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It’s been a strong start to 2018 for New York City’s burgeoning fintech scene.

Last week, alternative credit card issuer Petal closed its $13 million Series A led by Peter Thiel’s Valar Ventures. It was announced just four months after Petal’s $3.6 million seed round.

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The news marks a significant month for Manhattan’s sometimes-struggling fintech scene, with MoneyLion having raised a whopping $42 million during its Series B in early January. And while these numbers are a drop in the bucket compared to the U.S. fintech industry surpassing $5 billion in Q3 ’17, the momentum is already being felt, and it comes as a welcome change for the city.

NYC’s Dealmaking Prowess

“Having an address in San Francisco is no longer a dominating advantage.”

As the country’s financial hub, New York City still hasn’t done its part in disrupting finance—despite its ongoing attempt at playing catch-up to San Francisco’s massive fintech valuations. But NYC’s fortune may finally be reversing, with startups like Petal and MoneyLion hoping to take advantage of operating on the same island as Wall Street.

“It would be hard to build the company we’re building anywhere else,” Petal co-founder and CEO Jason Gross tells Crunchbase News.

Seeking investors in New York, where VC firms like Valar have been backing fintech projects, seems like a natural move.

“You have the benefit of so many different industries that intersect; from media to finance to technology,” Gross explained. “While it used to be harder to build startups here due to the lack of tech resources and talent in New York, recruiting is starting to pick up.”

For Chris Tse, the founding director of blockchain-developing firm NYC-based Cardstack, the gap is indeed closing.

While New York City’s fintech scene has received its fair share of the early-stage capital, very few of the city’s startups end up receiving the giant checks their West Coast counterparts routinely get, Tse tells Crunchbase News.

However, New York does have the advantage of many blockchain-based startups calling the city their base.

“Fintech innovation is increasingly driven by the decentralization force, currently amplified by blockchain technologies and cryptocurrencies,” Tse explains. He also cites the city’s lack of Bay Area-like startup culture as an advantage in finance. “NYC is suited as a place where multiple parties can run parallel experiments in close proximity and compete, without having to assimilate in a company culture in one giant campus.”

And one can’t mention New York fintech without noting the hub’s explosive crypto hedge fund emergence.

“Many of these hedge funds are run by New Yorkers that have cut their teeth in traditional finance,” Tse says. He believes this will eventually lead to emerging fintech “winners.”

“Having an address in San Francisco is no longer a dominating advantage,” according to Tse.

Fintech’s Regulatory Hurdle

“In fintech, the theory of disruption gets you in trouble quicker than you can growth-hack your way out of it.”

Financial services, compared to other industries, require more collaboration with the public sector and government-appointed regulators. And while the ubiquitousness of virtual meetings and video calls have taken over Silicon Valley, finance, Gross explained, is an old-school business that relies on face-to-face interactions.

“For companies like ours that offer personalized consumer products, working with payment processors and credit bureaus is crucial,” Gross says, citing proximity to public sectors on the East Coast, especially Washington D.C. “Before even pitching VCs, we were down in D.C. talking to regulators and nonprofits that specialize in credit card offerings.”

This is why, unlike making dating and rideshare apps, fintech startups tend to take longer to build from the ground up. Gross says Petal’s first product, a low-interest and no-fee credit card, took two years to develop.

For Tse, tech’s general snooty attitudes toward regulators and governments won’t work in finance.

“In fintech, the theory of disruption gets you in trouble quicker than you can growth-hack your way out of it,” he says of both federal and state laws. Meanwhile, many of New York’s blockchain and crypto lawyers have deep experience working with regulators on behalf of funds, banks, and firms.

NYC Retains Clout

Tiffani Montez, a senior analyst at financial research firm Aite Group, told Crunchbase News that the aforementioned factors will help push New York into the fintech spotlight.

“We’re definitely seeing growth when it comes to the East Coast,” Montez says. “Many financial institutions’ roots being in the city has encouraged startups to choose launch and grow alongside Wall Street.”

Montez also notes that in order to truly grow and disrupt—beyond offering trendy consumer products using a hyper-growth model—fintech companies will need to work with the established finance industry.

Building relationships with New York’s heritage financial institutions will eventually give the city’s fintech industry a significant advantage over other hubs.

Illustration: Li-Anne Dias