FinTech industry grows in Southwest Ohio
It’s a relatively new industry that is growing by leaps and bounds not only in Southwest Ohio, but across the entire state. It’s recognized by venture capitalists and economic development professionals for its explosive growth. And it’s being aided by some of the leading and most august financial institutions in Ohio.
“FinTech is one of our most important and fastest growing sectors for venture capital investment,” says Pete Blackshaw, CEO of Cintrifuse, a syndicate “fund of funds” and startup incubator in the Greater Cincinnati area created by P&G, Kroger, Western & Southern and other major companies in Southwest Ohio. “Of the total venture capital invested, FinTech companies represent about 25%.”
One of the reasons that the percentage of venture capital investment is so high is because FinTech intersects with so many industries such as e-commerce, sustainability and security. Indeed, if a company has anything to do with helping companies or consumers purchase products or services, it can be classified as being a part of FinTech.
So, what is it?
FinTech, a portmanteau of Financial Technology, is a catch-all term referring to software, mobile apps and other technologies that improve and automate more traditional forms of finance for both business and consumers. It can be as straightforward as a mobile app to more complex block chains housing encrypted transactions.
Those kinds of applications don’t have to be confined to financial services sector but can include everything from health care to real estate. FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable. It can also apply to companies and services utilizing AI, big data and encrypted blockchain technology to facilitate highly secure transactions in an internal network.
Over the past decade, technological advancements and innovative new companies have launched FinTech from the fringe to the forefront of financial services, according to McKinsey & Company. That growth has come at a fast and furious pace, mirroring the growth of the banking sector powered by rapid digitalization. As of this summer, publicly traded FinTechs represented a market capitalization of $550 billion, two times what it was in 2019. At the same time there were more than 272 FinTech companies with a valuation of $935 billion, according to published reports, which represents a seven-fold increase from 39 companies valued at just over $1 billion a mere five years ago.
Ohio is an especially fecund business environment for anything in financial services like FinTech. According to Ron Rock, managing director of financial services at JobsOhio, Ohio has the fourth largest financial services economy in the U.S. The state is tied for third when it comes to being home to the top 50 bank headquarters by assets. It also has more than 255,000 folks employed in the financial services industry.
With world-leading institutions like Progressive Insurance, KeyBank, Huntington and Fifth Third Bank as well as FinTech companies that include Klarna, Root Insurance and Alliance Data, it’s easy to see how the FinTech industry could migrate away from coastal markets like New York and San Francisco to a Midwest market like the Greater Cincinnati area. The Tristate also is within a two-hour flight of 75% of U.S. and Canadian financial services companies.
Those are just a few of the reasons Cintrifuse created something it calls FinTech Frontier, a future-focused partnership between Cincinnati based, leading financial services corporations and FinTech-focused entrepreneurs. The organization is designed to accelerate innovation to transform every aspect of financial services, from back-office operations to consumer experiences.
Designed as a launching pad for FinTech entrepreneurs, FinTech Frontier’s mission is to attract people who see bold new ways of making financial services more accessible and engage consumers from all walks of life. From AI to block chain to IoT (Internet of things), FinTech Frontier wants to open doors for innovative founders with ideas that will help enterprise customers succeed.
According to Blackshaw, major financial institutions like Fifth Third Bank, Western & Southern and First Financial are all actively involved with FinTech Frontier.
“And these companies are taking a very active role in helping us develop the industry, whether that is through building partnerships with smaller companies or through actual investment,” says Blackshaw. “They are putting some real skin in the game.”
Two years ago, Fifth Third acquired Provide, a FinTech in Columbus, that created a digital platform for health care practices. Fifth Third was an early investor in the company, starting in 2018.
Provide offers an integrated suite of financial products that makes starting and running a health care practice easier, giving providers more time to care for their patients. Provide’s first product was practice lending, enabling providers to start, buy or expand health care practices. Today, it has since grown to offer banking accounts and payments services.
Founded by Mohsin Masud, AKRU’s platform unlocks investment in the real estate market through fractionalized ownership and investments. The company created a technology that lowers barriers to investment in both commercial and consumer real estate projects.
