Tag: Fintech

Funding and Profitability: Two Sides of FinTech Startup Growth

Posted on | by Marta Re Ferrè
Grow at any cost or pursue sustainability? FinTech start-ups face a crucial choice: raise funds to scale quickly or focus on profitability. A new study analyses how funding affects break-even, offering valuable insights for investors and founders.

 

FinTech startups are a driving force of innovation and competition in the financial sector. However, reaching break-even – the point at which revenue covers costs – is a crucial challenge for their sustainability and growth.

The study “Predicting break-even in FinTech startups as a signal for success”, conducted by Claudio Garitta and Laura Grassi from the POLIMI School of Management and published in Finance Research Letters, examines the impact of funding on break-even, providing valuable insights for investors, partners and founders.

Funding and Sustainability

Securing new capital is often a necessity for startups, not only to obtain financial resources but also to access expertise and strategic networks. However, the research highlights that FinTech startups receiving venture capital investments (funds specializing in startups) are less likely to reach break-even compared to those that grow without external support. This phenomenon can be attributed to several factors:

  • Focus on growth vs. profitability → External capital brings expectations of rapid growth and a longer time horizon, often at the expense of short-term financial sustainability.
  • Less rigorous financial management → The pressure to scale quickly may delay the adoption of structured financial management practices.
  • Impact of fundraising negotiations → Seeking investors requires complex and often prolonged negotiations, slowing down operational activities. In the early stages, founders must simultaneously manage product development, sales, and fundraising with limited resources.

Break-even: A Market and Partnership Signal

In the startup ecosystem, and particularly in financial services, break-even is not just an internal milestone but also a key signal for investors and potential industrial partners. Achieving it indicates a sustainable business model, reducing perceived risk and increasing opportunities for collaboration with financial intermediaries and established companies.

Conclusions and Implications

These findings do not suggest that external funding is an obstacle but rather emphasize the need for a balance between growth and sustainability. For investors and partners, understanding the relationship between funding and break-even is essential to evaluate not only a startup’s growth potential but also its ability to generate value in the present.

 

More details: Predicting break-even in FinTech startups as a signal for success

Gender disparity in the participation to equity crowdfunding campaigns

Posted on | by Marta Re Ferrè
Despite the advent of equity crowdfunding increased democratization and access to capital resources and contributed to the financing of sustainable projects, there is puzzling evidence that women are less likely to invest in equity offers on the Internet. A recent study highlights the determinants of women participating in equity crowdfunding campaigns.

 

Equity crowdfunding is a form of financing in which people acquire shares in a company in exchange for invested capital using collective platforms. Despite the sound contribution that equity crowdfunding is potentially bringing to the achievement of global sustainable targets, there is one unsolved issue that characterizes this industry around the world: the scarce participation of women investors in the proposed projects. Equity crowdfunding platforms redefine the technology-people relationship, supporting a sustainable digital transition that accelerates women’s empowerment as leaders and investors.

The study tests four specific hypotheses related to the factors attracting investments from women in equity crowdfunding. Firstly, there is a hypothesis that women-owned businesses are more likely to be attractive to women investors. Secondly, it is conjectured that potential female investors pay more attention to sustainability issues, compared to men. Thirdly, it is hypothesized that the participation of women in equity crowdfunding investments is more likely if the minimum ticket is smaller. Lastly, it is tested that women are relatively less attracted by follow-on campaigns.

The article “Gender disparity in the participation to equity crowdfunding campaigns” by Claudio Bonvino, Andrea Odille Bosio, and Giancarlo Giudici from the POLIMI School of Management at Politecnico di Milano, published as part of the special issue “Crowdfunding campaigns for a sustainable development” in the journal Finance Research Letters, investigates the determinants that in equity crowdfunding are associated with a larger (or lower) participation of women.

Searches are based on a proprietary database comprising all equity crowdfunding campaigns published by Italian platforms from 2014 to 2023.

The findings highlight

  • Women are less likely to invest in equity crowdfunding campaigns.
  • Female investors are more likely to finance projects proposed by women.
  • Women pay attention to sustainability in deciding whether to invest or not.
  • Less women fund the project when the minimum investment chip is larger.
  • Women are relatively less represented in follow-on campaigns.

The engagement of women is still far from being fully exploited in equity crowdfunding, despite this funding channel being deemed by the literature to be potentially more inclusive and sustainability-oriented compared to traditional sources of finance.

