A 23% compounded average annual rate of return.  Not too bad.

During his career Shelby advised Thomas Dewey on economic matters when he ran for president in 1940 and 1944 and served as Governor Dewey’s First Deputy Superintendent of Insurance from 1944 to 1947 in New York. Later, he served as US ambassador to Switzerland under Presidents Nixon and Ford (1969 – 1975).

A philanthropist, he was head of the Shelby Cullom Davis foundation which disperses funds to higher education and to research on public policy and economics. Princeton, his alma mater, was one of the beneficiaries of his grants. He also served as chairman of the Heritage Foundation.

Shelby got around.

But what the heck does this have to do with Fintech?

In a previous post we found that the Tucson, AZ metro area made our top 15 list of top addressable Fintech Securities & Investments markets on a per employee basis in 2015 (ranked 14^th).

Can a contributing reason for this can be tied directly back to Shelby Cullom Davis?

Securities & investments sector in Tucson, AZ

Tucson, AZ probably does not first come to mind when thinking about hot spots of financial activity. So, what is going on in Tucson?

As we have done in previous posts, let’s start with a high-level view of Tucson’s Securities & Investments sector. As shown below, 62% of the 2015 addressable Fintech market is due to portfolio management. Another 27% is due to securities brokerage. This is generally consistent with the West regional average of 28% for securities brokerage we saw in an earlier post. But it reflects a much higher concentration of potential Fintech spend in the portfolio management sub-sector (62 vs 48%).

Again, our analysis uses ZIP Pointe Market Sizer.  Market Sizer is our Tableau-based market sizing tool based on ZIP Code-level Census data on over 7 million private sector business locations.

In terms of business location size by sub-sector, nearly 80% of the locations are small (1 – 4 payroll employees). This is a recurring theme. The sub-sector is dominated by small locations though these are not necessarily all stand-alone companies (i.e. they could be formal branch locations).

There are only 29 locations with 10 or more payroll employees. A bit over 40% of the locations are involved with securities brokerage, another 26% are portfolio management and another 18% are investment advice (see below).

With respect to “hot spots” of potential Fintech spend per employee, it is clearly the portfolio management sub-sector that stands out, with potential spend ranging from $5,337 to $7,682 per payroll employee. The top hot spot consists of 3 locations with 50 to 99 employees.

Note: The US Census source used by Market Sizer tracks only payroll employees. Independent contractors are not reflected in these numbers. Hence, the actual employment level can be higher, possibly much higher, in sectors that make extensive use of contract labor.

ZIP Code level view

As we have done in prior posts, another way to drill into the addressable Fintech market in Tucson is by ZIP code. The following map shows the ZIP codes in the metro area color coded for addressable market size per employee. At the ZIP Code level, addressable Fintech market size ranges from $1k to $6k per payroll employee.

But there is a distinct hot spot in ZIP Code 85706 (circled in red) at $6k per employee. According to Wealthminder.com, the largest Tucson financial advisory firm (in terms of assets under management) is located in this ZIP Code:  Davis Selected Advisors.

Other top firms in the Tucson metro area (indicated by red arrows) are Tci Wealth Advisors in ZIP Code 85718; Sonora Investment Management in Zip Code 85719; Strategic Equity Management in Zip Code 85715; and Sterling Investment Management in Zip Code 85718.

Which ZIP codes account for the bulk of potential Fintech spend?

We have already discussed two of the top 3: 85706 at 16% and 85718 at 20%. But these are surpassed by ZIP Code 85712 (indicated by the green arrow) which accounts for 27%. These three ZIP Codes together account for 63% of Tucson’s potential Fintech spend in the Securities & Investments sub-sector.

Another way to drill into the addressable Fintech market is on a per business location basis.  Dividing potential spend by the number of locations is another way to normalize the data. This map (shown below) looks quite a bit different and one ZIP Code stands out above all the rest: 85706. Although the ZIP code overall accounts for 16% of total potential Fintech spend, on a per location basis, it ranks at the top with $230k in potential spend per site.

ZIP Code 85706

Turns out at there are only 3 locations in ZIP Code 85706.  At least one of these (the larger one) is associated with, yep, Davis Selected Advisors. And it may be that the other sites are also associated with Davis as we could not find any other Securities & Investments firms (with at least 10 employees) in this ZIP Code (If anyone knows, please let us know!)

