Finch Capital closes €150m fund for European fintech
Founded in 2013 and headquartered in Amsterdam, intends to channel the funds towards companies that are shaping “the future of finance” through the use of cutting edge technology like artificial intelligence (AI).
The firm now has a track record of 40 investments across the European and Asian markets, with an estimated US$400m in assets under management. Its portfolio includes startups in fintech, insurtech and regtech. Finch Capital also reports that its two prior funds - Europe I and II - are both “generating top-quartile returns.”
Financing the future
The company prides itself on strong leadership composed of “exceptional entrepreneurs” and makes use of both industry insights and an international network to grow fledgling investments into finance sector leaders.
In particular, Finch Capital selects companies that present pragmatic solutions to common problems and emphasise both scalability and sustainability.
Its goals for Europe III are to invest in 15 to 20 startups on the continent, investing €2m to €10m at Series A and B funding rounds. According to Managing Director Radboud Vlaar this broad interest is characteristic of Finch Capital, “We have always been bullish on investing in financial technology,” he said.
“We have seen the industry mature, giving rise now to a rich but fragmented landscape of robust businesses with €2m to €5m in revenues. These are the companies we are focused on working with now. With the right support and management they have great risk/return outcomes and they are ready to build leading positions and consolidate the European market.”
Adding AI expertise
Notably, Finch Capital has broadened its expertise in AI with the addition of to its ranks as a venture partner. Formerly a Product Lead at Google and , his tech sector knowledge is sure to be invaluable in guiding the VC firm’s next wave of funding.
“Europe is ready to compete in the global enterprise tech arena, with more capital being deployed in AI/deeptech than any other industry - $20bn last year alone,” he stated.
“In the wake of general performance pressure, we see an acceleration of the finance sector in their tech understanding and adoption creating pressure for additional innovation in these areas.”
As a instigated by the events of 2020 continues to cause dynamic changes to investment, Finch Capital’s particular focus on AI within finance could be pivotal; angel investor Steve MacDonald predicts that “AI will be core to every new breakout fintech company” in 2021. Truly, this year could be one of finance’s most exciting ever.
FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.