Some startups are out to find their place on Wall Street alongside the traditional players. And some are out to replace the establishment altogether.
Big banks have long depended on antiquated and personnel-heavy businesses to do everything from marketing bond deals to striking currency transfers.
Some nimble start-ups have sought to partner with Wall Street firms and make these processes more efficient. Others have sought to step in to the gaps left behind by traditional players as a result of regulation.
And then there is a group of startups founded in the U.S. and elsewhere that are out to disrupt them altogether. Some are off to a great start.
Business Insider spoke with dealmakers, venture capitalists and entrepreneurs to put together a list of the companies most likely to up-end Wall Street’s traditional hierarchy.
When some of these companies come to “occupy” lower Manhattan, they might not ever leave.
European startup Kantox was founded in 2011 by former Deloitte consultant Philippe Gelis, and has tapped into more than 1,500 businesses and processed in excess of $US1.5 billion in transactions for them. It isn't unlike TransferWise, another European payment processor, but Kantox focuses on currency exchange and has raised much less in funding than TransferWise. The company, which just took on $US11 million in a Series B financing, even posts at its website what customers would have saved using its technology to transfer funds. Gelis says the company will be profitable by the end of 2015.
Syndicated Loan Direct was founded by Shaheen Malik Kanda and Angela Levine, who are veterans of the leveraged finance industry. The company is looking to market and sell leveraged loans to institutional investors, and is very early in its development; it has only raised pre-seed capital. 'Only institutional clients use this platform,' said Malik Kanda, adding that the product is currently being rolled out exclusively with large banks' leveraged finance sell-side desks. Existing backers include TechStars and ValueStream Labs.
Raja Palaniappan spent years as a corporate bond trader before launching Origin Markets, with the hope of disrupting what he calls the 'slow, annoying, complicated (and) incredibly expensive' process of launching a bond deal. It's a duplicative process for banks, which sometimes try and sell an identical product to identical clients. Palaniappan says Origin Markets represents a combination of eBay and Airbnb for the bond market.
New York-based mobile banking startup Moven has one thing to differentiate itself from its other competitors offering savings and checking options via a handset: an actual swipe-able card. The startup has been partnering with Kansas-based CBW Bank in the U.S. and TD Bank north of the border. Moven will look for other bank partnerships in other countries as well, which could mean opportunities for international card issuers. President Alex Sion says the company could partner with a wealth management startup like Betterment to round out Moven's suite of services.
Big banks and other financial services firms that have been conducting trades for clients have depended on expensive legacy technology, according to Robinhood cofounder Vlad Tenev. 'We can offer this service for what it should cost,' he said. Robinhood doesn't charge clients until they start using margin accounts, meaning they trade with leverage. The firm has transacted more than $US1 billion in its first five months of operation, saving over $US22 million in trading commissions. Robinhood's investor list is surprisingly wide-ranging. Celebrity backers such as Jared Leto, Snoop Dogg and Nas join traditional investors like Andreessen Horowitz and Google Ventures. Robinhood's app is the first finance product to receive the Apple Design Award.
Motif Investing aims to disrupt retail investment operations by letting clients build their own 'motif,' and then execute trades. Motif clients can pick from a wide range of strategies, including 'Dogs of the Dow,' 'Buyback Leaders' and 'Buy the Dip,' to name a few. The company has raised more than $US120 million from backers including banks Goldman Sachs and JPMorgan.