Davis Selected Advisors

So, the Davis name is a major player in the Tucson metro Securities & Investments sector. Any relation to Shelby Cullom Davis perhaps?

Davis Selected Advisers was started in 1969 in New York by Shelby Davis…not Shelby Cullom Davis but his son Shelby Moore Cullom Davis. Following his father’s footsteps, Shelby M.C. Davis graduated from Princeton and rose through the ranks of the New York financial industry – specifically at the Bank of New York.

In the late 1970s the non-portfolio operations of Davis Selected were moved to Sante Fe, N.M. In 1997, a service center was opened in Tucson and personnel were hired locally and moved from Santa Fe. By 2000, Tucson had became Davis Selected’s global headquarters, specifically in ZIP Code 85706 where the company operates out of its own commercial property.

Today, Davis Selected Advisers is led by Shelby’s son, Chris Shelby, grandson of Shelby Cullom Davis.  “Davis Selected controls the nine-fund Davis group, the Selected group of funds, which is a no-load, four-fund group, private accounts of no less than $5 million, and other managed money programs.” (Inside Tucson Business).  Currently, Davis Selected has about $30b in assets under management.

So, there you have it…from Switzerland to the Sonoran Desert! 

Ok, maybe New York to Arizona…

The post Top 15 Metros – From Switzerland to the Sonoran Desert – Fintech Securities & Investments appeared first on KDD Analytics.

And so will tax incentives.

The Raleigh-Durham-Chapel Hill combined statistical area (CSA), with over 2 million people, is the second largest metro area in North Carolina following Charlotte to the south. It is home to 3 major universities: Duke, University of North Carolina (UNC) and North Carolina State. Duke and UNC form two of the vertices of the “Research Triangle,” an area known for a high concentration of corporate operations and research companies and startups, especially in life sciences. The third vertex is formed by North Carolina State University in Raleigh.

The Raleigh metro area was number two on the 2015 Forbes list of the best place for businesses and careers. Durham ranked number 20 while Charlotte was 14th. Companies located in the Raleigh-Durham area include heavy hitters like IBM, GlaxoSmithKline, Cisco, SAS Institute and Lenovo.

As one of the largest research parks in the world, Research Triangle Park (RTP), sits mostly within the Durham-Chapel Hill metro area. RTP employs nearly 50,000 “high-tech” workers and is home to over 250 companies including Credit Suisse, Dell, EMC and Fidelity Investments. None of these are tobacco companies.

North Carolina has been very aggressive in wooing companies to locate in the state.  Lucrative incentives have been offered including outright grants, rebates of employee withholding taxes and sales tax refunds. Raleigh-Durham-Chapel Hill has directly benefited from these incentive programs as has the Charlotte-Concord-Gastonia metro area.

So, what does this have to do with Fintech?

Two million people and a healthy economy means there’s a lot of money that needs good advice. And a healthy program incentivizing companies to locate in the state doesn’t hurt. This combination has pushed the Durham-Chapel Hill Metro to #6 in our ranking of the Top 15 List of Fintech Securities & Investments Markets on a per employee basis in 2015.

Securities & Investments sector in Durham-Chapel Hill

What does the Securities & Investments sector look like in Durham-Chapel Hill, NC? To start, as shown below, over 50% of the 2015 addressable Fintech market is due to securities brokerage. Another 27% is due to portfolio management. This is generally consistent with the South Atlantic regional average of 45% and 28% that we saw in an earlier post.

Again, our analysis uses ZIP Pointe Market Sizer. Market Sizer is our Tableau-based market sizing tool based on ZIP Code-level Census data on over 7 million private sector business locations.

In terms of business location size by sub-sector, over 70% of the locations are small (1 to 4 payroll employees). There are only 7 locations with 100 or more employees. A bit over 40% of these locations are involved with securities brokerage, another 28% are portfolio management and 19% are investment advice (see below). With respect to “hot spots” of potential Fintech spend per employee, several business locations classified as Miscellaneous Intermediation (e.g. venture capital) have the highest Fintech spend per employee of around $12,000. In the chart below we have circled the largest locations.

