Digital banking startups have secured more than $10.3B in funding since 2010, as they disrupt the banking value chain, providing consumers with new alternatives for services traditionally dominated by consumer banks, including lending, bill pay, personal finance, and investment management.
The breakdown of the categories is as follows:
- Marketplace Lending: Tech startups primarily providing platforms for consumer borrowers to connect with willing lenders. These are often referred to as peer-to-peer (P2P) lenders, though institutions also provide capital on many of these marketplaces.
- Direct Lending & Underwriting: Companies primarily lending directly online and/or facilitating consumer access to credit scoring, often using machine learning technologies and other nontraditional methods to assess creditworthiness.
- Online/Mobile Banking: Startups providing digital-native banking deposit and account solutions, either online or through various mobile platforms.
- Personal Finance: Tech startups offering tools and advice to manage personal accounts, expenses, budgeting, and personal financial planning.
- Bill Pay / Money Transfer: Startups enabling individuals to transfer money to peers and pay bills, often across international borders.
- Investment Management: A broad category encompassing companies serving retail investors with automated, social, or other novel investment vehicles and advice. These startups may also offer retail investors alternative ways to access securities beyond large traditional brokerages. Some, like Personal Capital, pair algorithmically-driven advice and portfolio management with human advice.
- Robo-advisor: Investment management startups that focus exclusively on providing fully automated, algorithm-driven investments.