For more detail: https://authors.elsevier.com/c/1kPiU5VD4KyeER

Fintech Awards 2024: Laura Grassi wins the Woman of the Year award

Posted on | by Marta Re Ferrè

The second edition of the Fintech Awards, organized by Financecommunity.it in collaboration with ItaliaFintech, took place on March 14, 2024.

 

The initiative, promoted by LC Publishing Group, aims to stimulate competition and growth in the Fintech world by recognizing companies and professionals who have distinguished themselves for their activities in 2023.

The winners were nominated by a  Jury of experts from the corporate world in the Fintech sector, representatives of Financecommunity.it, and representatives of professional Associations.

The criteria considered for the allocation to the best “Individual Professionals” finalists included technical and negotiation skills, knowledge of business dynamics related to the industry, commitment and ability to relate to clients, and professional reputation among colleagues.

Laura Grassi, awarded as “Woman of the Year,” is Professor of Investment Banking and Fintech Lab at the  Politecnico di Milano,  and head of the Fintech and Insurtech Observatory , where she actively engages in innovative research exploring the dynamic landscape of actors and startups, with a specific focus on Europe and international markets.

“It is an honor to be recognized for promoting innovation in financial services. For years, together with my team at Politecnico di Milano, we have dedicated to this mission with passion and determination. We firmly believe that innovation is not just a trend but a necessity that leads to superior performance in the long run and to more useful services for citizens and companies.

Through in-depth research and targeted initiatives, including work within the Fintech and Insurtech Observatory, we lead high-impact projects in the Italian context. From promoting financial identity solutions to supporting startups by providing crucial data for investment decisions and improvement, to facilitating partnerships and open finance projects for both large financial institutions and startups. Our research spans cutting-edge areas such as Generative AI, Banking-as-a-service, and embedded finance, just to name a few.

I am often involved in international projects, including those funded by the European Commission through PNRR and Horizon Europe, for new initiatives that excite us. The two most recent ones focus on supporting startups facing legal, governance, and growth challenges, and on innovating insurance methods to address climate change.

This award is an encouragement to continue on our path, driven by the belief that innovation is the key to a more sustainable financial future, and also a more stimulating one.”

 

The event was organized in partnership with CMS, EY, and PedersoliGattai.

For more information: https://www.italiafintech.org/2024/03/18/i-vincitori-dei-fintech-awards-2024/

The European Microfinance Research Award to a team of the School of Management

Posted on | by Mirja Calgaro | Leave a Comment on The European Microfinance Research Award to a team of the School of Management

The award for a study on the positive social impact of fintech.

 

A team of the Department of Management, Economics and Industrial Engineering at the Politecnico di Milano won the European Microfinance Research Award 2022 with paper “FinTech for Good: unveiling social value creation in the fintech sector”. The award was given by European Microfinance Network (EMN), a not-for-profit organisation which promotes microfinance as a tool to fight social and financial exclusion in Europe through self-employment and the creation of microenterprises.

The study carried out by Federico Bartolomucci, PhD candidate, Veronica Chiodo, professor of Social Entrepreneurship, and Andrea Petrolati, Junior Project Manager at Fintech District, investigates the FinTech world, aiming to understand if and how technological innovation generates impact in the financial sector and which is the role played by technology in the value creation process. Results show that FinTechs, operating in underserved markets and combining technological innovation with the intentionality to generate positive social impact, can generate social value both in developed and emerging economies. Results challenge traditional financial players, institutions and social economy actors to re-imagine their relation with them.

 

BlackRock Hackathon: a green experience!

Posted on | by Beatrice Grillo | Leave a Comment on BlackRock Hackathon: a green experience!

Milano Digital Week (MDW) is a social initiative hosted every year by the City Council of Milan to inform the public about challenges and issues in the digital environment. Among keynotes, roundtables and workshops, the organizational committee launches initiatives aimed at engaging companies and citizens in shaping the future of digital. The BlackRock Hackathon is an example of such public involvement.

At the beginning of 2020, Larry Fink, BlackRock’s CEO, announced that environmental sustainability would be at the core of the company’s investment strategy. This was a bold decision made by a global leader in the industry. Following the news, the company decided to launch a challenge aligned with UN SDG (United Nations Sustainable Development Goal) #13: Climate action. The goal of BlackRock’s Hackathon was to create a tool, leveraging big data and analytics, to support investment professionals in taking environmentally informed decisions for their clients.

