Achieving the vision of helping more and more people experience financial well-being isn’t an easy feat, but one company is advancing on its conviction of building upon this purpose by extending its investment, advisory, and risk management biddings.
BlackRock, one of the world’s largest asset managers with ~$8.0T in assets under management as of October 2022, has been a big believer in leveraging FinTech propositions to empower more inclusive economies. They have forged a variety of relationships with FinTechs across sectors and geographies over the last decade. A majority of these FinTech relationships are primarily around funding but also extend to partnerships and acquisitions.
2011- 2019: BlackRock, The Early Bird
According to the ,Global FinTech Survey 2016, over one-third of the asset managers were receptive to investment opportunities in the FinTech sector, while a staggering 45% needed to prioritise the window of FinTech gold. BlackRock was one of the early movers in taking FinTech bets when it offered a debt facility of $30M to a lending company Oportun in 2011. It extended its focus on FinTech lending by investing in LendingClub and Funding Circle in 2014 and 2015, respectively, offering retail investors exposure to peer-to-peer loans.
As the technology landscape evolved and clients looked to innovative wealth management solutions, WealthTech emerged as a key sector for BlackRock, where it invested in a variety of firms across sectors – from robo-advisors and micro-investment to alternative investment platforms – including names of Acorns, iCapital Network, and eFront. Soon after, in 2018, it launched BlackRock FinTech Fund as an investment vehicle to allow investors to get access to diversified FinTech portfolios. 2019 was a breakout year for the global fund manager, with BlackRock participating in massive funding rounds of cross-border payment firm Wise ($292M) and Buy Now, Pay Later (BNPL) firm Klarna ($460M) to support the growth of the respective payment business models.
2020-2021: Consolidating the FinTech Bets
While the world reeled in a raging pandemic in 2019-20, there grew a clear appetite for FinTech infrastructure firms providing technology to power modern financial products and digital experiences. BlackRock invested in Open Banking infrastructure provider Trustly and also participated in a $200M funding round of Trumid – an electronic trading platform for fixed securities – in order to address this newfound industry interest.
It further collaborated with J.P. Morgan and Saphyre to digitise the process of opening new accounts with custodians and broker-dealers.
2021-22: Carrying on the FinTech Momentum
2021 – the year of recovery from the global pandemic – further bought a boom of initiatives. By joining hands with Cassini Systems, BlackRock strived to integrate its margin analytics system in its in-house glory – Aladdin. While previous investments established control, BlackRock further extended its partnership with iCapital to launch a series of private market funds, while simultaneously collaborating with Wise to support its foray into wealth management via its Wise Assets offering for retail and business banking customers.
At the end of the second quarter in 2021, BlackRock participated in a Series E funding round of digital investment platform Scalable Capital for $180M. It extended its FinTech infrastructure bets by participating as the lead investor in the $187M funding rounds of 10x Banking – a modern core banking tech provider. BlackRock took significant exposure in payments technology firms such as Rapyd and Pine Labs, offering technology to small businesses for digital payment acceptance. Not only that, but BlackRock also supported the SPAC merger route of public listing of the US neobank MoneyLion.
2022 saw BlackRock diversifying its FinTech bets even further when it invested in Bolt – an e-commerce payments technology firm – and offered a $300M term loan facility to Root Insurance, which is a modern insurance provider. In 2021, BlackRock had only warmed up to the digital asset platforms’ propositions, participating in late-stage funding rounds of crypto exchange firm FTX and crypto platform Anchorage Digital. The following year, it partook in the $400M funding round of USDC stablecoin issuer Circle, which also started to slowly move its reserves for USDC stablecoin into a dedicated fund set up by BlackRock. But its massive move to allow crypto investments to institutional clients came when it teamed up with Coinbase in 2022, a step taken to help clients easily manage and trade their Bitcoin.
BlackRock’s FinTech Fortunes
BlackRock, being a global fiduciary to investors, has built a diversified FinTech portfolio which spans payments, consumer and business lending, WealthTech, digital assets, neobanking, insurance, and FinTech infrastructure segments. However, given that the FinTech industry as a whole is witnessing a massive valuation correction period, a majority of the funding bets are in the red. The BlackRock FinTech fund has equally been bearing the brunt of the same, witnessing YTD returns of -22.2% till October 2022. The digital assets platform’s investments are expected to experience some heavy weather ahead, with the crisis engulfing FTX unfolding thick and fast.
In hindsight, BlackRock’s FinTech and digital investments may not look like intelligent bets in the short term, but it offers one of the largest asset management company exposure and access to emerging technology and modern business models. And when the financial industry is undergoing a massive digital transformation at all levels, it may prove useful for BlackRock to leverage its FinTech exposure and digital platforms to deal with economic uncertainty, regulatory mandates, and customer expectations. As described best in the words of CEO Larry Fink: “Clients not only turn to BlackRock to manage their assets, but also to help them understand the larger term impact of global events.”