2020 Fintech Prediction Palooza

Some of you have noticed that I have already missed a day of the blog in 2020.

Unfortunately, I spent the last two days in the hospital with a bad infection of my colon. It is under control now and I am back home feeling good, but to be honest I was scared and not in the mood to write while I was getting all my tests and feeling terrible.

Let’s get back on track with a longer prediction post I have been working on.

I made a few predictions last week but today wanted to write about the area I focus on…fintech. Our fund (Social Leverage) has not announced a couple of our most recent fintech investments but will be doing so shortly.

In the last 10-12 years fintech (I started making fintech investments in 2006) has gone from a neglected category to a very crowded ‘can’t miss’ venture capital playground.

It makes sense as the financial crisis threw the banking world into chaos and while banks were figuring out fines, and how to survive post crisis, new leaders on the edge of regulated banking got a foothold:

Bitcoin
Coinbase
SoFi
Paypal
Visa
Mastercard
Stripe
Lending Club
Adyen (Amsterdam)
Ant Financial (Alibaba spinoff)
We Chat (Tencent)
Square
Robinhood
Chime
Vanguard

I mixed some public companies in here because we have learned that nobody is threatening companies like Visa and Mastercard, and others like Ant Financial and Paypal are now making huge global acquisitions themselves after being spun off by public companies.

Like I said, the year 2019 landcape in fintech is a lot different than the pre financial crisis landscape in 2006.

So where are we today and what is likely to happen in the coming years as these fintech startus continue to mature?

My eyeballs and gut say the current fintech landscape is way too crowded with me too startups that will not have enough capital to take on more established (well funded) startups and the banking incumbents that seem finally ready to take the fintech challenge of the last decade seriously.

Look no further than the free trading ‘free for all’ that started with Schwab dropping commissions a few months back and just yesterday Vanguard doing the same.

The Robo advisors like Betterment and Wealthfront may have gathered $20 billion in assets, but event at a generous 50 basis point in fees on 20 billion in assets…the revenue is just $100 million. Wealthfront and Betterment won’t be raising fees anytime soon. Take a look a this chart which shows where fees are heading. Maybe some acquisitions take place, but Vanguard looks stronger than ever.

You can’t just dismiss all the robo and non bank bank growth and activity. So far in this fintech cycle, it is estimated (using 3Q 2019 CB Insights data) that U.S. fintechs have taken 60+ million customers from banks across the budget, save, borrow, invest product spectrum.

The big question all predictions must answer in 2020 is ‘Can Fintechs Really Beat Banks‘?

I personally think we will see a lot more acquisitions (mega and small) as the banks come to terms with the 60 million accounts outside their direct reach.

My friend Julian Hebron does a great job summarizing this question – Can Fintechs Really Beat Banks – in his post you can read here.

I will be revisiting my post here and Julien’s a few times as the year progresses.

And of course…fintech entrepreneurs reading this or friends of fintech entrepreneurs, please keep sending me your pitches and ideas. I am always happy to read and share my opinion or try and match you with other capital. There are still many angle of attacks that will allow startups to succeed in this world of giants.

Have a great weekend.