Hackathons are generally demanding, as participants are asked to develop a thorough, innovative solution in an incredibly short amount of time. Personally, I found this one even more challenging for two reasons.
I signed up to the event as an individual. I was reluctant, at first. Building something with people you have never met before in just 36 hours is not an easy task: you need to create a common ground of communication style and understand how to push your ideas, among other things. Then I remembered something I had learnt some years ago: if you wish to grow and achieve great things, you need to exit your comfort zone ̶ so that is what I did. Luckily, I got along quite well from the start with Mattia and Stefano, my teammates, and, since the team is the key, everything was downhill from then on. And, despite the struggles and the little sleep, we managed to have fun and achieve our goal: winning the hackathon.

Furthermore, the contest addressed a quite complex issue. Despite improved willingness from companies to disclose their environmental impact, the greatest obstacle remains data availability. Whichever solution you want to design, you need to take this into account. Another crucial element was the type of product to present. How are users going to benefit? Which channels to use?

Throughout the competition, teams were supported by BlackRock professionals: in our case, the mentoring was extremely useful. Mentors helped us reason better with regard to the choices we were making by questioning them constantly. In the end, when we prepared the pitch for the jury, Mattia, Stefano and I had motivated our choices so many times that we were confident about the idea, and it only took us a few minutes to find the right words to describe it.

After an initial, long brainstorming session, where ideas seemed to pop up from everywhere, we decided to focus our attention on something that could easily be implemented by an incumbent and whose usage could possibly be sold: an algorithm optimizing the environmental performance of investment portfolios. The name? (re)Balance!

Our starting point was the Paris agreement and its stated goal to contain any increase in global temperatures within 2°C by 2030. Upon that, we built a mechanism that allocates money by picking the most environmentally virtuous emitters and securities from among a predefined set of categories (best-in-class approach). Moreover, as a team, we wanted something visual that could communicate to investors how much they are contributing to the goal: something socially valuable; a thermometer, showing how much investors’ portfolios are helping limit global warming.

I am a student of the International Master in Fintech. One could say the competition was basically my bread and butter, as it addressed innovation in the financial industry. Looking at the specificity of the challenge, especially, one could equally add that mastering financial and technological concepts was pivotal to performing well. This is not completely true. First, because the environmental component was relevant. Second, because innovation does not result just from knowing things. You need to analyse, understand and take decisions in an unexplored environment. In other words, you need to exercise critical thinking ̶ and I believe that’s where the Master was a game-changer for me: it taught me to think about what I know and use it in unconventional ways.

 

About the author
 Lorenzo D’Auria 
I am 24 and grew up in Cagliari, Italy. I am a student of the International Master in Fintech at MIP and I hold a BSc in Economics and Management from the University of Trento. My professional interests revolve around the investment management industry and the impact new technologies have on it.

The frontiers of Fintech

Posted on | by albe@mip.polimi.it | Leave a Comment on The frontiers of Fintech

You can’t do without Fintech. The figures make it clear: in 2018, M&A (merger and acquisition) transactions tied to this sector at a global level generated a value of nine billion dollars, up 25% on the year earlier.  Affirming this is an analysis carried out by the Mind the Bridge startup school. In other words, Fintech startups attract an increasing amount of capital and investments. And the trend is growing, because a rising number of users choose to manage their finances online.

Whether its mobile payments, InsurTech or Robo Advisors, financial transactions are increasingly managed online, bypassing the traditional intermediation, until recently indispensable, of banks and insurance companies. Confirming this is Professor Emilio Barucci, director of Politecnico di Milano’s International Master in FinTech, Finance and Digital Innovation. «Disintermediation is a key factor. It allows us to carry out numerous operations much more quickly with the tools made available via new technologies. We no longer go to the bank once a month like we used to».

Banks themselves aren’t standing by and watching: «Right now they are moving in two directions. On one hand they’re trying to appropriate the ways of operating typical of Fintech companies, increasingly developing home banking and fast payment channels. On the other they’re trying to cope with the growth of non-traditional channels, that are eroding a large part of their market.  The startups that launched Robo Advisors, for example, provide the user with personalised financial advice, cutting out banks, fund managers and financial advisers», explains Professor Barucci.

