The US sits atop the global fintech market, outperforming rivals on several metrics.
The US also boasts some of the biggest fintech valuations: Stripe is valued at $36bn; Robinhood ($11.2bn) and Coinbase ($8bn) while fintech investment across the U.S. reached a record high of nearly $60bn in 2019.
US hubs etched on the fintech landscape
San Francisco, New York and Atlanta are among those US hubs firmly etched on the fintech landscape, bolstered by a strong tech community; competitive landscape, a plentiful talent pool, and sometimes helpful regulation.
In these fintech hubs, companies are leading across fintechs of all categories: healthtech, insurtech, payments, wealth management, banking and crypto.
For instance, Atlanta is known as “Transaction Alley” on account of its dominance of the payment processing sector and an eye-watering 70 per cent of U.S. transactions take place across the state of Georgia.
Covid-19, meanwhile, has helped fintechs in these hubs gain market share, as investors have rewarded software-based tech companies while cities in Texas and Florida are also emerging as newer fintech hubs,
Here, the Fintech Times looks at some of the top fintech hubs in the US.
San Francisco Bay Area
San Francisco Bay Area is a mecca for startups and innovators wanting to mimic the success of unicorns like Stripe, Credit Karma and Coinbase.
Nine of the ten biggest fintech companies in the US are based in the region (Stripe, Chime, Plaid, SoFi, Credit Karma, Ripple, Coinbase, Opendoor and Robinhood).
Fintechs in the region span fintechs of all hue, from crypto (Coinbase) to insurance (SoFi) to credit monitoring (Credit Karma) to real estate (Opendoor) to payments (Stripe).
San Francisco Bay Area is a fintech ecosystem, home to accelerators and incubators from the likes of Deutsche Bank and Wells Fargo; trade associations like City Innovate and San Francisco Department of Commerce; as well as hosting global renowned events like Blockchain Expo North America.
Meanwhile, the entrepreneurs of tomorrow flock to the Fintech Club at Berkeley’s Haas School of Business, which showcases industry sectors like blockchain and payments.
Case study: Varo
Alex Woie, head of strategic communications, says the neobank is based on the area largely because of the “talent pool” and “access to capital”.
Varo is located near to traditional banks, like Charles Schwab and Wells Fargo. Woie said: ‘We have benefited immensely from being within this financial services hub- particularly from a talent perspective.”
On affordable rent space, Woie says Covid-19 has had a “fairly profound” impact on real estate prices for prime locations. “Many major employers are continuing to grow in the Bay Area, but with more flexible arrangements, which may not require the same ramp-up in space as before.”
One advantage to being located in the Bay Area, says Woie, is “benefiting from meetups and networking events” while the principal downside is the cost of acquiring talent and office space.
New York
Like San Francisco, New York is a thriving fintech hub, spanning digital wealth, crypto, lending and B2B fintech, amongst other areas.
New York has also been dubbed the “insurtech capital of the world”, due to the cluster of insurance companies, investors and tech talent in the area. Leading the insurance charge in New York are Lemonade and Oscar while other notable fintechs based in New York include Betterment (robo-advising), Forter (fraud protection), Petal (credit) and Stash (micro-investing).
Incubators and accelerators in New York include TechStars and Citi Innovation Labs while NYU and Columbia Business School offer courses in financial services.
The city’s strict regulation of cryptocurrency seems to be softening, with the June announcement that conditional “Bitlicenses” could be issued to startups partnered with licensed entities. Paypal was the first to receive a conditional Bitlicense in October.
Case study: Lemonade
A spokesperson for Lemonade said it opted to be based in New York as it wanted to work “hand in glove” with New York regulators and the state legal system, which it cites as being “one of the most exacting” in the world.
“We wanted to push ourselves to get licensed in such a strict state so that we would be able to replicate the licensing process in other states nationwide,” the spokesperson added.
Los Angeles
A hotbed of entrepreneurial talent, diversity of cultures, a penchant for relationship building and comparatively cheaper rents have made Los Angeles fertile ground for fintechs.
Conscious consumerism fintech Aspiration and Tala, a fintech that offers loans to the underserved communities, are part of LA’s venture capital and startup ecosystem. Experts say that LA has all the advantages to grow into a national, and even international, fintech hub.
Speaking to the Los Angeles Business Journal, co-founder of LA-based Aspiration Andrei Cherny set out the company benefits from being located beyond Silicon Valley, citing LA’s top-quality customer experience and relationship building as key factors.
Some LA-based fintechs benefit from being based near to UCLA where they get top talent from while a further attraction to the city is that rents in western Los Angeles tend to be cheaper than San Francisco.
Case study: HMBradley
Zach Bruhnke, CEO, cites LA’s “good weather” and “laid-back environment” as pull factors. On office space in LA, he says it is “relatively expensive” compared to most of the US but cheap compared to San Francisco and New York City.
Bruhnke also says he has personally benefitted from supportive infrastructure in Los Angeles. “I’ve been a beneficiary of watching the ecosystem grow here,” he adds. On any downsides to LA, Bruhnke says: “I think generally the taxes are very high in California and that is starting to drive a lot of people in our industry out of state. I could see a world where some (or even most) of our team ends up in places like Nashville or Austin where things seem to be very much up and coming.”
Boston
It was nicknamed “The Hub” in the 19th century, but Boston’s moniker seems especially fitting today in light of its thriving fintech ecosystem.
It has grown into a centre of financial innovation thanks to its cluster of banks, venture capital firms, and – most of all – colleges. The city is home to Boston and Northeastern University, and enclosed by the “Brainpower Triangle” of Tufts, MIT, and Harvard.
Boston also boasts substantial infrastructure to support fintechs. The IDEA Lab, for example, is a student-led venture accelerator which claims to have launched 65 startups.
A number of the city’s fintechs are aimed at the student population, including EverTrue (fundraising) and Flywire (payments). It is also the home of Toast, the restaurant management startup valued at $5 billion.
Case study: Flywire
According to a Flywire spokeswoman, Boston provides a “deep talent pool” which is “largely the outcome of the numerous top-tier colleges and universities in the city.”
“Our CEO [Mike Massaro] often speaks to many universities and their students about life at a high-growth fintech”, she added, calling it a “wonderful way to grow our brand.”
The company has also benefitted from the city’s fintech infrastructure, as an alumnus of the startup accelerator MassChallenge.
Chicago
Payments companies are central to Chicago’s prominence as a fintech hub, powered by the likes of Braintree, Keyo and Raise.
Chicago also boasts major financial exchanges including the Chicago Stock Exchange and the Chicago Board Options Exchange while the Federal Reserve Bank of Chicago is also located in the Windy City.
Chicago has an active Accelerator scene and one big lure for budding entrepreneurs is the Polsky Exchange, an innovation incubator, which is affiliated to the University of Chicago.
Case study: Raise
A Raise spokesperson said the fintech benefited from being located close to many of its partners.
“The proximity has enabled deeper collaboration and strategic partnerships, as we can meet in person (pre-Covid) to craft out plans.”
The spokesperson adds: “Chicago has a very healthy startup scene, between organisations like 1871 and Bulletin. We attend frequent networking events and have made both commercial connections as well as networking connections.”
On the downsides to Chicago, the spokesperson says: “I think there’s a reality for any startup not based in California or New York in that investors still sit on the coasts.
“Before Covid, that meant hopping on a plane for investor or board meetings. With that being said, given the entire world has built a new normal with remote collaboration, I don’t see this being an issue going forward.”
Additional reporting by Benedict Smith
