Issue #39: 🆕 The FR Jobs Board, Stasis Becomes The Default For Incumbent Banks And More PFM Talk
👋 Hi, FR fam. I hope you’ve all had a great week.
A quick shout-out to all the $GME diamond hands (💎 🙌 ) who were straight-up ripping the faces off all the shorts… before it all came tumbling down. I can’t wait to see where this all goes. For all the non-degenerate readers who don’t spend their days on r/wallstreetbet, you can get the latest on the $GME sage HERE.
Ok, before we dig into this week’s issue of FR, I’ve got a quick announcement about a brand spanking new FR initiative.
🆕 Launching The FR Jobs Board
Finding that next amazing hire for a startup is hard. Like really, really hard.
It's even more complex in the world of fintech because you’re often looking for people with particular skills. Whether it’s a developer who gets the acquiring side of payments or a person who’s got experience building a compliance program from scratch, it’s not easy to find that next superstar hire.
So to help, we’re starting a jobs board that is specifically targeted at the fintech sector. It’ll be a place where job hunters will be able to find the most exciting roles in fintech and where employers can show off the amazing fintech roles they have going at their company.
You can check out the FR jobs board right here → www.jobs.fintechradar.co
The FR community is filled with amazingly talented people from some of the fastest-growing fintech startups — name a fintech unicorn, and we probably have a few people from that company who are avid FR subscribers. So this is the perfect place to find your next hire 😉.
So to kick things off, we’re throwing the gates open for the next month and providing free listings for all FR subscribers as a thank-you for being part of the FR fam 🙏.
So if you’d like to promote an opening at your startup, all you need to do is respond to this email with a link to the roles you’re hiring for, and we’ll add them to the FR Jobs Board for you. How’s that for service?
Also, if you’re looking for your next role, don’t forget to check out www.jobs.fintechradar.co.
☝️ One more thing, in next week’s issue of FR, I’ll be spotlighting 4 jobs from the ones submitted. Make sure you get all those job openings across to me to be in the running to have them highlighted right here in FR.
🤷♂️ Prediction #3: Statis Becomes The Default For Incumbents
🥡 Takeaway: 2020 was a watershed moment for the fintech industry. What was up until last year, a slow changing of the guard began to look and feel more like an avalanche of change — everyone went digital, and all of a sudden, it was clear the incumbents were losing ground in a meaningful way. In 2021 we’re going to see this trend accelerate like never before. It’s well and truly “Day 2” for incumbent FSIs.
Jeff Bezo’s shareholder letters are legendary. Famously, he ends each one in the same way.
Our approach remains the same, and it’s still Day 1.
At a 2017 Amazon all-hands, Bezos was asked what Day 2 looks like? He answered in typical Bezos style.
Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.
If banks lived on the Bezos timeline, it’d be day 10 for them.
I know it’s easy to rag on banks and, more generally legacy FSIs — they’re soft targets. Ask anyone senior executive at a large financial institution, and they know they’re lumbering oafs when it comes to innovation. It’s not news to them. They know the issues (in fact, they’ve usually had many innovation council meetings to discuss them), they get they need to be more “agile,” etc. However, the reality is it’s proving too hard for them to change. Steering the bank cruise ship towards what their customers need is almost impossible — by the time they even begin to move the rudder, their customers are already demanding the next new feature (one that has usually been pioneered by a fintech). Meanwhile, fintech startups are moving with some serious wind in their sails to solve problems for their customers and, more importantly, delight them with their products. What started as a few nautical miles of distance is turning into them being oceans apart.
When we look back on 2020, we’re going to realise that it was a watershed year for fintech. Everyone moving to contactless payments and being forced to go full digital for their banking (some for the first time) due to COVID19 exposed the digital divide between startups and the incumbents.
The meteoric growth of Chime, Afterpay, Robinhood, and the Cash App last year also showed how willing consumers were to try and, in many instances, move to fintech products as their primary financial services provider. Fintech has gone mainstream, and data is starting to show it.
Meanwhile, many incumbents continued to wander aimlessly, trying to come up with ways to innovate rapidly. A great example of this digital innovation meandering is Australian banks' response to the growing popularity of BNPL. In the midst of the battle for the highly coveted Millenial and Gen-Z banking relationship, CBA and NAB both countered with a new innovative product (checks notes)… another credit card.
There are many reasons for this slow, painful decline. I don’t propose to rehash all of them; there are literally book devoted to what FSIs can do to stem the blood loss that covers the topic better than what I could (I particularly like this one from Chris Skinner). However, part of it is that many have become so detached from the customers that they don’t even understand what their customers expect from them. Here is a great tweet from Jason Mikula (who you should definitely follow on Twitter) that perfectly captures this divide.
