November 13, 2019
Following another successful Money20/20, we find ourselves thinking about the year ahead for FinTech and the opportunities that will emerge in 2020 and beyond…
Over the last decade, no industry has been more deeply impacted by technology and innovation than financial services. From mobile payments to digital banking to next-gen commerce, FinTech has forced legacy products and processes into the digital age in a way that has vastly improved the user experience for consumers and businesses alike. We need look no further than companies like Square, Robinhood and Stripe to understand FinTech’s reach and impact on the world.
This first wave of digitizing financial services — FinTech 1.0 as we like to call it — has created an aggregate private value of $187 billion. But despite the monumental transformation and value creation, we’re only just scratching the surface of FinTech’s full potential. The next wave of change — what we at Oak HC/FT call FinTech 2.0 — will see the widespread integration of financial technology within virtually every other product and service — embedded in everything from transportation to entertainment to healthcare and beyond. This idea was reinforced at Money20/20, where we witnessed many key speakers discussing financial services from companies like Home Depot, 1–800-Flowers.com, Netflix, Microsoft, Facebook, Pinterest, Google, eBay, as well as actress Chrissy Metz.
Looking ahead, here are some FinTech 2.0 predictions we see on the horizon within the major categories within FinTech.
The digital age has enabled cheaper, faster, and more efficient methods of transacting and moving money. In the next generation of payments innovation, we expect businesses to deliver their products globally — with no constraints on where, when, or how they process payments. Similarly, consumers will be able to pay exactly when and how they want, without having to think about the process. Poynt and Rapyd are already playing a role in shaping this.
New digital touch points created vulnerabilities in identity and security, necessitating the creation of fraud and risk tools to stop bad actors. This effort has been tremendous, however there is still much to do. We believe the next iteration of innovation will seek to address an equally important but no less complex issue of “identity diaspora.” What we mean by this is the notion that your identity and financial footprint is now dispersed across many platforms and digital providers. We believe, enabling financial services providers to securely verify identity and understand financial assets without compromising the experience is a complex problem waiting to be solved. Feedzai and Namogoo are two examples of companies pushing the fraud frontier forward.
We have started to see the transition of the archaic, offline insurance experience into the online world. The next wave promises to take insurance innovation further — both for providers as well as consumers — by embedding the discovery, underwriting and claims processing into daily life. Consumers and businesses as diverse as transportation, real estate, and logistics will soon be protected without even having to think about insurance beyond the initial selection phase. Groundspeed is the first of many companies helping to do this.
Wealth & Asset Management 2.0
Wealth has started to lower barriers to entry for investment products but hasn’t done enough to automate the consumer experience. We want to get to a place where wealth management promises to delight consumers with a whole new experience, automating their wealth creation across home ownership, healthcare, retirement, savings, and investing. For example, consumers will be able to invest in products and services they identify with in an unconstrained manner. Similarly, companies will be able to create even greater opportunities for their employees by integrating new wealth management options — beyond the traditional salary and benefits we know today — like Pagaya and Next Capital.
Credit and Lending 2.0
The first wave of credit innovation has enabled more accurate underwriting models with more data inputs, greater consumer visibility, and statistical modeling to better understand risk. We believe the future of credit establishes deeper integrations with purchasing flows and relies more heavily on machine learning to drive decision making. We also believe innovation will allow for the portability of data across tools and platforms while managing sensitive data flows in a secure manner. Urjanet is a great example of this.
Real Estate 2.0
Real estate gave rise to Zillow, Redfin, and a whole host of other digital tools for making rent payments, searching for homes, or accessing real estate financial products. In the next decade, we see innovation eliminating pain points and inefficiencies, giving back more economic surplus during the transaction to the buyer and seller, and providing greater tools for agents, landlords and other individuals to increase access to property data.
FinTech 1.0 has transformed all aspects of financial services and created remarkable value. But the opportunities to come, enabled through the arrival and expansion of FinTech 2.0, will truly reshape all industries in the decades ahead. We are excited to partner with the next wave of founders focused on building FinTech 2.0.