Thursday, January 23, 2020

The Great Re-bundling of Fintech


A twitter thread unrolled for spreading wisdom.



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The last few weeks have been a bit busy, so my contribution to the prediction party is late. Without further ado: Fintech Predictions for 2020 (1/10)

The Great Rebundling has begun. Consumer fintech apps are all building towards a full product suite including checking, savings, investing, and cards. Lending solutions are close behind. Expect this to continue. (2/10)

Demographics, not geographics. Historically banks acquired customers based on branch geography. Now fintech acquires customers via referrals and ads targeted at specific demographics. Expect the Rebundling to focus around the needs of these specific demographics. (3/10)

Customer acquisition war. Banks are in a customer acquisition war against neobanks, fintech, and lenders, and paid acquisition costs are rising. Expect a reorientation towards products that generate referrals + network effects, or organic online signups (ex: high-yield savings).

Online account opening. Opening a bank account is still difficult, and resetting direct deposit is even worse. Given rising CAC, there is an increasing focus on simplifying the signup flows. The companies that best solve onboarding will have a massive advantage. (5/10)

Every company is a fintech company. Digital finance will reshape every company that has a repeat consumer financial interaction. Insurance, retail, services, and more will all seek to differentiate by offering financial products. (6/10)

Shakeout of the mid-stage. A wave of fintech companies are reaching mid-stage, and are at the point that they must raise a mega-round, become profitable, or sell. Investors are waiting longer and waiting to fund the winners, so many of the copy-cats will likely struggle or sell.

Emerging infrastructure. Under the surface, there is a wave of early fintech infrastructure companies solving important problems (identity, KYC, compliance, risk). The most exciting early fintech companies are the ones most people won’t hear about for years. (8/10)

Multiple arbitrage? Many late-stage fintech companies are adding lending services, and investors are valuing this new revenue at software multiples. Many lenders are adding great fintech products, but are weighed down by low lending multiples. Maybe this will correct; maybe not.

Lots of opportunities in business banking. Despite the neobank boom, business banking is largely unaddressed and represents significant profit potential. Hopefully we will see much more attention here in 2020. (fin)

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