. Enablers such as exceptional computing power, widespread internet penetration and increased internet speed and coverage, driven by 4G and 5G enabled mobile access are allowing FinTech startups to penetrate the market more widely than ever before.
- Increased demand, heightened customer expectations and the need to reduce costs while providing faster, safer and more reliable services, all underpin the rise of FinTech
- Key technologies driving Fintech include, AI, Big data and advanced analytics, blockchain.
- Global FinTech Investment has increased over 13 times in the past 10 years, from $8B in 2010 to over $110B in 2019.
- Massachusetts FinTech Data Snapshot:
- More than 350 FinTech startups are headquartered in the state - covering a diverse set of businesses and entrepreneurs.
- 496 Capital providers – Alternate investment players include 197 VC funds, 96 angel investors, 89PE firms and 13 angel groups.
- 105 Academic Institutions – Massachusetts is home to some of the top academic institutions in the world.
- Financial Institutions – Massachusetts is home to many of the top financial institutions in the US. Roughly 283 banks, 67 wealth & asset managers, 55 insurance firms call Massachusetts home.
- Government (federal and state regulatory frameworks) – State government is active and supportive of FinTech (i.e. EOHED and MassTech)
- Massachusetts employs 160,000 people in the financial sector - thereby representing 12% of all jobs in the state’s innovation economy.
- Previous research conducted by Massachusetts into the most impactful innovation clusters of the future led to the identification of FinTech as one of five priority innovation sectors as an area for growth and support. FinTech was incorporated in the Economic Development Plan (2019) and Economic Development Bill (2020).
- Massachusetts firms represented approximately 9% of new FinTech startups in 2019…and that’s rising year over year.
- Generic Growth of FinTech:
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