Investments in financial technology companies continue to be on a tear, as everyone sees an open field to grab the attention… and money of millennial consumers (and even the preceding generations before they enter financial dotage),
With the field continuing to expand, each flavor of technologically enhanced financial services vendor is looking to be the hub for consumer services.
As an increasing number of companies enter the fray, Betterment (at this point one of the industry’s elder statesmen after launching in 2010 at TechCrunch Disrupt) has raised $100 million in new financing to build out its war chest and invest in new products and services.
Like, Wealthfront, its West Coast competitor, the New York-based Betterment believes that it has the right angle on convincing millennials to make its service the entry point to a wider world of financial health.
No one puts it more plainly than Betterment chief executive and founder Jon Stein. “Our goal is to become the central financial relationship for our clients,” he said in a statement.
The company has added a number of features like a retirement guide and account aggregation, but the new developments that are perhaps most encouraging for the company are the work with corporate customers on retirement plans and with financial advisors as a white label tool that advisors can use with their own existing clients.
It’s worth noting that there are several ways in which consumers (especially consumers with money) manage their money. Most people use a retirement plan through their company — like a 401K — and maybe have a mix of stocks and bonds that they’ve bought for themselves.
As people move up the income ladder, they can afford to pay professionals to manage their money for them. Those can be folks like wealth management professionals (or if you’re really rich — or gutsy — you can find a way to invest in a hedge fund, private equity fund, or venture capital fund).
The new suite of offerings that the company has rolled out over the last year were enough to lure new capital from the Swedish growth-stage investment firm, Kinnevik, which led the new round. Previous investors Bessemer Venture Partners, Anthemis Group, Menlo Ventures, and Francisco Partners also participated in the whopping $100 million investment, which gives the company a $700 million valuation. In all the company has raised roughly $200 million across five investment rounds.
“Kinnevik shares our vision of building a technology-driven financial services company that customers love,” Stein said in a statement. “From our first meeting, it was clear that we shared the same values of what a modern day financial company would look like.”
The new offerings have also paid off in terms of the company’s assets under management. Betterment now boasts $3.9 billion in assets under management and 150,000 customers.
“Everyone should have access to un-conflicted and low-cost financial services that enable them to reach their financial goals,” said Lorenzo Grabau, the chief executive of Kinnevik, in a statement.
That statement echoes Betterment’s own pitch to consumers. Stein views other vendors in the financial technology sector as mere vendors, who are out for a buck and nothing more. Lenders — who’ve taken the biggest chunk of the fintech market outside of the robo-advisory space — or even the payments firms that are in the market; all of them are trying to sell something in the end.
While both Betterment and Wealthfront are also interested in the sale, they have a fiduciary responsibility to customers, which, Stein says, represents a higher standard of care than one would get from other industry players.
Whether Stein’s view wins out in the end is anyone’s guess, but it’s safe to say that investors are betting big on all potential outcomes.
According to a report from KPMG and CBInsights published earlier this month, global investment in fintech companies totaled US$19.1 billion in last year, with US$13.8 billion invested into VC-backed fintech companies.
That represents a 106 percent jump compared to 2014. Those record-breaking levels were achieved despite a 64 percent sequential drop off in funding in Q4,according to the report, with US$1.7 billion invested across 154 deals to VC-backed fintech companies globally, the lowest quarterly fintech funding total since the third quarter of 2014.
“2015 was a tremendous year for fintech investment around the globe. The evolving needs of digitally savvy consumers and the drive for efficiency, not least to meet regulatory and compliance costs, is propelling innovation in financial services like never before – and investors are taking notice,” said Warren Mead, Global Co-Leader, KPMG Fintech practice, KPMG International, and Head of Challenger Banks, KPMG in the UK. “Notwithstanding the investment pullback in Q4 2015, we expect the larger fintech investment trend to continue.”