Another way to drill into this market is by ZIP code. The following map shows the ZIP codes in the metro area color coded for addressable market size per employee. At the ZIP Code level, addressable Fintech market size ranges from $1k to $6k per employee.

According to Wealthminder.com, the largest financial advisory firms (in terms of assets under management) are located in ZIP Codes 22701 (Amundi Smith Breeden and Verity Asset Management), 27713 (Piedmont Investment Advisors), 27703 (Gordon Asset Management) and 27707 (NCM Capital Management Group).

 

ZIP Code 27709

So, on a per business location basis as well as a total basis, there is a very heavy concentration of potential Fintech spend in ZIP Code 27709. Focusing on the distribution of sites in this ZIP Code we see that the largest locations in the metro area are also in this ZIP Code (see the chart above with the red circle). Since this ZIP Code partially covers Research Triangle Park (RTP), these large locations are likely Credit Suisse and Fidelity Investments (see the RTP company directory).

Note: The US Census source used by Market Sizer tracks only payroll employees. Independent contractors are not reflected in these numbers. Hence, the actual employment level can be higher, possibly much higher, in sectors that make extensive use of contract labor.

Fidelity Investments and JIDGs

Fidelity is one of the larger employers in the Durham-Chapel Hill metro area. Fidelity first began to operate in North Carolina in 2002 “when it acquired an employee benefits business. Four years later, the firm designated North Carolina as a regional technology center, added a data center and a customer contact center and based Fidelity Charitable in the Triangle.” wral.com 

Fidelity further expanded its presence starting in 2006 and in 2015 announced plans to add an additional 600 jobs. Projections are for 4,200 jobs by 2018, mostly at the Research Triangle Park campus.

Fidelity, as well as other business, was likely incentivized to locate and expand in North Carolina by Job Investment Development Grants or JIDGs. These state grants are a

“performance-based, discretionary incentive program that provides cash grants directly to new and expanding companies to help offset the cost of locating or expanding a facility in the state. The amount of the grant is based on a percentage of the personal income tax withholdings associated with the new jobs.” Economic Development Partnership of North Carolina.

Companies can use JIDG funds for any purpose.

As these grants are performance-based, companies receive the full incentive only after meeting certain benchmarks.  These requirements can be in the form of a certain number of jobs created and retained, generation of a targeted $ amount of gross state product and/or the generation of a certain positive net revenue amount over the life of the grant.

Recently, North Carolina has “sweetened the pot” of these incentives, with an eye towards “transformative projects”, those that invest at least $4 billion and create 5,000+ jobs (ahem…listening Amazon?).

All states have some type of incentive program to entice businesses to locate and expand in their states. North Carolina appears to be one of the more aggressive ones. And this definitely was a contributing factor to why the Durham-Chapel Hill, NC metro area is #6 on our list.  #2 Omaha powered its way there more organically it seems.

All regions are different.  And Fintech companies looking to successfully disrupt these segments will need to be able to take these differences into account.

The post Top 15 Metros – Fidelity Durham – Fintech Securities & Investments appeared first on KDD Analytics.

But for those of us old enough to remember, we knew it thanks to Mutual of Omaha’s Wild Kingdom. The show aired on NBC TV just before Walt Disney’s Wonderful World of Color on Sunday nights. Hosted and narrated by zoologist Marlin Perkins, Wild Kingdom featured Jim Fowler showcasing wild animals.

Or maybe you know it for the corn? Nebraska and Iowa have always been synonymous with corn.

But now, Omaha will also be famous for making the Boulder Equity Analytics’ Top 15 List of the Largest Securities & Investments Fintech Markets, ranked by per employee revenue. In fact, as we discussed in an earlier post, it ranked #2 right after the New York metro area.

So, is Omaha’s ranking due to Berkshire Hathaway? Mutual of Omaha? Or maybe it’s companies like TD Ameritrade, Wealthplan, CWM or Securities America? Let’s dig into the data.

Securities & Investments sector in Omaha

What does the Securities & Investments sector look like in the Omaha-Council Bluffs metro area? To start, as shown below, 70% of the 2015 addressable Fintech market is securities brokerage. Another 13% is portfolio management. This is much more skewed towards securities brokerage than the Midwest region overall (36%). So, Omaha is a relative hotbed of securities brokerage business.

