Signals: The rocky marriage between sports and fintech

At the peak of the dot-com bubble in 1999, commercial internet provider PSINet signed a twenty-year, $105 million deal to acquire the naming rights for Baltimore’s new football stadium. But just three years later, as the bubble burst and the company slid into bankruptcy, PSINet’s neon-purple logo was hauled down from the stadium’s facade and the former internet darling became a poster child for the mania of the dot-com era. 

Twenty-three years later, workers scraped FTX’s lettering off of the Miami Heat’s arena as customers, investors, and regulators picked up the pieces of another burst bubble. The crypto giant, just a year after inking a 19-year, $135 million naming rights agreement with the Heat and kicking off a massive marketing binge within sports, had dramatically and publicly collapsed. This implosion wiped out livelihoods, jeopardized the Heat’s brand and the brands of FTX’s countless other partners, and reset how sports engage with financial services. 

The correlation between major stadium sponsorship deals and corporate failures, dubbed the “stadium curse”, is practically a meme at this point. But money is and always will be intertwined with sports. The sources of the money - whether it be internet providers, fintech startups, or beer companies - may shift over time as fads come and go, but companies will continue to see sports as a valuable marketing channel. For some, like JP Morgan and AT&T, investments in sports make a ton of sense: they have a sustainable business and a large footprint that merit significant spending on sports marketing. For others, like PSINet and FTX, little rationale exists and self-delusion and greed take over. The crypto collapse is just a natural purging of this recklessness and desperation. There are flashes in the pan like FTX in fintech as in every industry, but the underlying drivers pulling sports and financial services together remain powerful.

Until relatively recently, the ties between the two sectors were nearly non-existent, confined to the sponsorship of little leagues and other local organizations. With narrow marketing channels, heavy regulation around the size and geographic footprint of institutions, and limited competition, banks long relied on entrenched relationships within local communities to grow their customer base. 

By the 1980s, everything changed. Sweeping deregulation, including the lifting of interstate banking restrictions, triggered a still-ongoing wave of consolidation and geographic expansion among banks. While close to 15,000 commercial banks operated in the US in 1980, that number fell sharply to nearly 8,000 in 2000 and just 4,000 today. In parallel, non-bank financial institutions like Visa and new financial technologies emerged as both competition and service providers to banks. The result was a more concentrated but more competitive banking industry with a handful of firms - JP Morgan, Bank of America, etc. - that now had the appetite and ability to deploy big marketing budgets. 

At the same time, sports exploded in popularity. The expansion of TV and media coverage, cultural shifts in attitudes around disposable income, and the emergence of superstars like Joe Montana vaulted the vertical into legitimacy. Notions of amateurism gave way to an obsession over professionalism, carving out a massive business opportunity. In 1968, commercial time in the Super Bowl sold for $150,000 per minute. By 1977 it would rise to $250,000, and by 1985, to a staggering $1 million. 

It was off to the races for sports marketing. 

Eager to capitalize on this growing opportunity, banks and nonbanks leapt into the sports world. JP Morgan launched its iconic sponsorship of the US Open tennis championships in 1982. Visa began its partnership with the Olympics in 1986.  French bank LCL first adorned the yellow jersey of the Tour de France in 1987. BankOne became one of the first financial institutions to secure naming rights for a sports stadium with the opening of its eponymous Arizona ballpark in 1998. The momentum extended beyond explicit sponsorships, too: the PGA Tour introduced rewards for Mastercard cardholders in 1995. 

Besides lending credibility, sports provide a platform to sell financial products, drive spending, and entertain, attract, and retain customers. More tangibly, sports fans exhibit much higher levels of loyalty and intent than the general population - ideal customer traits for an industry that relies on trust, like financial services. And the geographic concentration of banks, which persists to this day, aligns well with the inherent regionalization of sports. 

Into the 2000s, as fintech began to creep into the headlines, these ties between sports and financial services only hardened. The ascendance of social media expanded the motives behind sports partnerships, and the logos of financial brands littered stadiums, jerseys, and advertising spots. Even in the wake of the 2008 financial crisis, banks stubbornly clung onto sports: Citigroup refused to pull out of its $400 million deal with the New York Mets’ new ballpark despite receiving a $45 billion government bailout just months before the stadium opened. 

But COVID brought about a complete transformation of these relationships. Desperate to build their brand in an era that prioritized “growth at all costs'', fintech and crypto startups poured billions into sports, quickly stealing the spotlight from established institutions. Financial incumbents were largely cutting back during this period, so sports organizations reeling from the pandemic were more than willing to turn to riskier fintech and crypto firms to fill the void. 

The card networks led the way, but fintechs of every size and sector leapt into the sports world. LoanDepot signed an expansive deal with the MLB. CashApp partnered with Max Verstappen and other athletes, while Klarna collaborated with the National Women’s Soccer League and others to offer buy-now-pay-later at stadiums and in team stores. Cardless built an entire business around co-branding credit cards for sports franchises and other brands. Sports even served as a proving ground for financial technology at scale: Visa, SpotOn, and other payment players helped 29 of 30 NFL Stadiums, including the host of the 2021 Super Bowl, go cash-free. 

