Ben Soppitt

Future of Fintech 2020 Predictions Review

Back in Dec 2019, we posted an article called 10 Irreverent (irrelevant?) Predictions for the Future of Fintech. It’s been a year since this was posted so seems timely to review how accurate these predictions turned out to be.  Given what an incredible year it's been (not in a good way) and the entirely unexpected arrival and impact of Covid-19, it should make for an interesting read.


The key predictions were:

  1. Big tech will fail in Fintech
  2. Banks will fail in Fintech but it won’t matter
  3. At least 1 Wework’ish blow-up by a Challenger Bank
  4. Bifurcation of the “Challenger Bank” market into mass undifferentiated brands and hyper fragmented ones
  5. The next big battle will be for revenue
  6. The next big battle will be for affluent consumers and credit cards
  7. Competition will change from access to value for money
  8. PFM apps will have to consolidate or die
  9. The rise of real product innovation
  10. Bank as a Service will struggle
  11. (+1 bonus). Investors will start to look at the market in a more nuanced way

So how did we do?

Big Tech Will Fail in Fintech

This was a bold one - but whilst we have not seen any massive blow ups we have certainly not seen any categorical success either.  True Apple Card has launched and seen fantastic uptake but we have not seen any data on its usage.  Those very expensive white metal cards are sitting unused in many wallets and drawers during lock down.  Google relaunched (again) their Fintech strategy this time with Google Plex but too early to say if this will be successful.  Nothing new from Amazon or Microsoft. Samsung Pay showed brief life after some years of no news about their Fintech strategy with, wait for it, a debit card.  Not exactly worth waiting for and has sunk without trace since.

No doubt Covid-19 has helped drive both in store contactless and of course online as well as in app purchases so its assumed the numbers for Apple Pay and Google Pay transactions are flying. Samsung Pay having made the odd decision not to bet on in app or online has missed again.

Jury’s still out on this prediction. 


Banks Will Fail in Fintech But it Won’t Matter

No news from any Big Brand Bank except possibly the news BBVA is giving up their ambitions in the US including their Fintech strategy.

Going to call this one as: true.


At least 1 Wework’ish blow-up by a Challenger Bank

Was really thinking about Chime, Varo and co. here but they have just gone from strength to strength. We have had Beam, of course, but not a major big fintech blowup.

So this one is a miss (at least so far).


Bifurcation of the “Challenger Bank” market into mass undifferentiated brands and hyper fragmented ones

This one we are going to take as a win.  If you follow our Fintech tracker you will know that there has been a continuous stream of new neobank launches with a strong focus recently on social impact and more affluent segments.  There are almost 90 in the market now. Still a fraction of the ~5,000 off FDIC member banks of course.

Social Impact brands have really diversified since Aspiration, we have Tenth, Daylight, Spiral and Bankpurple to name a few plus Bella most recently with a value proposition about love.

Full credit on this prediction. 


The next big battle will be for revenue

Difficult to assess this one as the larger challenger banks are typically trying to get people to focus on their size not the quality of the customer base and are very tight lipped indeed about financials. Behind the scenes though we know this prediction to be true so we are going to call it as a win.


The next big battle will be for affluent consumers and credit cards

Credit Cards have been a big part of the last quarter - and more affluent cards at that so a double win. We have seen the launch of the X1 Card (you know it's for affluent consumers as it's metal you know), BlockFi’s new crypto card, Sofi’s credit card (at least 4 years in the making and its a great very simple value prop).  Earlier in the year we had HM Bradley and Grand Reserve.

We are going to take this one as a win.


Competition will change from access to value for money

It's clear the time when launching a virtual checking account, debit card and an app (with 2 day salary advance!) and calling yourself a Fintech innovation play has come and gone.  We see richer features and functionality coming (like credit cards) and these products evolving quickly.  Value for money is less clear cut. Sofi stands out — flat rate 2% credit card — no messing or obfuscation is a great example. HM Bradleys claimed 3% cashback/APY is a lot less clear to understand. We subscribe to the point of view that if it takes you more than 2 seconds to understand the return on your financial products then we apply the “if it looks too good to be true it probably is”.

The established bait-and-switch model in financial services is still alive and well unfortunately and many Fintechs feel compelled to propagate this model so we are going to call this as a miss with sadness.


PFM apps will have to consolidate or die

With at least 80 PFM apps in the market that we know of, this segment shows no sign of dying off and being subsumed into apps that say and do and offer products that hold and manage funds rather than report on them.

We have seen very few new launches of significance so maybe we have reached the zenith and the market contraction will come next year.

So, a miss here.


The rise of real product innovation

Some interesting plays emerging — we would like to humbly include Unifimoney here.  Also of note is Finch and Save — both playing in the space of saving/investing.  GooglePlex seems to be more about access and channel innovation rather than product innovation.  BlockFi’s use of crypto is interesting. 

But on the whole it would not be fair to call this a win.


Bank-as-a-Service will struggle

On the basis of Bond, Railsbank and Productfy all having sizable rounds this sector seems to be in extreme health.  Banks' own efforts at creating their own API’s have (surprise!) been a lot slower than predicted. 

What is really encouraging is the product and service breadth these platforms are working to enable e.g. Credit Cards. 

So we took the L on this.


Investors will start to look at the market in a more nuanced way

Based on our own experience, this is definitely starting to be true. The proportion of discussions with investors that lead with “it’s a very crowded market” is in decline. There is a recognition that similar to every other consumer market in the world customer segmentation is a thing and whist an investment in Chime or Varo is great it only gives you access to one portion of the market and arguably not the greatest portion at that.

So we are not so confident to say that this was a yes, but definitely the money is seeing a broader and more segmented market opportunity than the unbanked/underbanked alone.


In giving ourselves a grade for this, we think a B- is fair but must do better next time.

We will publish our predictions for 2021 soon.


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The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.