When we embarked on our analysis of global financial activity from venture capital and private equity firms, corporations, hedge funds and more, from 2008 through to the first quarter of 2014, we sought to underscore the macro trend of a growing opportunity for entrepreneurs to help financial institutions solve problems they traditionally solved in-house. What we found was a common view that financial technology (fintech) investment is growing—especially in New York, and there are a number of reasons why.

More than just the city that never sleeps

Banks, capital markets firms and insurers have increasingly opened their eyes to the benefits of having a fintech cluster close to home, and New York, with its huge financial center, provides that opportunity—and it shows. According to the research we did with the Partnership Fund for New York City, the city’s fintech sector has grown at twice the rate of Silicon Valley’s over the past five years. In fact, New York has become the fastest growing market for fintech investment in the county and second in the world after Silicon Valley for annual deal flow and investment.

Location, location, location

By having a fintech cluster close to home, entrepreneurs and financial institutions can work together closely to ensure that innovations are tailored to the specific needs of the financial industry and its customers. The best example of this effective relationship is the FinTech Innovation Lab, now in its fourth year in New York. This elite mentoring program is designed to help the brightest fintech entrepreneurs engage with the city’s financial services industry—and the success to date has been considerable. Since participating, the Lab’s 18 alumni have raised $76 million and one company was acquired for $175 million.

Financial institutions take note

By partnering with innovative startups, financial services companies can strengthen their competitive position and cut the time needed to develop new products and bring them to market. Through the FinTech Innovation Lab, we have seen many collaborations to develop new mobile, cloud, analytic, cybersecurity and regulatory solutions.

The key takeaway for financial institutions: the growth of the fintech sector in New York cannot be ignored. The pace of innovation and depth of demand means that fintech has a strong future. With US fintech investment likely to reach $4.7 billion annually by 2018, New York has a considerable chance of being the prime beneficiary. Now it’s time for financial institutions to build upon the existing momentum.