fintech's one-stop shop

 

Free apps vs. financial literacy. Alternative data. Fintech hall of fame. VIEW IN BROWSER

November 23, 2020

And that's a wrap

Hi there,    Last week, we hosted our annual Future of Fintech conference.   Over 3 days, we had the opportunity to engage with 30+ senior leaders across the financial services industry, including the chief product officer of Visa, the CEO of US consumer banking of Citigroup, the COO of Robinhood, the CEO of Galileo, the CEO & co-founder of Lemonade, and the CEO & founder of Marqeta.

We covered a wide range of topics on stage, from the future of financial inclusion and wealth management to regulations in open banking and crypto assets. Below, we dig into the key themes that emerged.

AND NOW, THE INSIGHTS

The Covid-19 pandemic accelerated the adoption of digital tools in financial services by 3 to 5 years — and the shift to digital will continue long after a vaccine becomes available.  An unprecedented number of first-time investors took on trading during the lockdown, and used mobile apps to open bank accounts and access routine banking services. Investing platforms like Acorns and Robinhood reported a record number of new accounts. Anand Selva, CEO of US consumer banking at Citigroup, defined the bank's outlook as “physical-light and digital-heavy,” and stated that “customers are adapting to a different means of banking because of the lockdowns and the commuting concerns. [...] We believe digital is the way to go [for banking].” The rapid shift to digital in response to pandemic restrictions also highlighted the competition gap between companies. “Those who were prepared to switch to digital [...] scaled faster than those who weren’t ready and still relied on manual paperwork,” according to Steve Smith, the CEO & co-founder of Finicity.

Free or low-cost platforms lower barriers to entry in financial markets, but to actually improve customers’ financial lives, wealth tech companies must increase financial literacy among users.    The new generation of wealth tech platforms has successfully democratized access to financial markets. Investing today is as easy as buying a product on Amazon. However, with more amateur investors comes more responsibility.   The Covid-19 pandemic has shown that fintech companies will need to shoulder the responsibility of educating their customers. “The culture in the US used to be one of independent responsibility. [Today], access to engaging financial information is part of the industry’s responsibility,” said Tricia Rothschild, the president of Apex Clearing.

The API economy will drive the next wave of innovation in financial services, enabling a distributed, open, and customer-centric banking system.    Customers continue to demand more flexibility and ownership of their financial data, and want their banks to meet them where they are — on the specific apps they use. The evolution of this API economy has brought us “embedded finance,” which seamlessly integrates banking services and customer data in third-party applications, such as Uber and Shopify.  Several incumbents have already joined the API trend through acquisitions, including Visa’s acquisition of Plaid, and Mastercard’s acquisition of Finicity. As for next steps, Finicity CEO and co-founder Steve Smith said that “regulators will have to step in and formulate guardrails and industry standards...to create a rich environment for innovation and propel things forward.”

Leveraging alternative data and rebuilding credit infrastructure are crucial to extending credit to the underserved.    From low-interest loans to credit cards, most financial instruments require good credit history. Yet, the systems designed to build credit fail to equally serve different groups. New technologies have shown that, when it comes to credit access, alternative data goes a long way.  Lack of credit history is a significant hurdle in gaining access to capital, and 22.5M people are credit-invisible in the US, per Esusu co-CEO and co-founder Abbey Wemimo. Startups like Tala, NovaCredit, and Esusu provide alternative datasets, such as rental history, or reporting structures to increase credit access to underbanked and underserved individuals, including immigrants and low-income households.

Consolidation is a big trend among both fintechs and incumbents, with more companies striving to become a one-stop shop for all things finance.   Customers don’t just want a platform that offers the most efficient and simple process for borrowing, budgeting, saving, or investing. What they actually want is a unified product ecosystem.    For SoFi CEO Anthony Noto, that means “leveraging a broader suite of products to become a one-stop shop” across lending, saving, investing, and more. Another example is Wealthfront, which recently introduced checking features on top of its robo-advisor services.  On the saving and investing side, Noah Kerner, the CEO of Acorns, said, “We believe that the moat of the future is a system of products working together [...]. If you build a system of great products that deliver a lot of value, you lock the customer into that relationship."

HALL OF FAME

We asked the fintech world to help pick our first-ever Fintech Hall of Fame in 4 categories: The OGs, 2020 All Stars, Women in Fintech, and Fintech Media.    Below are the first 8 inductees into the CB Insights Fintech Hall of Fame:    The OGs: Jud Bergman (co-founded Envestnet, 1999), Kathryn Petralia (founded Kabbage, 2008) Fintech Media: Brett King (author, speaker, radio host; founded Moven, 2011), Anna Irrera (chief fintech correspondent, Reuters)  Women in Fintech: Jo Ann Barefoot (CEO & co-founder, Alliance for Innovative Regulation; co-founder, Hummingbird Regtech), Anna Boden (CEO, Starling Bank) 2020 All Stars: Angela Galardi Ceresnie (CEO, Climb Credit), Colin Walsh (founder & CEO, Varo Bank)

CHALLENGE WINNERS

More than 500 participants from around the world spent 3 weeks creating projects that solved for challenges around some of financial services' most pressing issues, including embedded fintech, financial inclusion, financial literacy, and more. We shared the top 5 presentations on stage, and asked our audience to choose a winner. Here’s the winning project, as well as the 2 runners-up:    Winning Project: EVVA Community Fund, which offers a donation platform powered by the community in order to support Mexican small businesses affected by Covid-19   Runners-Up: DataStop, which keeps customers' financial data private by localizing transaction computation on their devices   Savey, which helps consumers maximize credit card points and rewards by helping them choose the right card to pay with

FROM OUR SPONSOR

Reinventing payments with Stellar   Whether it’s by reducing the cost of remittances or improving or enabling cross-border payments, the Stellar blockchain network creates frictionless access to the global financial system.    Cowrie Integrated Systems and Tempo France built their payment solution on Stellar, establishing a bi-directional NGNT-EURT corridor for customers to move funds more efficiently than ever before.   Learn how here.

I love you. Anand @asanwal

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