Of course, the decentralized finance world was the true epicenter of this excitement. FTX’s landmark agreement with the Miami Heat triggered a wave of crypto deals across sports, with DeFi players willing to outbid existing sponsors still cash-strapped from COVID. In the NBA, crypto vaulted from the 43rd to the 2nd-highest spending sponsorship category in just a single year. And in the NFL, the flood of multi-million dollar commercials from crypto companies during the 2022 Super Bowl led many to dub the game the “Crypto Bowl”. As FTX US’s then-CEO Brett Harrison explained at the time, “If we just take the slow, well-trod path of traditional marketing—digital ads, Facebook ads, Google ads—and slowly work on user acquisition that way, we’ll never overcome the bias against the industry.” 

Inevitably, cracks soon began to appear behind all of this mania. A mountain of regulatory and media scrutiny, coupled with the tightening of capital markets, exposed some serious issues in the marriage between sports and financial services. 

FTX was one of the first dominoes to fall. The Company’s collapse raised serious questions about the ethics of sports endorsements, with lawsuits alleging that Tom Brady, Stephen Curry, and other superstars ”aggressively marketed” FTX’s offerings to investors. Similarly, the MLB and the Mercedes Formula One team were just two of the organizations forced to quietly walk back their partnerships with the failed crypto giant. 

These issues cascaded across the crypto ecosystem. Just this year, the SEC urged caution around athletes promoting other cryptoassets after fining NBA legend Paul Pierce for misleading investors. Shuttered European crypto exchange WhaleFin prematurely terminated its multi-million dollar jersey sponsorships with two global soccer giants, Chelsea and Atletico Madrid, leaving the clubs scrambling to find a replacement. And the MLB’s Washington Nationals face a growing nightmare around their extensive partnership with the failed crypto ecosystem Terra, a deal that the club has still been unable to fully unwind. 

While less dramatic, this same uncertainty extends to the fiat world. The buy-now-pay-later bubble burst nearly as quickly as the crypto one, casting a shadow on the category’s array of sports partnerships. Robinhood launched a controversial NIL initiative with West Virginia University athletes and other college programs to promote financial literacy and rehabilitate the startup’s image in the wake of their well-publicized troubles. More broadly, layoffs across the fintech space have threatened nearly every sports partnership, with prominent sponsors PayPal and SoFi particularly exposed. Financially and ethically, sports and fintech players are walking a tightrope. 

For many, these problems necessitate an end to financial services’ tangled mess of partnerships with sports. Critics made similar arguments amidst the PSINet debacle and the wider dot-com bust at the turn of the century. 

But as the dust has settled on this frenzy, sports and financial services are more intertwined than ever. Financial services remain the most active sector in sports sponsorship, and fans face a barrage of engagement from banks, fintechs, and other firms every time they tune into a game. As of 2023, financial brands are key sponsors for more than 80% of NBA organizations, 40% of NFL franchises, both of this year's Champions League finalists, and nearly every Formula One team. In the October 2022 edition of Money 20/20, Derek Jeter, Serena Williams, and Allyson Felix served as three of the conference’s keynote speakers in what the organizers described as “building on a long history of bringing together exceptional leaders in sports and finance”. Fintech veterans have even become sports owners in recent months: Paystack’s CEO acquired a Danish soccer club, mortgage titan Matt Ishbia scooped up the Phoenix Suns, and fintech heavyweight Nigel Morris made a major investment in the Welsh club Swansea City.

The influence of money on sports is inevitable, but that reality does not diminish the lessons from the recent crises. In 2020 and 2021, sports organizations struggling to stay afloat in the pandemic cast aside due diligence on their partners in favor of a quick payday. Mercedes’s commercial director explained that while the team wanted to wait out the frenzy, “it became clear that they had to make a move or miss out on a big opportunity”. 

Fintech and crypto firms aren’t absolved from blame either. At the peak of his hubris, even FTX’s CEO and founder Sam Bankman-Fried conceded that the data didn’t support the company’s lavish spending on sports, acknowledging that “If you measure it by something like downloads per dollar spent on advertising, it’s not going to come out well. It’s just not going to look good by that metric.”

As Georgetown Professor Martin Conway aptly explains, “It was this perfect storm of the rise of a new industry and an insatiable need for more money.” Sports teams and organizations struggling to stay afloat hurtled into venture-backed fintech and crypto companies eager to make a splash. Bubbles in financial markets translate directly into bubbles in sports marketing, and when combined with the egos and delusions of founders like SBF, it boils over into a toxic stew of greed and overspending. 

Despite the FTXs of the world, partnerships between sports and financial services remain productive and rewarding. Sports sponsorships are arguably ROI-positive, and sports remains one of the most trusted advertising channels. But athletes, teams, and leagues need to exercise the necessary due diligence on their partners before blindly accepting piles of cash. And even more importantly, financial brands need to fully quantify the value of their tie-ups with sports. Fintechs are not alone in abdicating this responsibility - up to 50% of all US companies do not have a system in place to gauge sports sponsorships effectively. Yet comprehensively measuring the impact of sponsorships can increase returns by as much as 30%. 

As sports and financial services navigate this post-pandemic world, the mandate is simple: 

With their web of committees and controls, banks have nearly perfected this art. After the Ravens terminated their partnership with PSINet in 2002, it was M&T Bank, a sleepy regional bank, that took a chance and signed a naming rights deal with the team. As M&T has trucked along through the financial crisis and the Ravens have grown into one of the most well-respected franchises in the league, their partnership has exceeded expectations - so much so that the two parties just extended their deal for another decade. In this reset of the fintech industry at-large, maybe M&T’s slow, deliberate approach, not some ego-driven blitz of corporate spending, is the blueprint for builders to follow.