Austin Mac Nab is the CEO and founder of VizyPay, a payment processing FinTech with transparent and affordable services for small businesses.
Growing demand for innovations in payment processing, lending, personal finance, and wealth management are some of the factors driving the growth of the fintech segment.
Between 2022 and 2027, the fintech market is projected to see a compound annual growth rate of 20.5%, an increase of $277.2 billion. While fintech companies are popping up across the country, the Midwest is fast becoming a fintech hub with some of the most innovative companies in the industry making this region their home base.
While most of the venture capital dollars flowing into San Francisco, New York, Boston and Los Angeles (63% in Q3 2022) go towards creating a thriving tech ecosystem, the new venture capital available in the Midwest is attracting fintechs in the region. That, combined with a growing number of Midwestern fintech startups achieving success without the backing of venture capital, is helping the region earn the nickname “Silicon Prairie.”
Fintech companies started and backed by venture capital are flocking to the region to take advantage of the favorable business climate.
According to a ranking by Forbes Advisor, five of the top 10 states to start a business this year are in the Midwest: Indiana, North Dakota, South Dakota, Illinois and Ohio. The article noted that this ranking “considers factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce, and affordability in each state.” . Indiana took the top spot due to the state’s low taxes, reasonable cost of living, and excellent workforce, all of which create favorable conditions for business. The article noted that in addition to Indiana’s business climate, entrepreneurs benefit from a cost of living that is 15% lower than the national average.
Fintechs are also building their companies in the Midwest thanks to the strong pipeline of top tech talent. The lifeblood of any successful fintech, some of the best and brightest talent is easily accessible through the many world-class universities based in the region.
The Midwest is home to top educational institutions including the University of Notre Dame, Purdue University, Iowa State University, University of Michigan, Ohio State University and many others that fuel the region’s talent pool. A report by the Chicago Council on Global Affairs found that “all communities reporting to one of the region’s many top research universities (such as Iowa City, Ann Arbor and State College) are thriving in an economic era in which talent and innovation dominate.”
Many fast-growing fintech companies are moving away from the East and West coasts in favor of a low-cost-of-living environment that allows them to stretch their cash flow. A recent cost-of-living index released by the Council for Community and Economic Research ranked five Midwestern urban areas among the top 10 least expensive places in the nation to live. Decatur, Illinois; Kalamazoo, Michigan; Topeka, Kansas; Ashland, Ohio; and Salina, Kansas were some of the most affordable places to live based on factors like housing, utilities, grocery costs, etc.
This lower cost of living also helps broaden the talent pool for fintech companies by attracting young talent who are increasingly choosing to settle in more affordable cities.
Having lived in both California and Iowa, these factors made it easy for me to decide where I wanted to establish my company. For me and many other entrepreneurs, it’s much more cost-effective to start an established company or a low-investment business in the Midwest. The cost of living is nowhere near what it is on the west or east coasts. Thus, the cost of operations such as renting office space or hiring and retaining top talent is much lower, allowing cash-strapped startups to reinvest those vital funds into their company’s long-term growth strategies. agency.
Fintech entrepreneurs are also attracted to the Midwest by the slower pace of life, which leads to a relatively less stressful business environment and contributes to the region’s overall livability. A recent WalletHub study that compared the 50 states across 41 stress indicators found that six of the 10 least stressed states were in the Midwest. The study compared states on factors such as average hours of sleep per night, health and affordable housing.
The Midwest has a population of over 68 million people and is home to a sizeable portion of the Fortune 500 companies, two more reasons the Midwest continues to attract fintech companies. This robust ecosystem of customers and businesses fuels an economic engine that can help midwestern fintech startups thrive.
All of these factors and more are making the Midwest an epicenter for fintech companies and fintech innovation. As more fintech and tech companies establish their operations in the Midwest, the region is evolving from Flyover Country to a thriving tech scene known as Silicon Prairie.
To further capitalize on this trend, Midwestern states should not only encourage tech startups backed by private equity or venture capital to take root in the region, but also pay special attention to established companies. This will show entrepreneurs in the US that the Midwest can be a great place to fulfill a dream and build an empire from the ground up. Additionally, fintech companies based in the region can also play their part in growing the thriving tech ecosystem and economy by collaborating more with each other. Only by helping each other can fintechs level up together.
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