Again, our analysis uses ZIP Pointe Market Sizer. Market Sizer is our Tableau-based market sizing tool based on ZIP Code-level Census data on over 7 million private sector business locations.

In terms of business location size by sub-sector, nearly 76% of the locations are small (1 – 4 payroll employees). There are only 10 locations with 100 or more payroll employees. A bit under 40% of the locations are involved with securities brokerage, another 22% are in portfolio management and 24% are in investment advice (see below).

With respect to “hot spots” of potential Fintech spend per employee, business sites with over 20 employees in securities brokerage are at the top. Thirty (30) sites have a potential Fintech spend of at least $6,000 per employee.

 

Another way to drill into the addressable Fintech market in Omaha is by ZIP Code. The following map shows the ZIP Codes in the metro area color coded for addressable market size per employee. At the ZIP Code level, addressable Fintech market size ranges from $1k to $8k per employee.

At the upper end, ZIP Code 68101 shows a per employee value of $8k. There is only 1 site in this ZIP Code and it only has 1-4 employees, in securities brokerage. This is probably a branch office associated with a much larger company. The other 2 top ZIP Codes are 68128 and 68154 with over $6k in potential Fintech spend per employee. We will focus in on them in a bit.

 

However, if we measure addressable market size on a per business location basis (another way to normalize the data), the map looks very different but yields similar conclusions. A shown below, the top ZIP Code in terms of potential Fintech spend per site is 68128 with over $700k.  In second place is ZIP Code 68154 with a total of $126k per site. 

 

But these two ZIP codes are quite different.  ZIP Code 68128 has only 3 sites while ZIP Code 68154 has 81. And in terms of total potential Fintech spend, the ranking is reversed. ZIP Code 68154 accounts for 54% of the addressable Fintech market in Omaha while ZIP Code 68128 accounts for 12%. In third place is ZIP Code 68130 with another 9% in total potential Fintech spend.

A tale of two ZIPS

ZIP Code 68128 has the largest potential Fintech spend per business site at over $700k. But this is due to one large location as shown below (values in the chart are potential Fintech spend per employee). 

Turns out this one large site is the headquarters of Securities America.

We caution that our estimates of potential Fintech spend at a company level are directional. Our Fintech estimates are derived from market aggregates and not from specific company revenue accounts. 

Securities America, founded in 1984, helps financial advisers create more profitable practices. Through a series of acquisitions, the most recent by Ladenburg Thalmann Financial Services, it also offers more traditional services such as equity research, brokerage services and investment banking. On their website, the company says they currently have 575 employees.

We should note that the Census data only track payroll employees. Contractors are not included in these totals. So, the total employee count at any given location could be higher than what is shown here, especially sub-sectors that rely heavily on contracted labor.

ZIP Code 68154 has a much more varied representation of business sites, both in terms of size and in terms of sub-sector, as well as a larger number of sites (81). Securities brokerage accounts for 38% of the business sites with all the large sites (100+ employees) being in this sector. Portfolio management accounts for another 27% of sites and investment advice another 24%.

Wealthplan Partners, who provides financial planning and asset management services, is based in ZIP Code 68154 as is Carson Wealth CWM LLC, another asset management company. Although the representation is more varied, there does appears to be a dominant company in this Zip Code: TD Ameritrade.

TD Ameritrade consolidated employees from around the Omaha metro area into this ZIP Code in 2013. About 2/3 were relocated to the company’s new headquarters building and the remainder in other buildings nearby. At the time, the company says that 2,000 employees were relocated to the ZIP Code.

Amerivest Investment Management, owned by TD Ameritrade and the largest financial advisory firm in Omaha according to Wealthminder.com, is co-located with TD Ameritrade in its ZIP Code 68154 headquarters building.

So what about Berkshire Hathaway and Mutual of Omaha?

Berkshire Hathaway’s headquarters is in ZIP Code 68131 and is not classified as being in the Securities & Investments sector; it is a holding company. Mutual of Omaha is classified as an insurance carrier so is also outside the Securities & Investments sector.

So, the Fintech Securities & Investments market in Omaha is powered by companies in the securities brokerage sub-sector, like TD Ameritrade and Securities America.

