FinTech's startups evolving called finer

The quality of the startup companies applying to the Venture Center's Financial Technology Accelerator mentoring program is improving, an executive with the program said.

The success of the program in its first two years, as well as the reputation of the participants, has contributed to the improvement, said Collins Andrews, an executive in residence with Fidelity National Information Services Inc., better known as FIS.

"It looks like we have more that are obviously of a higher caliber than we probably have had before," Andrews said.

Little Rock's Venture Center, which hosts the 12-week mentoring program each year, began seeking applications for this year's class soon after last year's program ended, said Wayne Miller, managing director of the FinTech Accelerator. Applications were accepted through Feb. 11.

"We're still digesting what we've received," Miller said.

There were about 260 applications received for the third FinTech Accelerator class. Included in the 260 were applications from 44 countries and six continents. Some of the foreign companies are wanting to expand to the U.S. market, Andrews said.

That compares with about 150 applications for the first program in 2016 and about 295 last year.

FIS has increased the initial investment it gives to the 10 finalists from $50,000 to $75,000, Miller said. And the state of Arkansas offers financial incentives to startups that decide to move offices to Little Rock.

FIS has about 20,000 clients, more than $9 billion in annual revenue and is the world's largest financial technology company. FIS has about 55,000 employees worldwide and about 1,200 in Little Rock. It does business with more than half of the world's banks.

In going over the applications, trends among the companies become apparent, Andrews said.

After interviewing many of the applicants, quite a few are applying blockchain technology to their businesses, Andrews said.

Blockchain technology is a continuously growing list of records, called blocks, that are linked and secured using cryptography, the art of writing or solving codes. It is used most prominently to secure transactions of the cryptocurrency bitcoin.

"Blockchain technology is a popular technology that people are trying to use in financial applications," Andrews said. "We have a number of those."

Like last year's applications, many applicants' businesses this year focus on millennials, a difficult target market to reach for some bankers, Andrews said.

"[Bankers] are concerned about being able to offer the kind of products and services that continue to attract [millennials] and keep them [as customers]," Andrews said.

Some of the businesses focus on teaching millennials how to start and learn how to be investors, Andrews said.

"That gets into the use of machine learning and robotics in the investing process some way," he said.

Instead of using a person to provide investment ideas, machine learning might be used to evaluate investment alternatives and results and make suggestions about investments or asset allocations, Andrews said.

Some businesses are targeting those he called "unbanked," which includes people who are not sufficiently creditworthy to maintain a bank account.

"That's a fairly large market," Andrews said. "The attraction to a bank would be that those might be future customers."

Venture Center executives are working with FIS executives to interview the startups' executives, Miller said.

It is an intense process, he said.

The first interview is about 20 minutes. For those who make the cut, the next interview is 45 minutes or so, he said. That process will leave about 60 or 80 companies.

"From there, we'll try to distill it down to 10, which is the number we're ultimately trying to get to," Miller said.

Business on 02/24/2018

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