I’ve been spending a lot o time recently chatting with other fintech founders as well as my consulting clients on what the near future holds for fintech. Here are a few of the topical trends that keep coming up.
# 1. Of Course Generative AI.
This one’s obvious because it’s clearly impacting the way we work and get stuff done in every industry. There’s so much opportunity in accelerating how we generate customer and internal communications, documentation and code. As a learning tool and as an oracle of (mostly true) knowledge on any subject. But also, there’s real potential to solve longstanding challenges in open banking and open finance. Huge problems with data quality and consistency has been one of the dirty secret problems in fintech for a while. Now with new standards like ISO20022 emerging with (hypothetically) rich new rails for moving payments data, that just creates more problems of how to consistently supply these rails with useful data from fragmented sources. And then on the other ends of the pipes, the parsing and finding any valuable sense-making from firehoses of rich-but-inconsistent payment data, bank data, accounting data etc. You may have seen @Shpigford playing around with GPT4 to fix card txn data. Strong new LLM AIs may also be the answer to…
#2. Plateau of productivity of Open Banking and Open Finance
API aggregators of fintech data (think Plaid, Merge, Codat, Finch, Pinwheel etc.) are hardly new-news. But if you’ve been building on them, the experience is getting steadily better. Quality, reliability and coverage issues are improving. New AI tools might give us another step function in utility of creating new value from all of these sources. But the other big news is that it’s not just ‘read’ usecases anymore. Write-back cases are emerging, and 2023 is the start (read the US catching up to rest of world) of ‘execute’ permissions coming to open banking with new realtime payment rails starting to come online.
#3. RTP and ISO 2022
Realtime funds transfers are happening, finally happening and in the US too. That said, implementations like fednow still have a lot holes and missed opportunities. But at least it’s happening. The new ISO standard is super interesting too for it’s potential to convey SO MUCH more useful context and SKU info with payments. All that potential though, is still going to be just potential for a while now. I think it’s going to be a long while before ISO2022 and RTP is being used and implemented effectively and ubiquitously. But that’s years of opportunity and solution building for us builders to work on, just on the platform/network side. Not to mention the near infinite number of solutions that could/should be built on top of fast, data-rich, global and ubuiquitous money movement rails. Once those conditions are finally met. Final note: Blockchains never were, and never will be needed to make realtime payments work. Computers have been more than capable of realtime messaging since arpanet was invented. Fast payments is a problem of firstly multi-party coordination, standardization, competing economic incentives, politics, risk-controls and regulatory compliance. Actual technolonogy choices as long been very low on the list of the harder problems to solve.
#4. True digital issuance
Have you noticed, that you really don’t need to bring your wallet out with you to pay for (almost) anything? I’ve been waiting years for this tipping point. It means something special. Digital-only issuance (provisioning a card straight to applepay, chrome etc.) becomes… enough. It also means that the marginal cost of spinning up a unique payment credential can approach zero. So may interesting usecases here for spinning up virtual ‘cards’ on-demand in the consumer space, not just in commercial (where virtual cards have been taking off for a while now).
#5. The year of Post-crypto awakening
FINALLY the crypto bubble is bursting. I really lookforward to the clearing of the crypto fog. Once free of that miasma of bullshit, so much talent, time and attention can potentially get back to building real solutions based on actual technology. Still, hold on to your seats for the last few shoes to fall, we’ve yet to see the collapse of some remaining mostly-fraudulent bubbles like the ‘stable’coin Tether. But it’s a matter of time.
#6. The Post SVB cold shower
2022 was a brutal year of valuation implosion across fintech. We might hope that q4 last year was the bottom and that things will trend better. But of course the investment environment will still be challenging and fintech may never again be as (inexplicably?) sexy as it was through the last few years. I am also concerned that we’ll all take the wrong lessons from the collapse of SVB. I’ve seen this movie before in past cycles. A tendency for the big institution and from regulators to retrench from all innovation and creativity in financial services. The tragedy of SVB was that they were a great bank! One of the few that would even provide high quality, essential basic banking services to growth companies and SMB. 90% of the bank was being run exceptionally well. What failed them, were egregious but very specific failings in the treasury department.