But in case you are wondering whatever became of Mutual of Omaha’s Wild Kingdom…it is back on the web with Stephanie Arne hosting.

The post Top 15 Metros – Wild in Omaha – Fintech Securities & Investments appeared first on KDD Analytics.

Previously, we estimated the potential Fintech spend in the Securities & Investments sector to be a little over 16% of the total Fintech market of $18.8b. As of 2015, this was $3.1b.

In our continuing series on the addressable Fintech market we dive deeper into the Securities & Investments sector. Again, our analysis uses ZIP Pointe Market Sizer.  Market Sizer is our Tableau-based market sizing tool. It is based on ZIP Code-level Census data on over 7 million private sector business locations.

Portfolio Management tops the sector

Within the Securities & Investments sector, portfolio management accounts for the largest share of the addressable Fintech market at 38%. Securities brokerage (27%) and investment banking (16%) round out the top 3.

This breakout, though, varies across regions. As shown below, portfolio management companies account for the largest regional share of the market in the Northeast (42%) and the West (48%). In all other regions, securities brokerage accounts for the largest share. Across all regions, portfolio management and securities management together account for 64% to 78% of total potential Fintech spend, respectively.

As shown below, in terms of business location size by sub-sector, 77% of the locations are small (1 – 4 payroll employees). And nearly 94% have fewer than 20 payroll employees. The Census data also indicate that there are nearly 1,200 sites with 100+ employees, representing a bit over 1% of all business sites in the Securities & Investments sector.

We should note that the Census data only track payroll employees. Contractors are not included in these totals. So, the total employee count at any given location could be higher than what is shown here, especially sub-sectors that rely heavily on contracted labor.

In terms of potential Fintech spend per employee, the chart above shows a range of $598 (commodity contracts, 500 to 999 employees) to $7,041 (securities exchanges, 50 to 99 employees). The “hot spots” of potential Fintech spend are in the investment banking sub-sector among sites with 100+ employees, and the securities exchanges sub-sector among sites with 10+ employees (though there are only 36 sites in this sub-sector).

No Surprise, NYC Metro tops area ranking

In terms of total potential Fintech spend, the usual suspects are again at the top of the addressable market list in the Securities & Investments sector. The New York metro area leads the list at $1,090m. Boston $191m, Chicago $183m, Los Angeles $172m, and San Francisco $171m round out the top 5.

But in terms of per employee, San Francisco jumps from #5 to top the list.

In 2015, the top 15 metro areas in terms of addressable Fintech market per employee in the Securities & Investments sector are shown below:

We limited our analysis to metro areas with 150 or more business locations in the Securities & Investments sector. This helps reduce the “noise” in our analysis and minimizes (but does not eliminate) the likelihood that a metro’s normalized estimate is unduly swayed by a few extreme business locations.

Omaha is #2?  There’s a surprise

The San Francisco metro area heads our list of the largest addressable Fintech markets on a per employee basis in the Securities & Investments sector at $5,313. Rounding out the top 5 are Omaha-Council Bluffs, NE-IA ($5,298), Bridgeport-Stamford-Norwalk, CT ($5,122), New York ($5,107) and Worcester, MA ($4,685). Other notables in the top 15 are Durham-Chapel Hill, NC ($4,94), Charlotte-Concord-Gastonia, NC ($3,381), Austin, TX ($3,256) and Tucson, AZ ($3,130).

If you already knew Warren Buffett’s hometown of Omaha, Nebraska was going to be the #2 market in the US for Securities & Investments, give yourself a pat on the back. We’ll break that down for you in future posts, along with two other surprises on the list, Durham-Chapel Hill and Tucson.

This post was written with Tom Marsh, CTO at Boulder Equity Analytics (BEA).

The post Breaking Down the Fintech Securities & Investments Sector appeared first on KDD Analytics.

In regions where data are less complete, like Latin America, a descriptive approach offers a very cost-effective way to reveal what the size of the prospective market might be. In fact, such an approach may be the only feasible approach depending on fill rates in the database.

Once identified, this population of prospective sites or look-alikes can then be pulled from the database, matched with a contact database or passed to a call center for verification of firmagraphics, contact details and technology usage.