Pay Theory created a financial services infrastructure for SaaS (Software as a Service) platforms, breaking down the barrier between families and their most vital service providers.
Those are but a few of the examples of Ohio-based FinTech companies and the diverse industries they serve. Many of the FinTechs in Ohio, particularly Southwest Ohio, are garnering the attention and direct investments of larger financial institutions.
This year, FinTech innovator Neural Payments announced a partnership with GoWest Credit Union Association, a six-state organization serving more than 300 credit unions and their 16.5 million consumer members.
Through the partnership, Neural Payments is offering association credit unions its customized, white label P2P (peer to peer) platform.
Embedded directly and seamlessly within digital banking, the P2P solution makes payments easier for consumers. For credit unions, the technology is a product designed to help expand membership, providing enhanced opportunities to appeal to consumers looking for greater convenience in how they make payments.
To further enhance the P2P product, Neural Payments also offers Fraud Rules Engine, a revolutionary technology that leverages real-time automation to lock down, evaluate and respond to suspicious transactions.
“For members of GoWest Credit Union Association, Neural Payments offers the opportunity to step onto the playing field of this growing $50 billion industry,” says Mick Oppy, Neural Payments CEO. “It gives credit unions a way to not just remain competitive but to also reduce operating expenses and stay ahead of the FinTech curve with technology that consumers really want.”
“Within our association, our member credit unions have a keen interest in making a real difference in their communities,” says Cameron Smith, GoWest Credit Union Association’s chief growth officer. “We are excited to partner with Neural Payments because it is easy to see the difference this team’s solution will make for both consumers and credit unions. By making P2P payments easier and safer, Neural Payments is helping credit unions reach more members and create greater impact.”
This past summer, Neural Payments also signed a multi-year agreement with Firstrust Bank in Philadelphia for Neural’s P2P solution, which is fully embedded within the banks Q2 digital banking platform.
“We are excited to continue offering an integrated P2P payment option to our Firstrust customers, now in partnership with Neural Payments,” says Richard Hildebrandt, senior vice president of Marketing at Firstrust Bank. “Our customers need convenient and reliable payment solutions, especially as more payments move online and mobile, and with this partnership we will be able to ensure that our customers have access to the highest quality offerings.”
“Firstrust Bank shares in our vision and strategy for P2P payments and we are thrilled to have them join us on this journey,” adds Melissa Kopp, executive director of Client Experience at Neural Payments. “Firstrust is very deeply rooted in the Greater Philadelphia market and has a reputation for listening to their customers and personalizing solutions to meet their needs. We are honored to be a part of that delivery and look forward to partnering with them to enable P2P solutions for their customers from within their Q2 digital banking experience.”
Under the leadership of founders CEO Brad Hoeweler and CTO Eric Fulkert, Pay Theory has raised $2.4 million in three rounds from eight investors since its founding in 2019. Its latest funding was in 2022.
Pay Theory is a payment platform that enables service providers to accept any form of payment. This platform aims to give online payment access to all, regardless of banking status. It focuses on must-pay services such as school, childcare, and health services but opens the door to SaaS vendors for all sectors.
The platform allows underserved families to complete digital payment transactions without having a credit card. They can pay physical cash for online purchases using a network of retailers from which 95% of the population lives within a 1-mile radius. These include about 65,000 outlets of Dollar General, 7-Eleven, CVS, Walgreens and Walmart.
Anyone can pay a bill generated by a Pay Theory partner on its mobile app or website. The payer can choose cash, card, check or payment plan. If the payer chooses cash, the app issues a barcode that the payer can present to a partner retailer. After scanning, the retailer accepts the payment, marking the bill paid and reconciled among all parties.
The simplified payment architecture of Pay Theory integrates with many SaaS platforms already in use by service providers, such as schools and doctors’ offices. That means these service providers and Cincinnati companies do not have to set up a separate channel to accept Pay Theory payments.
“There are 20 or so FinTech companies in our area that are creating synergies, matching the innovative solutions that startups often have with the needs of larger financial institutions,” says Blackshaw. “We should also have opportunities to do some scale ups in the future.
“And there should be a lot more to come,” Blackshaw adds.
