Fintech is a big deal. CB Insights reports that the first half of 2019 saw the largest number of fintech deals in any half-year to date, and the value of deals rose by 60% in the U.S. to nearly $13 billion1. To get a view of what is driving this surge, one need look no further than Money 20/20, a conference that boldly plots a course for a “journey to the future of money”. Held over four days in Las Vegas, Money 20/20 brings together incumbents, upstarts, and everyone in-between for a peek at the trends that are driving fintech innovation.
Maven Wave made our first foray to Money 20/20 in conjunction with FinTEx, a non-profit that is “fueling the community of fintech innovation.” Here are a few key takeaways from what we observed and learned in Las Vegas last week:
- Lines are blurring between sectors: It felt as though there was a great deal of “pay to play” in the panels and presentations and many of the companies “playing” are making moves to broaden their business lines. One example could be seen in Uber’s discussion of its increasing depth and breadth of financial services offerings. Uber’s cash-back debit card (itself something of an anomaly) gives its drivers double rewards of 6% for gasoline purchases and $100 of free overdraft protection to help in tight financial times. Another example of lines blurring came on a panel where Kabbage described their move from business loans to payments at the same time that PayPal was discussing their addition of business loans to their core strength in payments through PayPal Working Capital.
- Start-ups don’t have a monopoly on innovation: Giuseppe Tomasi de Lampedusa2 once wrote, “if we want everything to remain as it is, everything must change.” Those words can well explain the attitude of incumbent institutions that are facing disruption from challenger banks and neobanks. Two notable cases from Money 20/20 were Marcus from Goldman Sachs and Greenhouse from Wells Fargo. The Marcus example is unique because Goldman has heretofore been an exclusive, premium brand that did not offer retail products. On the other hand,the Greenhouse effort is a fresh departure for an old-line, and in many ways challenged, customer-centric financial services firm. Incumbents need to invest in and drive fresh ideas if they want to keep their positions.
- New technologies add fuel to the fire: Cloud technology is the foundation for all want-to-be fintech disruptors, and future innovations are likely to come from derivations of distributed ledger technology. Neither was directly evidenced at Money 20/20 (with the exception of much talk about the bumpy road that Libra is facing), but that will likely change in the future.
- Fintech has an international flair: Strolling around the exhibit hall, it was not at all uncommon to hear Spanish, Portuguese, Russian and many other languages being spoken. It seems likely that technology innovation will emanate from the U.S., but adoption will be strongest in other parts of the world, particularly in developing markets. In fact, one panelist described the U.S. payments space as being like an emerging market and shared a statistic that 50% of all credit card fraud occurs here even though only 25% of credit card transactions take place in the U.S.
- Cooperation results in exponential gains: In an off-the-record conversation, one major provider of financial services technology with a market cap in the tens of billions of dollars described how they only recently began a direct program to collaborate with fintech companies. They budgeted revenues of approximately $10 million for their first year but didn’t expect any direct revenue in that period because their traditional business sales cycle is well over 12 months. Ten months into this year, they have already doubled their forecasted revenue and expect to book considerably more business by New Year’s.
- Innovative companies that you need to know if you don’t already: Every conference features companies that generate comments from both the panels/presentations and the trade show floor. Three companies that are well known in the payments community but may be less visible outside of the industry are:
- Green Dot: the world’s largest prepaid debit card company by market capitalization, Green Dot is also a payments platform company and is the technology platform used by Apple Pay Cash, Uber, and Intuit.
- Marqeta: “The Marqeta Platform, built from the ground up with no legacy infrastructure, provides the world’s first fully documented, open API issuer processor platform.”
- Tenemos: “Temenos offers cloud-native, cloud-agnostic, API-first digital banking, core banking, payments, fund management, and wealth management software products, enabling banks to deliver consistent, frictionless customer journeys and achieve market-leading cost/income performance.”
Technology Drives Innovation
The common denominator for the innovation and change on display at Money 20/20 is technology. The public cloud is a central factor in all of these efforts and with it comes new ways of working, fresh perspectives on product and delivery and, most importantly, a relentless drive to improve efficiency. In that way, Money 20/20 is a strong reflection on the changes that are sweeping financial services.
Financial services organizations seeking to accelerate performance rely on Maven Wave for innovation-driven digital transformation. Maven Wave delivers strategy-led, results-driven business solutions powered by cloud computing. To learn more, contact us now.
1 Globally, fintech fundraising fell 29% in the first half of 2019 largely due to the massive $14bn raise by Ant Financial in China in the same period in 2018.
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