By Allen Miller from Matrix Partners
Earlier this week I attended Money2020 in Las Vegas. In just over 5 years, Money2020 has become the leading industry conference for everything to do with FinTech. It’s a jam-packed but valuable 4 days of expert panels, startup pitches, networking events and keynotes from industry leaders. I was there for just under 24 hours, which meant the experience was even more of a blur. This post is my attempt to capture twelve of the biggest learnings from the conference.
Lesson 1: Money is still the #1 biggest stressor for most Americans, understandably so. Dan Wernikoff from Intuit was one of the keynote speakers Tuesday morning and some of the data points he surfaced on consumer behaviors around money are sobering:
- 44% of Americans cannot come up with $400 for an emergency.
- 49% of Mint users spend more than they make.
- Intuit customers on average paid $1,700 a year in interest.
Lesson 2: Most financial institutions are not adequately meeting the needs of their customers. Despite the potential opportunity created by the high stress around money, banks and other financial institutions really struggle to provide the experience their customers need. This is in part because most financial institutions are product centric not customer centric. The result has been notoriously low NPS scores and a disenchanted end user. Even more alarmingly, most customers of the leading banking brands distrust their banks:
Lesson 3: Among an already pretty unhappy customer base, millennials are the most disenfranchised of all. As Philippe Dintrans, Chief Digital Officer at Cognizant put it, most financial institutions are totally missing the mark with millennials. That is in part because millennials exhibit fundamentally different behaviors than earlier generations around things like savings. 63% of millennials are focused on saving towards desired life goals (e.g. getting out of student debt, purchasing a home, etc.) as compared to 45% of gen Xers and baby boomers. 55% of gen Xers and baby boomers are focused on developing savings towards retirement, where only 37% of millennials are planning for retirement
Lesson 4: FinTech startups have capitalized on the failures of incumbents by addressing specific pain-points with carefully designed products. The examples are smattered across financial services but a few examples that stand-out:
● Wealth management was traditionally a confusing and fee-heavy landscape to navigate. Betterment created a beautiful and educational product that reduced fees and enabled a better user experience.
● Peer-to-peer money transfers traditionally required a manual process that took days and trips to the bank. Venmo made it simple, quick and fun to do P2P payments.
● SMBs used to have to use clunky check-out payment methods that locked them into a set location and required back-end processing to reconcile the books. Stripe enabled any merchant anywhere to accept payments with ease using an iPad.
● Applying for, managing and refinancing loans was historically a painful process for most students. SoFi provided students with an easy way to apply for and refinance their loans all with the promise of a lower interest rate.
Lesson 5: Barriers to entry have never been lower to starting a FinTech business. It’s not just that the cost of starting a business in tech has been dramatically reduced (which has been well documented). In FinTech, there are also important industry-specific enablers allowing startups to enter and compete with the incumbents:
● Insurgents don’t need a large balance sheet to open business. For example, marketplaces like LendingClub and Prosper connect borrowers and lenders without underwriting any of the loans.
● Regulatory hurdles, for almost every sub-category within FinTech (with the exception of Blockchain / crypto assets), have been removed thanks to early pioneers like PayPal.
● Platforms and developer tools like Stripe and Shopify have reduced development costs and time-to-market dramatically enabling SMB merchants to sell with the same ease as larger enterprises.
Lesson 6: Large and enduring companies have been and will continue to be built in FinTech. In two decades, PayPal, the “original” FinTech startup has reached a market cap of $84B. By comparison AMEX, which was founded a 167 years ago, has a market cap of $82B. Many more enduring companies will be built in FinTech in the years to come.
Lesson 7: There is no shortage of venture money. As of today there are 36 FinTech unicorns globally — that number represents 17% of the total share of unicorns. The venture market has realized the breadth of opportunity in FinTech and more money has poured into FinTech than ever before. In 2008, the number of FinTech companies funded was just over 200. In 2016, the number of FinTech companies receiving venture capital exceeded 5,000. In the same time period, venture funding from a dollar perspective climbed from <$1B to close to $60B.
Lesson 8: Great companies are being built across categories. With this increase in FinTech funding, great new companies are being built and entire sub-categories, from payments to insurance, are being served in new ways. Some of the really big winners of today either didn’t exist or were in their infancy 10 years ago. A few examples include publicly traded companies (LendingClub, Square, etc.), unicorns (Stripe, Sofi, GreenSky, CreditKarma, AvidXchange, Gusto, etc,) and several others that are well on their way (Betterment, Affirm, Plaid, etc.)
Lesson 9: Many think that the big area of opportunity for FinTech is in Blockchain/ crypto assets but that may not necessarily be true. Blockchain/ crypto assets are certainly getting all the attention right now but there are plenty of other areas that are just as interesting on both the B2C and B2B sides of the table. Some areas that are particularly exciting include:
● Consumer: (1) personal financial management, (2) insurance, (3) real estate and (4) investing / wealth management
● Enterprise: (1) institutional investing, (2) infrastructure apps, (3) SMB tools, (4) commercial insurance and (5) security & fraud detection
Lesson 10: Blockchain — lots of noise but few clear signals. Bitcoin today is trading at $5,500+ per coin and the total market cap of all cryptocurrencies is $170B. ICOs meanwhile have raised $8B in 2017 to-date. In the midst of this some things are clearer than others. What is clear today is that crypto assets have a definite use case as a store of value. What’s less clear is how we get from there to the end goal of software with no central operator, which is the big promise behind blockchain. The big advantage to blockchain, as Adam Ludwin from Chain put it, is “censorship resistance” (access is unfettered and transactions are unstoppable) but we have yet to see killer applications that can cannibalize existing practices.
Lesson 11: It’s not all about the U.S. ~1/3 of today’s FinTech unicorns are outside the U.S. (Asia + Europe). U.S. FinTech companies can likely learn a bit from their peers in other geographies. Behavioral and cultural differences certainly exist but there are a few clear examples of this that came up during one of the payment-focused panels. For example, in China, WeChat is using messaging capability to allow social payments. Stan Chudnovsky, the Head of Product for Facebook’s Messenger, revealed during one of the payments sessions that Facebook is developing this and expects it to be a key use case in the next 18–24 months. But in this space we are certainly followers not leaders.
Lesson 12: The FinTech community grows more vibrant and robust each year. Money 2020 was founded 5 years ago and since its launch then has grown into the leading FinTech conference globally. There are now 11,000+ attendees, more than 1,700 CEOs & Presidents and 85 countries represented. Still a lot of opportunity ahead but the numbers speak clearly to the vibrancy and enthusiasm in the community. Many thanks to the founders of Money2020 Anil Aggarwal, Simran Aggarwal and Jonathan Weiner for another great conference. Looking forward to next year!