TUDLA’s Latin America database

As we discussed in a previous post, TUDLA maintains a database of over 1 million business sites in Latin America and the Caribbean. The data include basic firmagraphics (company name, address, URL) and expanded firmagraphics where available (employee counts, industry and revenue). Also, indicators of what technology may be used at these business site are available.

TUDLA also offers free access to the data through interactive Tableau dashboards. This allows users to explore the data at an aggregate level and get a sense of TUDLA’s coverage. It also allows users to perform their own descriptive look-alike analysis.

Descriptive look-alike analysis

As a simple example, suppose I am SAP and I want to know how many prospective customers there might be for an SAP branded ERP offering in Brazil. (Alternatively, I could be an SAP ERP competitor and I am looking for possible SAP customer sites for a competitive kill campaign). Consider the following screenshot from TUDLA’s interactive Tableau dashboard.

TUDLA’s database shows (lower left-hand corner) that there are 2,828 sites in Brazil that are known to have SAP ERP. And the charts show the characteristics of these sites (i.e. the employee, revenue and industry distributions).

Also in the left-hand corner is shown that there are 424,693 sites in Brazil that share the same characteristics (employee count, revenue size and industry) as these 2,828 sites known to have SAP ERP (i.e. these are SAP’s look-alikes). So, this is the size of the prospective market for SAP in Brazil.

Further refinement to a specific firmagraphic, say, revenue size, will more narrowly focus the prospective market. For example, suppose SAP is only interested in sites with enterprise revenue greater than $50m. In this case, the prospective market size is reduced to 19,144 sites, nearly 50% of which are in the manufacturing industry (see below).

Interactive visualization

Interactive visualization is an excellent way to get a comprehensive view of exactly what is in your database. Lack of coverage in firmagraphics, geographies and other business attributes, such as technology presence, can quickly become apparent.

Moreover, it can be used, as in the case of TUDLA, to examine your look-alike market. You can quickly and cost-effectively (don’t need to pay to have a predictive model built) see the size of your prospective market based on the characteristics of your current customers.

Are your sales territories aligned as they should be?  With just a few clicks, an interactive visualization can provide the answer.

For more information on providing an interactive visualization for your data, give us a shout.

KDD Analytics is providing analytical services to TUDLA.

The post Finding B2B “Look-Alikes” in Latin America appeared first on KDD Analytics.

TUDLA

Since 1999, TUDLA (Technology User Database Latin America) has maintained a 70,000+ phone verified panel of business locations across LATAM and the Caribbean. The data from this panel include firmagraphics, contacts with direct phone numbers and opt-in email addresses and full technology profiles with hardware, software, and telecom information. Using an in-region call center, TUDLA regularly interviews IT Decision-Makers across the region to collect, update, and validate the information in the database.

But as is often the case in B2B marketing, numbers matter.  So TUDLA has partnered with other data providers to expand its database beyond the 70,000 phone-verified panel.  Today, the full database covers over 1 million business sites across the LATAM region.  These expanded data include basic firmagraphics (company name, address, URL) and expanded firmagraphics where available (employee counts, industry and revenue).  Also, indicators of what technology may be used at these business sites are available.

Tableau dashboard access to data

TUDLA is offering free “access” to their data so users can see what’s available. This access is through interactive Tableau dashboards embedded in TUDLA’s website.  Users can view and interact with data aggregations (but are not able to download any data) to get a sense of TUDLA’s coverage.

So, check it out and let TUDLA know what you think.

KDD Analytics is providing analytical services to TUDLA.

The post B2B Marketing in Latin America with TUDLA appeared first on KDD Analytics.

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 6^th 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 11^th), savings institutions account for 65% of the Fintech addressable market; and in the Portland ME metro (ranked 13^th), 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).

The post Fintech, Savings and Loans and Springfield MA appeared first on KDD Analytics.

The disruption is well underway and big money is flowing into the space. CB Insights recently released their quarterly tracking of this segment, Trends in Fintech: Q2 2017.  VC-backed investment in global Fintech companies was $13.5b in 2016.  Up from $2.6b in 2012, a CAGR of 51%.  In the US, VC-backed investment was $5.7b in 2016.  Up an average 33% per year (CAGR) from 2012’s $1.8b.

