Sustaining Economic Recovery Means Investing in Bridges, But Also ‘Bridges to the Future’ Like Fintech
By Siobhan Dullea, CEO of MassChallenge and Member of Mass Fintech Hub
The considerable buzz around Congress’ $3.5 trillion infrastructure bill has resonated across the fintech industry given recent tax proposals on crypto businesses. As our recovery from the pandemic wanes, we must not also let fintech innovation fall by the wayside.
Everyone expects an American renaissance after we finally emerge from the pandemic. However, there isn’t a precedent where sustainable economic recovery happened overnight, nor randomly.
With U.S. gross domestic product plummeting 3.5% in 2020, the first regression in GDP since 2009, and the largest drop since 1946 according to the Bureau of Economic Analysis, getting back to normal will entail strategic thinking and fluid execution.
The booming fintech industry presents the optimal tailwind to recapture lost growth. While the pandemic hammered the American economy last year, the fintech industry proved resilient. According to CB Insights, Q2’21 was the largest funding quarter on record: “Across 657 deals, global VC-backed fintech companies raised a record $30.8B,” breaking the previous quarter’s funding record by 30%.
A 2019 report from think tank Brookings Institution found that economic development “tends to be paved by young, high-growth companies that achieve technological breakthroughs, create new markets, and yield quality job growth.”
Brookings explained that “this development occurs via thousands of less recognizable 50-to-250-person companies whose growth enhances prosperity across the American landscape every year.” It follows that in post-COVID America, economic recovery will be best achieved with an eye towards high-tech ecosystem development in cities, states and regions throughout the U.S.
Early-stage ventures are a key reason why many cities and regions are establishing fintech hubs, and they serve as a catalyst for growth across the entire financial ecosystem. In Massachusetts, fintech is positioned to be a vital contributor to the innovation agenda and our economic recovery. Recent success of startups, such as Flywire and Circle and early-stage ventures, such as Posh Technologies are examples of the enormous activity taking place in the state. But how can we sustain it?
We need to invest not just in public works projects, but also in community development and alignment between a diverse spectrum of stakeholders. In Massachusetts and throughout the U.S., recovery must be collaborative and inclusive of the public, private and nonprofit sectors.
While fintech ecosystems bloomed across the world in cities including New York City, London, Montreal, Hong Kong and Singapore, many promising early-stage entrepreneurs remain underserved by not having immediate physical access to these communities. Aligning the interests of Massachusetts fintechs, incumbent FIs, capital providers, academics, policymakers and others, Mass Fintech Hub is the latest ecosystem collaborative to blossom. Launched in June, the Mass Fintech Hub public-private partnership was conceived to capitalize and accelerate fintech innovation in the Commonwealth.
Hub models stimulate fintech innovation in many ways. They provide targeted access to high-quality talent, pool large allocations of institutional capital that can be used to benefit regional ecosystems, and they can indirectly affect a net-positive impact on the business community by generating ancillary demand for complementary goods and services.
Massachusetts also has a long history in finance and banking and cross-sector tech (i.e. healthcare, AI, advanced computing) which is difficult to replicate. By engaging new entrants into fintech via the academic community, nonprofits such as MassChallenge and FinTech Sandbox, and a partnership like Mass Fintech Hub which works closely with an array of emerging entrepreneurs, we are seizing an opportunity to stand out among peers by offering the community stakeholder alignment across a variety of sectors. This helps give rise to sustainable economic development and increased capital flow to the system.
The common link is investing in community – without it, our American recovery will stagnate to the detriment of business and society at large. If we embrace diverse leadership and a strategic, long-term approach based on collaboration, we will emerge stronger than ever before.
