Connecting Community Banks to Promising Fintech Partners: Why ABA Is Investing (Again) in Canapi

By Rob Nichols
ABA Viewpoint

Countless articles have been written about the so-called battle between banks and nonbank fintech firms, and in the early days of fintech this characterization may have been true. A generation of bright entrepreneurs set out to make banking better, often without having ever worked in a bank. Unsurprisingly, many quickly discovered the challenge of operating within the highly regulated banking industry and the importance of developing trust with customers. Many of these fintech companies, which began life seeking to disrupt and disintermediate banks, have now pivoted and are actively partnering with banks to deliver innovative solutions for consumers and businesses.

We think this is a great development and a huge opportunity for our industry. ABA has long supported bank-fintech partnerships, and we are constantly pursuing opportunities to encourage bank-driven innovation. We believe that by connecting banks with innovating entrepreneurs we can support partnerships that tackle banking’s toughest problems, ultimately improving experiences for customers. This is why we are excited to announce that ABA will invest in Canapi Ventures’ second fund and serve as a critical link between Canapi and the nation’s community banks.

Canapi is a financial technology venture platform investing in early-to-growth-stage companies that offer bank-friendly business models and technologies. With our investment, ABA will ensure that community banks are engaged deeply with Canapi and their unique challenges are top of mind as Canapi evaluates fintech investments. This relationship will also allow ABA to capture unique insights on fintech market trends and notable startups and share them broadly across ABA’s membership.

ABA invested in Canapi’s first fund in 2020 alongside over 35 financial institutions (including many ABA members), several state bankers associations, regulatory experts and bank executives. Through its own investment and engagement, ABA has seen first-hand the strategic value Canapi brings to its bank partners through industry briefings, pipeline calls and curated introductions—in addition to financial returns. Canapi acts as a force multiplier for banks, leveraging the Canapi team of experts to identify promising entrepreneurs and bank-friendly startups.

Bank investors form the Canapi Alliance and are a critical sounding board—employing their deep expertise on banking challenges, operations and regulation—as Canapi selects market verticals and evaluates investments. The banks benefit from participating in several ways. Financially, the fund has achieved venture-level returns from its 19 portfolio companies. In addition, portfolio companies and LPs have inked more than 65 commercial agreements, not to mention the hundreds of introductions and productive engagement stemming from banks’ exposure to the startups.

Founded by veteran bankers and bank service providers, Canapi has a track record of fintech investments that benefit banks. Its portfolio companies are taking on critical challenges, including streamlining retail and commercial banking origination and servicing processes, improving identity decisions and reducing fraud and enhancing payments technologies. As one of Canapi’s partners put it, Canapi is “on a mission to help banks and fintechs develop mutually-beneficial partnerships.”

Over the next few months, Canapi will present at a series of webinars for ABA, where the Canapi team will speak directly to the trends they’re seeing and companies they are watching. These sessions will be open to all ABA members. In addition, they will describe their investment approach and benefits that come from joining the alliance, and provide fund information for banks considering their own investment. To be clear, ABA does not receive any financial incentive if its members invest in Canapi, but we think community banks should have the opportunity if it makes sense for the institution.

Supporting bank innovation remains a top priority for ABA, and with this step, we further reinforce that commitment. All ABA members, regardless of whether they choose to invest, will benefit from the thought leadership, insights and startup exposure generated through this initiative. We look forward to seeing the positive benefits for the entire industry from our expanding relationship with Canapi.

ABA Viewpoint is the source for analysis, commentary and perspective from the American Bankers Association on the policy issues shaping banking today and into the future. Click here to view all posts in this series.


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