Happy new year everyone! I just got back from a two week vacation in Thailand and am currently in a somewhat delirious, jetlagged state, so what better time than now to look back on my 2019 fintech calls :). I’m also planning on sending a follow-up newsletter in the next few days for 2020 “predictions” so look forward to that 🙌.
Without further ado…
1) Neobanks - Gradually, then suddenly
Neobanks started to get some more mainstream attention in 2018, and I believe that in 2019 companies such as Chime, Acorns, MoneyLion, Empower, Aspiration, etc will continue to scale.
By the end of 2019, large FI's will be caught by surprise at the amount of scale that these neobanks will achieve and will start thinking about M&A for user, product, and talent acquisition.
Mixed result I think - the largest neobanks continued to scale whereas those with less scale started to hit some growth limits. For example, Chime was rumored to be raising at a $5B+ valuation with over 5MM customers after just raising a $200MM round in March 2019 valuing the company at $1.5B. However other neobanks with lesser scale started to see some growth concerns - I thought this would lead to more M&A opportunities but hasn’t quite been the case.
2) Global competition heats up
Related to thought number one, 2019 will see later stage fintech companies compete on a global stage
UK + EU based companies such as Revolut, Monzo, N26, and EToro have all announced plans to launch in the US
Meanwhile US based companies such as Robinhood, Coinbase, Acorns have already launched small beachheads in countries such as Australia + UK
A lot of these companies have requisite amount of significant capital to launch internationally and scale quickly, will be particularly interesting to see how it affects the US neobank market
True, but a bit obvious in retrospect and it’s taking a bit longer than I expected to get to launch. N26, Monzo, and Revolut all have their US product live in various states from an open beta (Monzo), to waitlist (Revolut), to full subway ad launch (N26) - however it took the better part of a year+ to get to this state! More and more companies are also announcing international launches - Robinhood started their UK waitlist in November, Gemini continued to expand out in Europe, Coinbase expanding out more products across Europe, and many more.
3) Bitcoin price remains (relatively) constant
¯\_(ツ)_/¯ seems as though most retail investors have been burned, so at this point it's mostly hodler or institutional investors
would not be surprised if we still see more massive rises + dips driven by algo's chasing signal
Mixed? Bitcoin Dec 2019 - $3,900. Bitcoin July 2019 - $12,500. Bitcoin Jan 2020 - $7,200. Still ¯\_(ツ)_/¯, not making anymore Bitcoin predictions…
4) Enterprise blockchain still isn't really a thing
I've blogged about this before, but I'm still super bearish on "enterprise blockchain" - I have yet to see a great use case that's actually easily implementable by a large enterprise
Getting an enterprise to buy and deploy a simple database is hard enough...
Still think this is true, debate me please.
5) AI moves into overhyped enterprise technology
Honestly more of a personal wish due to a lot of personal experiences this year with my banks...
The point isn't to completely automate personal banking, the point is make it easier for consumers to get their needs met in a de-risked manner
When it's something that should take 1-2 minutes, give me an AI but if it's something more involved, please stop making me click through 500 options, that's not using AI!!
Still think this is true.
6) Beginnings of a new credit model
A ton of companies are starting to investigate / build really interesting new credit models based off data separate from a pure credit score.
Companies to look at include Square, Petal, Brigit, Dave, Even, Earnin, Credit Karma, etc
I find CK to be really interesting as they've been able to use their scale to convince large US lenders to share underwriting models...
(Slowly) moving away from a delayed, pull based model to a real time, consumer-consent push model.
True. More capital products were launched for businesses this year including Toast Capital, Stripe Capital, etc. Meanwhile, consumer underwriting got a big lift from the regulators in Dec 2019 - U.S. federal banking regulators issued an interagency statement supporting the evaluation of alternative data when assessing consumers’ creditworthiness and recognized that the use of alternative data may improve the speed and accuracy of credit decisions. Big step forward for the use of alternative signal + more real time data to determine true ability to pay.
7) Winter is (finally) coming? Raise up.
Growth stage companies will continue to raise "mega-rounds" and stay private longer
I actually think this is not a bad outcome, allows fintech companies to focus more on long term value creation vs chasing endless growth (although of course they will still need to grow...)
True - a lot of large fundraises in 2019 and no new fintech companies signaling to go public any time soon. Fintech companies like Stripe, Robinhood, SoFi, Chime, MoneyLion, etc all raised large rounds in 2019.
8) Larger tech companies offering more "fintech" products
Everything is fintech if you look closely. I don't expect large tech companies to be launching competing fintech products any time soon, but increasingly they are starting to offer more products that look like fintech.
Examples include Uber Cash, Amazon Pay + Cash + Lending, Facebook's stablecoin for WhatApp India, etc
Privacy topics from 2018 will prevent many of these companies from launching new finance products quickly - public fintech companies to watch IMO are Amazon, Square, PayPal, and FiServ.
True. Facebook tried to launch Libra (and failed for now due to regulator concerns), Google announced that they’re testing banking accounts, Uber launched Uber Money, etc. Square continues to be my favorite public fintech company to follow - Square Cash continues to just crush all the metrics…
9) M&A activity driven by banking core providers
Hot take - I think we'll see FiServ ($29B market cap) acquire a "newer-age" banking core provider like a Q2 holdings ($2B market cap), or a large bank acquiring a smaller core banking provider to jumpstart a new application
Mixed result. Got the company right, but the price and acquired company totally wrong. Fiserv acquired FirstData in 2019 in a $22B all stock deal…
10) All of the large fintech unicorns stay private
Pretty self explanatory - it seems as though most unicorn fintech companies still have a healthy amount of funding (at least off the number of ads that I see still...), so no need to IPO for 2019
Unicorn companies will find other ways to provide liquidity to employees while still staying private ala Uber's secondary offerings, etc.
True! Carta posted an interested take on secondary liquidity as a employee benefit which is really fascinating - starting to see more companies do this as companies stay private longer.
Overall, I think I did pretty well! That being said, I also think that my “predictions” weren’t super crazy and a bit obvious - but it may also be due to hindset so you tell me :).