Valley Ventures, the investment arm of Valley Bank, invests in fintechs that can be integrated into its operations. 

Nearly 50% of the fintechs Valley Ventures invests in are used by Valley Bank or its commercial or retail clients, Izge Cengiz Ercan, director of product innovation at $62 billion Valley Bank, told Bank Automation News. The bank invests in four to seven fintechs each year.

“We talk to hundreds of fintechs each year,” Cengiz Ercan said. “That gives us a very specific view into what’s happening in the market.” 

This year, Valley Ventures invested in the following four fintechs: 

• Sandbox environment provider for banks NayaOne;
• Accounts payable provider Finexio;
• Financial crime alerts solution Refine Intelligence; and
• Loan origination software Enable.  

Valley Ventures looks at the pain points of banks and tries to find fintechs that are solving those problems, Cengiz Ercan said.  

“If there is a trend that we are seeing, that might be worth looking into,” she said. 

When investing in a fintech, Morristown, N.J.-based Valley Ventures considers: 

• Fintech maturity: The venture capital firm often invests in fintechs that are in series B rounds and are generating $5 million or more in annual recurring revenue, Cengiz Ercan said. “The earlier you get in, the more likely you are to get more returns, but they’re also more likely to fail,” she said of risk evaluation. 

• Long-term investments: Valley Ventures invests in companies and technologies that are forward-looking, Cengiz Ercan said, adding that it looks for fintechs that are developing relevant technologies.
  “Our investment horizon is seven years up to 10 years” and macroeconomic conditions have little effect on decisions, she said. 
• Integration opportunities: The VC determines if the technology can be applied to Valley Bank or one of its commercial customers, Cengiz Ercan said.
  “Sometimes we start using it and then realize it’s a good investment opportunity,” she said. 

It is “seeing more startups leveraging AI” and will explore such opportunities down the road, Cengiz Ercan said. “I think the startups we see more and more are the ones that address a specific problem and then leverage AI to do it,” rather than just having AI as an added feature. 

The VC will also explore investments in open banking and data-sharing fintechs after it has a comprehensive plan on how to approach new regulations, Cengiz Ercan said. 

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