An old piece of business advice for startups is to “get out of the office and visit customers.” “Great,” you say, “the Fintech market is over $18b (see our previous post)! Where do I find my prospects?” If you have a new service for savings and loans or their customers, the data may point to Springfield MA. In this post, we’ll show you how we break down the “big number” to look at segments and customer location. Prospect targeting helps allocate advertising budgets, fine tune customer personas and plan your sales territories.
We’ll come back to Springfield. But first, let’s slice that $18.8b into some smaller pieces. Nearly 84% of this market is in the banking sector; the other 16% is in the securities & investments sector. In absolute terms, the New York metro area (unsurprisingly) leads the list at $1,090m. Other key financial centers that make the top 15 are Boston ($191m), Chicago ($183m), Los Angeles ($172m) and San Francisco ($171m).
Normalizing market data
Focusing on total market size misses the hot spots or concentrations of “spend potential” for the segment you’re after. And while the best targets may not even reside in the list of large markets, you can bet a lot of your competitors haven’t figured that out.
A first step in prospect targeting is to “normalize” your data. The New York market is #1 because of the substantial number of financial companies based in the metro area. But on a per employee basis, there are other metro areas that rank higher than New York. To delve into a per employee analysis, we again use ZIP Pointe Market Sizer. Market Sizer is our Tableau-based market sizing tool using ZIP Code-level Census data on over 7 million private sector business locations.
Fintech market size per employee
We limited our analysis to the 80% of metro areas with 250 or more business locations in the banking and securities & investments sectors. This helps reduce the “noise” in our analysis and minimizes the likelihood that a metro’s estimate is unduly swayed by a few extreme business locations. In 2015, the top 15 metro areas in terms of Fintech market size per employee are shown in the figure below.
Aside from the fact that Chicago and Los Angeles didn’t make the list, look at the concentration in the Northeast region. 10 of the top 15 are in the Washington DC – Boston corridor. Washington DC is the largest Fintech market in terms of revenue per employee at $12,863, followed by Springfield MA ($10,848) and Worcester MA-CT ($9,094). Rounding out the top 5 are Boston MA-NH ($8,381) and Bridgeport CT ($7,851). New York is 6th with $7,844 per employee.
Washington, Boston and New York are not surprising. But what about Springfield Massachusetts?
Savings and Loans in Springfield MA
According to 2015 US Census data, there were 4,254 employees on the payrolls of banking and securities & investments companies in the Springfield MA metro area. Roughly 40% of these employees worked at 143 savings institution locations. Savings institutions (“savings and loans”) are apparently quite popular in New England, and quite lucrative. 85% of the total Fintech market in Springfield MA is attributable to savings institutions.
Savings institutions also account for most of the Fintech addressable market in neighboring Worcester metro (71%); but only 33% of Boston’s addressable market (although still is the top sub-sector). In the neighboring Hartford CT metro (ranked 11th), savings institutions account for 65% of the Fintech addressable market; and in the Portland ME metro (ranked 13th), 67%. So, indeed, savings institutions are popular in New England.
Although caution is always warranted when drilling down too deeply into market segments (due to low counts), this heat map reveals several interesting characteristics of the Springfield metro market:
(The heat map shows per employee Fintech market size by employee size of location and sub-sector. A darker color and larger size indicate a larger market size per employee).
- Savings Institutions have the largest Fintech market size per employee across all location sizes in which savings institutions operate;
- Fintech market size per employee for savings institutions is over $20,000, while the average for Springfield is $10,848;
- While there are many other financial institutions in the smaller groups, savings institutions dominate the largest location sizes.
Making use of this analysis
How is this information useful? Suppose your company has a solution for savings institutions. The Springfield MA metro has 143 prospects. It is very accessible to the rest of the major financial markets in the Northeast. And it most likely is ignored by your competitors located in those markets. These prospects are likely very accessible and would be a great beachhead, providing enough revenue and referenceable customers to launch your business. Similarly, if your mission is to disrupt the savings and loan industry, then Springfield has a concentration of customers you can target.
As always, data have different stories to tell. Revenue per employee can also be used as a metric for productivity within the segment. If you’re selling technology to improve employee productivity, your best market would be at the low end of the range. In this case, savings and loans in Springfield would not be the best sub-sector to target.
We’ll continue taking apart the data on Fintech and offering a few observations along the way. If there’s an angle you’d like us to explore in a future post, let us know.
This post was written with Tom Marsh, CTO at Boulder Equity Analytics (BEA).