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FinTech Hubs: San Francisco Brings The Tech In FinTech

If you look at the big fintech hubs around the world, you will see they all follow a similar pattern. They tend to be big financial centres first, with a booming financial technology industry built on top of it.

And it makes sense. With close proximity to traditional financial institutions like banks, insurance firms and investors, there are plenty of opportunities for fintech startups to grow.

However, San Francisco turned this concept upside down and did it the other way around. The city is a technology centre first (thanks to its famous tech district, a.k.a. Silicon Valley) that attracts financial institutions looking for new, innovative products that will give them the edge over the competition.

As a result, some of the world’s biggest fintech companies call this city home. PayPal needs no introduction and Stripe, a strong competitor to PayPal, was valued at over $9 billion in 2016.

With financial technology flourishing in San Francisco, it’s no surprise then that it attracts a lot of young talent, eager to make a difference. There are around 74,000 people working in the fintech sector in San Francisco, compared to 61,000 in London, regarded by many as the world’s leading fintech hub.

Intuit, a provider of business and financial management solutions, employs 2,378 individuals in the Sa Francisco Bay area alone.

Apart from being an iconic city, some of San Francisco’s other attractive qualities include a warm climate with leafy suburbs and a vibrant social scene with enough entertainment to keep you busy for a long time.

San Francisco also has a relatively young working demographic with good salary expectations. The average age of an employee working in fintech in the city is around 30 and can expect to earn close to £90,000 annually.

As an added cherry on the cake, many of the startups also offer carpools (in the form of coaches), to ferry employees back and forth between their homes and the office.

Attracting new talent is important as it’s a foundational block of fintech innovation and it’s clear why so many prospective employees flock to San Francisco to work in its fintech sector.

However, a talented workforce is not always enough. Fintech innovation also needs investment. It’s what gives startups the resources they need to develop and launch new products.

When it comes to attracting investment, San Francisco as a whole can boast about being the number one region in the world. More than half of global investments go to the US and a large portion of this is thanks to Silicon Valley. It attracted $13 billion in 2015 with $1.4 billion going to the fintech sector. Again compare this to London’s $680 million, and it is clear how significant this amount is.

And because San Francisco has this rich history with investment, it means that new fintech startups have access to a base of more than 17,000 potential Angel Investors. Very few other fintech hubs around the world can provide this level of access to new market entrants.

Attracting $1 billion in investment in 2015, SoFi, an alternative finance platform for student loans, personal loans and mortgages, has issued loans worth $16 billion in total.

Credit Karma offers free credit scores and insights and has raised more than $360 million in equity funding. In 2016, the company was valued at $3.5 billion.

These are just a couple of examples but it is clear that San Francisco is not short on fintech investment which has helped it to grow into a global fintech hub.

And although Silicon Valley is renowned for its innovation in multiple sectors, there are a number of specialist areas in which it stands out. These include the lending, payments and investment sectors.

As we already mentioned, SoFi is a leading loan provider and Prosper is another big player in the lending sphere. The p2p lending platform has more than 2 million members. It has financed more than $5 billion in customer loans and is yet another Silicon Valley startup that’s valued at over $1 billion (close to $1.9 billion to be exact).

Lending Club fills the gap between lending and investing. It’s the world’s largest marketplace for connecting investors with borrowers. Starting out as a Facebook app, it grew into a massive online credit marketplace, reaching $11 billion in loans through its platform in 2015.

Another innovative investing platform is Robinhood. It encourages newbie investors to take the plunge by offering $0 trades. The startup has raised $66 million in funding with big name backers including Index Ventures and Google Ventures.

When it comes to payments, San Francisco’s pedigree is just as strong. Apart from Stripe, another successful startup operating in the payments sphere is Square. The company is valued at over $3 billion and enable retailers to accept payments through mobile devices, with extended services including marketing and even inventory tracking.

Bill.com is a B2B payment solution that helps businesses to pay, and get paid, quickly. In addition, it can support cash flow and budget functions by automating accounts payable and accounts receivable processes. Transactions processed through the platform hit $19 billion annually.

Finally, no global fintech hub can continue to grow without dedicated incubators and accelerators supporting its resident startups.

San Francisco is no different, with a number of these programs backing its fintech industry.

The Plug And Play fintech accelerator offers a three-month program to a select few startups. This intimate program ensures that the chosen companies are connected with the right investors that can take them to the next level through accelerated growth.

YCombinator is a seed funding platform that supports startups through the early stages of venture funding. Forbes has ranked YCombinator as one of only two “Platinum Plus tier U.S. Accelerators" and the platform has helped fintech giants like WePay, LendUp and Stripe to launch their products into the marketplace.

San Francisco plays in the major leagues when it comes to global fintech hubs, with its different successes often measured in billions of dollars. The city is regularly featured in “top global fintech” lists and with a strong tech sector, access to significant investment and a high-quality talent pool of motivated individuals, it won’t lose its spot on those lists anytime soon.

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