Issue # 28 - Top Six Observations from Money 20/20

Issue # 28 - Top Six Observations from Money 20/20

Conferences are back! 

Money 20/20 had over 8000 attendees - yes, I wore my mask! 

The whole thing felt like a high-school reunion...while running a marathon...for three days straight. 

Money 20/20 has been anchored around consumer payments and fintech. So while there were lots of startups, investors, banks and vendors there appeared to be precious few corporate CFOs or B2B payments players. Maybe next year they will put more focus on the larger, $125T B2B payments market. 

For those who missed out, here’s a few of my observations: 

1. Fintech investment is feeling bubble-ish. 

  • There were many VCs who were nervous about the valuations of fintechs. 

  • Many VCs (as well incumbent banks and tech vendors) said something like “There are so many startups I don’t understand what they all do...let alone tell the difference. 

  • But they’re sitting on an extraordinary amount of capital they need to deploy, so they are pushing hard to find new deals (and that’s how bubbles work).

2. Is there a BaaS (banking-as-a-service) bubble on the way? 

  • A key go-to-market challenge for fintechs and neo-banks has been securing partnerships with banks for issuing cards, providing deposit accounts and/or accessing payment rails.

  • There were a TON of both BaaS fintechs to help address this challenge, as well as many small, agile incumbent banks beginning to offer their own BaaS services.

  • It’s clear that banks are getting into the BaaS game to stay relevant in a digital world.

  • As a result, it will be easier (and presumably less expensive) for fintechs to secure partners, but the margins available to BaaS banks and fintechs will likely decline.

  • Bloomberg: Silicon Valley’s Hottest Money Apps Depend on Old-School Banks

3. New digital bank entrants. 

  • Small banks without a lot of budget to spend on technology have struggled to assemble compelling digital experiences for their customers.

  • There are lots of infrastructure-as-a-service companies coming to market with embedded fintech offerings for these banks. 

  • As most of these offers are still horizontal in nature (mobile interface-as-a-service, cash management tools-as-a-service, invoicing-as-a-service) these banks are a bit overwhelmed by the options.

  • However, the combination of small nimble banks with embedded fintech companies could pose a challenge to large incumbents.

4. What’s the future of interchange? 

  • Many of the US based neobanks and fintechs rely on interchange as their primary revenue source. 

  • What happens if US regulators decide to mandate lower interchange as they have in other jurisdictions? 

  • Will banks (and fintechs) double down on lobbying dollars to ensure that doesn’t happen?

5. Payment Orchestration was the buzzword du’jour. 

  • Payment Orchestration is a niche Infrastructure-as-a-Service that masks the complexity of managing multiple payments services and providers for merchants.

  • I met at least a dozen startups offering such services and most are very well funded.

  • While the value propositions include reducing development costs, increasing resiliency, and even least cost routing are clear, it’s not clear if they’re sustainable. 

  • Managing payments data will probably be more sustainable than managing payments. 

6. Financial Inclusion is actually a thing now.

If you have thoughts or questions to share on this series, please leave a comment.

These musings on the developments in data-rich payments are assembled by the team at 20022 Labs. See more issues and subscribe to get updates in your inbox.