While these are hefty investment numbers, they beg the question, how large is the addressable market for Fintech?  Public estimates of the “market size” are surprising scarce and difficult to reconcile.  One reason may be that the definition of what constitutes “fintech” has been a moving target.  With new platforms and software services evolving over time, the amount of potential revenue Fintech vendors are chasing has been changing as well.

Fintech market sizing

As a first step, we take a simple macro approach to sizing the market.  Starting with US census data on total revenue earned by two key sectors targeted by Fintech vendors – banking and securities investment – we estimate and decompose the market geographically.  We accomplish this using ZIP Pointe Market Sizer, a Tableau-based market sizing tool based on ZIP Code-level Census data on over 7 million private sector business locations in the US.

US financial services sector

The US Census (NAICS) data defines the financial services sector as consisting of 3 primary sub-sectors: Banking (522000), Securities and Investment (523000) and Insurance (524000).  Since our interest (KDD Analytics is partnering with Boulder Equity Analytics (BEA) in the development of a Fintech offering) is in the sectors primarily involved with financial reporting, analysis and investor relations, we will focus our analysis on the Banking and Securities sub-sectors. The 2015 US Census data for Banking and Securities recorded total revenue of $2.2t.  So how much of that is Fintech, where are those customers located and how fast is the market growing?

Published estimates of Fintech market

As suggested above, public estimates of the US Fintech market size are scarce and difficult to reconcile.  Working from the research we found, the current market is likely between 0.5% and 1.5% of total financial services revenue as reported by the US Census.  Below are several sources we used for our first pass at the market.

An Ernst and Young report commissioned by HM Treasury (UK) estimated the California and New York markets for Fintech were $7.1b and $8.4b in 2015.  Given that the US Census reported total revenue for NAICS 52 (all US Finance and Insurance) to be $432.5b and $568.1b in 2015, the EY estimates for Fintech represent a share of total revenue of 1.6% and 1.5%.

A 2016 Citibank report came in a bit lower with an estimate that 1% of North American banking revenue has migrated to a digital model.  Citibank projects that by 2020, this share will rise to 10%, then 17% by 2023 (see figure).

At the low end of the range, in their Annual Report, JPMorgan Chase disclosed it spent $600m on Fintech in 2016 out of a $9.5b technology spend, or 6.3%.  Extrapolating to the US banking sector, this implies a Fintech market size of $5.3b or 0.33% of 2015 banking sector revenue.

Additionally, JPMorgan’s Jamie Dimon commented on relationships with several independent Fintech companies highlighting the difficulty in separating its share of traditional banking revenue.  We believe this will become even more challenging in the future as large banks absorb “Fintech” business models and technology into their operations.  As Fintech gets more press, there will be even more marketing pressure to talk up the initiatives while it is unlikely that they will report them as separate line items on financial disclosures.

Fintech market size

Based on our initial survey of the research, we propose to use a revenue weighted average of the two sectors of .86%, 1% of revenue for Banking and .5% of revenue for Securities. We applied this percentage of .86% to the 2015 US Census Total revenue of $2.2t.

Conclusion: our baseline assumption for the Fintech share of the 2015 Banking and Securities market is $18.8b.

We invite the Fintech community to chime in on whether our assumptions make sense.  We will include any updates in future articles as we delve deeper into the Fintech market.

Top Fintech metro areas

Since BEA is a Fintech vendor, we want to know where the $18.8b in customers are located.  It is not surprising that, based solely on absolute numbers, the usual metro areas are at the top of the list:

Rank – Top Ten Metro Areas by Fintech Market Size

1.    New York-Newark-Jersey City, NY-NJ-PA
2.    Dallas-Fort Worth-Arlington, TX
3.    Los Angeles-Long Beach-Anaheim, CA

However, there is a fair amount of geographic variation as shown below:

Moreover, this variation becomes even more interesting when we drill into the data and examine Fintech markets by size of company, by revenue per employee, by growth rate, by region, by financial sector, etc.  Over the course of several articles we will be sharing our findings.

So stay tuned!

This post was written with Tom Marsh, CTO at Boulder Equity Analytics (BEA).

The post Sizing the Fintech addressable market appeared first on KDD Analytics.

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