March 3, 2020
A few weeks back, the Oak HC/FT team gathered some of the best entrepreneurs and founders, in our portfolio and beyond, in San Francisco for an evening of collaboration within the FinTech community. Around this event, we conducted a survey on the current state of financial services and what the future has in store for the industry as we enter a new decade. Below is a summary of the results and our take on what this all means:
1. In Big Tech, It’s All About Amazon
Is there anything the ecommerce juggernaut is not getting into? Apparently not, or at least so say our expert respondents. 55% believe Amazon will make the most meaningful advances in FinTech in 2020, followed by Apple (24%.) Many of the Big Tech players have made forays into FinTech in the 2010s with mixed levels of success (e.g. Google Wallet, Apple Pay, Facebook’s Libra, etc.) Time will tell if Amazon’s impending invasion of banking actually pans out, but it sure seems like a safe bet that they will do something big here this decade.
2. Incumbents Across Categories are Waking Up to FinTech
Visa sent a small shock wave through the FinTech world when it announced its acquisition of Plaid for $5.3 billion last month. Unsurprisingly, 36% of respondents believe networks will be the most acquisitive moving forward; though banks (29%) and payment processors (26%) also had their fair share of representation. Regardless of who is buying, hopefully the M&A activity picks up in the decade ahead because we have yet to see much liquidity, despite the progress made across other dimensions.
3. Will Stripe Ever IPO?
69% of respondents believe Stripe is the most likely FinTech to IPO in 2020/2021. This is despite the fact that John Collison has repeatedly told media sources over the years that the company has no plans to IPO. After the last financing event in September of 2019 (which valued Stripe at $35 billion), Collison re-iterated his desire to keep the company private. Our take? It’s possible that one of the other up-and-commers like Toast or SoFi makes its debut on Wall Street before Stripe does.
4. FinTech is About Better User Experiences; Not About Lowering Costs
Respondents believe that FinTech’s most important contribution to financial services is enabling better user experiences (62%) vs. lowering costs (14%.) Increasing access was also an important pain-point highlighted by a quarter of respondents. This seems to mesh with the reality around the companies that are gaining momentum today. Forbes FinTech 50 seems to highlight companies that roughly reflect this representation.
5. Are There Too Many Challenger Banks?
About half of experts (48%) stated that consumer finance feels over-invested. That’s unsurprising given the plethora of challenger banks valued at over $1 billion across Europe, the U.S., and LatAm. Many of these new entrants have exploded onto the scene with rapid user growth and momentum, though proving out the unit economics remains to be seen. Conversely, only 2% of respondents felt that infrastructure was over-invested. That’s music to our ears at Oak HC/FT because our FinTech portfolio is full of infrastructure companies, such as Au10Tix, Kryon, Namogoo, Ocrolus, and Rapyd.
6. If You Are a Crypto Believer, The Good News Is You’re Contrarian!
According to experts, Crypto is not making a comeback anytime soon; 76% of respondents believe that 2020 is going to be another slow year in the blockchain world. The only inkling of hope may be in the DeFi world where the collective market passed the $1 billion mark last week for the first time. Happy HODLing