The convenience and opportunities offered by Fintech are particularly attractive, even in a market a little bit less receptive to digital transactions like the Italian one. The issue of cybersecurity remains crucial: «The risks for those who use digital tools today are not bigger than those we already faced years ago, like the classic “theft” of credit card data – stresses Professor Barucci –. But it’s also true that the issue of security is perhaps the one on which the actors involved concentrate most and invest more. A single crack is enough to destroy the credibility of a service, and as a result sink the business».

The advantages of FinTech aren’t only for private users, but also for companies. According to Professor Barucci, «they will materialise in important cost reductions. Furthermore, there will be the possibility to interact with more subjects and the non-banking channel will grow». Some technologies, to the contrary, will remain confined to a more restricted area of use, far from the general public. That’s the case, for example, of Blockchain: «Personally I’m not convinced that Bitcoin is the currency of the future – says Barucci –. But it must be recognized that cryptocurrencies based on blockchain have led to extensive studies on this technology, generating a great legacy in terms of knowledge: it won’t be the solution for all problems, but in some areas it will represent an interesting solution». Something similar can be said about Artificial Intelligence: «Machines won’t substitute man, let alone in the financial world. But thanks to AI and to big data we’ll have the possibility to better understand the dynamics of some financial phenomena».

In short, cutting-edge technologies can’t do without the mastery of underlying digital phenomena. The International Master in Fintech, Finance and Digital Innovation of Politecnico di Milano’s School of Management has the objective of training professionals with these skills: «The process of change triggered by Fintech is irreversible – concludes Barucci –. Our master’s provides suitable skills, focusing on a complete education: no other university offers the same combination of method, technology and business».

 

 

 

 

 

Master Financial Technology with an MSc Fintech Degree

Posted on | by albe@mip.polimi.it | Leave a Comment on Master Financial Technology with an MSc Fintech Degree

Business schools are racing to offer masters degree programs in financial technology (fintech), as employer demand skyrockets for professionals who can use tools like artificial intelligence to boost financial institutions’ efficiency, generate new products or services for them, and help the big firms avoid being disrupted by nimbler startups.

And despite knowing that it is risky to offer a course on volatile and controversial markets such as cryptocurrencies (for example), as they could disappear as quickly as they emerged, schools are enhancing their brands with the fintech offerings, as students and employers demand them.

“I think a course in fintech was a must,” says Emilio Barucci, director of the International Master in Fintech, Finance and Digital Innovation at MIP Politecnico di Milano in Italy, in order to maintain MIP’s status as a leading technology university.

[…]

An increased demand for fintech skills

Business schools say the catalyst for the introduction of fintech courses has been high and growing demand among finance employers for trained professionals, who can use digital technologies, such as data science techniques.

[…]

Across the world, financial services firms are struggling to attract talent with a mixture of business smarts and technical acumen. In a recent employer survey by Hays Financial Markets, a recruitment firm, 61 percent said they faced moderate to extreme skills shortages, with technology among the most sought-after skills.

[…]

The demand is global. According to a 2018 report by the Monetary Authority of Singapore (MAS), 7,800 jobs were added to the fintech and financial services sectors in 2016-2017 in the city-state, with fintech alone contributing close to 2,000 net jobs, far exceeding a target set by the MAS.

[…]

However, financial institutions’ automation of some activities, has raised concerns that jobs could disappear as a result. A Citigroup report forecasted that fintech could cost almost 2m bank employees their jobs over the next decade.

So far, displacement has mostly affected staff in banks’ brick-and-mortar retail branches, as banks do more online and cut branches, and staff in “back office” functions, such as those working in settlements, who make sure that payments are processed.

Technology could free up “front office” workers, such as investment bankers, to do more interesting jobs. For example, several investment banks use AI to help determine the best way to execute big trades by reading market conditions. The AI comes up with the trading optimization strategy, but it’s validated by humans. In one case, the method achieved annualized returns that outperformed a benchmark index.

[…]

How MSc Fintech courses are keeping pace with the industry’s rapid change

But what exactly should be taught in fintech masters programs and who should teach it? With the field evolving so quickly, how are academics keeping pace with market developments?

[..]

MIP uses case studies in its fintech masters program that were developed by companies such as Aviva, Deloitte and IBM. “The companies help us in updating the course according to the evolution of the industry,” says Barucci.