As financial technology, or “FinTech,” grows from an obscure corner of the digital market to a source of mainstream trends and broad-reaching innovations, the cities that cultivate FinTech companies are no longer limited to large, traditional financial centers. Recent growth in the industries comprising FinTech has been distributed among markets, primarily in the South and West, that show the right combination of attributes to attract today’s employers.
CBRE has consulted many FinTech firms as they navigate the site location process, providing unique insight into the priorities that drive them. As with location decisions across other industries, cost, talent, and infrastructure play primary roles. But, while many financial start-ups were once tethered to a few dominant clusters of tech and banking expertise, smaller, less costly options have gained viability, facilitated largely by innovations to worker connectedness and information sharing, as well as a reshuffling of financial talent between markets.
For example, in 2015, the concentration of finance and insurance firms with fewer than 20 employees in Salt Lake City and Oklahoma City exceeded the national average by more than 30 percent, according to the most recent data from the U.S. Census Bureau’s Statistics of U.S. Businesses (SUSB). Denver, Kansas City, Phoenix, and Las Vegas each showed concentrations that were more than 20 percent higher than the national average.
Today’s growing FinTech markets are smaller cities that tend to share a vibrant professional services economy, advanced telecommunications infrastructure, growing pool of college-educated and tech-focused millennials, limited regulatory landscapes, and low taxes. These markets often provide business amenities and opportunities similar to the nation’s largest metropolitan areas, while offering lower costs and greater alignment with the growth patterns of today’s millennial workforce, such as affordable housing and plentiful outdoor recreation options in the Sunbelt and Mountain/West. The most successful markets for FinTech will largely be dependent on the types of skill sets businesses are targeting. Whether it be customer service, sales, tech or executive talent, the strongest markets will have a workforce that aligns to best serve all distinctive skill set and cost requirements, largely irrespective of overall size.
In fact, many of the nation’s largest banking centers, including New York, Chicago, Boston, and San Francisco, still have not returned to pre-recession financial employment, despite a national net increase of 88,000 jobs in the sector between 2006 and 2017, according to annual averages from the U.S. Bureau of Labor Statistics (BLS).
In the most recent data from its employer survey, the BLS shows that the 10 largest metros for financial employment in 2017 were down by 25,100 employees, collectively, compared to 2006 — and that number includes significant growth in Dallas and Phoenix, which saw increases of 59,800 and 31,000, respectively.
Conversely, the next 40 largest metros showed collective growth of 102,700 financial jobs between 2006 and 2017, indicating that much of the post-recession activity in this sector has been redistributed to moderately sized metros like Nashville (+17,600) and Columbus, Ohio (+10,800), and away from the largest markets that historically dominated the industry.
