Santander doubles investment in fintech fund to US$200m

LONDON, July 19 (IFR) - Santander has doubled investment in its two-year-old fund for financial technology firms, one of a variety of moves by banks to give them an edge in spotting the latest “fintech” to emerge.

Santander said it will put another US$100m into Santander InnoVentures in a second round of funding, taking its investment to US$200m since it was launched in 2014.

Santander InnoVentures is the Spanish bank’s fintech venture capital fund, which takes minority stakes in startup firms with the aim of collaborating and partnering with them to develop their ideas.

Managing partner Mariano Belinky said the fund will expand its reach into new geographies, such as Latin America, and look at more emerging themes, such as artificial intelligence and cognitive computing, such as how machines predict customer behaviour.

The Santander fund has invested in nine firms, and by the end of the year it should have 14-15 firms in its portfolio and have committed the first US$100m, Belinky told IFR.

Setting up a fintech fund is one of several ways banks are trying to spot and harness new technology. They are also developing new technology in-house, setting up incubators or accelerator programmes, and expanding scouting teams across Silicon Valley and globally to spot new ideas.

Customers have switched in their millions to banking via smartphones and banks are trying to stay ahead of rivals and offer new technology to reconnect with customers and improve the industry’s image after years of scandals. New technology can also help cut costs and improve processing and regulation, including the use of blockchain.

Proponents of blockchain, or distributed ledger technology, say it has the potential to shake up how financial markets operate. The technology creates a shared database in which participants can trace every transaction ever conducted.

Santander InnoVentures is based in London, and Belinky downplayed concern start-ups will quit London for other cities due to Britain’s decision to leave the European Union. Berlin has claimed several London start-ups have made inquiries about moving there since the vote.

“If the uncertainty continues new companies might look at whether they need to start somewhere else, but I don’t think any of the companies here in London are saying they need to get up and leave. That’s not reality,” Belinky said.

He said London remains Europe’s dominant fintech hub, thanks to its closeness to financial firms, pool of talent, existing fintech “ecosystem” and access to funding providers. (Reporting by Steve Slater)