What about banks partnering with startups? Wasn’t 2021 meant to be the year we saw startups and FSIs buddy up Starsky and Hutch style to fill the innovation gap?
Digging into the data, we see a different story about how committed banks really are to partnering. According to Cornerstone Advisors, roughly a quarter of banks have no personnel dedicated to fintech partnerships. On average, those who do only have two FTEs dedicated to sourcing, diligencing, negotiating, and deploying fintech partnerships into their institution. Clearly, partnering is a priority for banks (/sarcastic font). More anecdotally, I struggle to think of a single founder I know who behind closed doors has anything positive to say about their experience working with a legacy FSI. Although most want the revenue, the cache, and the opportunities that come from partnering with an FSI, most realize there is a new set of opportunities emerging as ‘everyone becomes a fintech.’
The die has been cast, and we’re in the midst of a new step-change in the fintech sector. That day when fintech goes mainstream is happening, and 2021 is the year it goes into overdrive.
I could be wrong, and we could see banks churn out unicorns or leapfrog fintechs to regain their position as financial services innovators. But I doubt it. In fact, if you want to see what “Day 2” really looks like you need only walk into your local bank branch.
📣 The News Grab Bag
The story of Affirm’s cap table ◌ Is AML the world's least effective policy experiment? ◌ Plaid launches an incubator ◌ People are angry with FinTock influencers ◌ An economic analysis of Eth ◌ The UK is still king of the fintech funding hill in Europe ◌ How do current accounts compare in the UK? ◌ New competition legislation that could impact Chinese payments companies ◌ Jack Ma makes an appearance 😅 ◌ You can now pay for your Pornhub membership with Dogecoin ◌
📈 Notable Funding Announcements
It was another big week for fintech fundraising. This week 35 financings events were announced totaling $1.2b.
This week I had occasion to look at the PFM space again, and I thought I’d use two recent fundraises to discuss how the segment is evolving.
👨⚕️ Brigit Raise A $35m Series A →
Financial health startup, Brigit, last week announced a $35m series A that they actually raised all the way back in early 2020. The round was led by Lightspeed Venture Partners and had participation from a range of earlier round investors.
🤓 My Take: ‘Financial health’ has become a bit of a meme in fintech. In part, this is because it’s come to be coded pitch deck language for apps that tell H.E.N.R.Ys to spend less on avocado toast and save more for retirement.
The first wave of PFM apps tended to sit in the realm of telling vs doing and sprinkling the word ‘financial health’ on the landing page to establish their bona fides finance doctors (“one less coffee a day keeps poverty at bay”). However, we’re now seeing a new crop of PFM apps emerging, in what I’ll loosely refer to as PFM 2.0. This new cohort is moving beyond showing you where you’re spending your money — they’re doing the work for you.
The full evolved, Gigantamax Charizard version if you will, of this is commonly referred to as self-driving money (as popularised by Wealthfront) — basically, your money going to where it needs to be based on your financial goals and lifestyle without you having to lift a finger. This is great in theory, but super challenging in practice to implement. However, smaller steps are possible like anticipating and covering overdraft fees, bill switching, and more broadly, real actionable advice to improve your financial life. Simultaneously many PFM apps are beginning to shift to focusing on those experiencing financial hardship, those living pay to paycheck who could really use a helping hand.
This brings us to Brigit, which is differentiating on the basis of going beyond just telling its users that an extra cup of coffee is going to put them over their February budget. Beyond the usual account insights, Brigit also has a feature called Auto Advances that automagically deposits cash into your account so you don’t get stung with overdraft fees. According to their fundraising announcement, they’ve saved their users over $250 million in fees since our launch, with each user saving on average ~$500 annually. Beyond this, it’s interesting to see companies begin to [gasp] directly charge for their PFM product. In the case of Brigit, beyond their free tier, they charge $9.99 p/m.
Things are clearly evolving in the world of PFM products, it’ll be interesting to see where products like Brigit go — whether they evolve into looking more like a challenger bank (like for example Albert) or whether they continue to be focused on the niche they’ve carved out in the world of PFM products.
📋 Quirk raises £300k For Personality Based PFM →
PFM app, Quirk, announced they’d raised a pre-seed round of $300k from SFC Capital and a range of angel investors.
🤓 My Take: I don’t usually cover pre-seed deals in FR, but I thought Quirk was an interesting juxtaposition to my above comments on where we’re seeing many of the PFM 2.0 apps going with their offering.
According to their website, Quirk uses a personality test to uncover a user’s “money personality” and from this, they’re better able to provide guidance on how a user can better manage their money.
Although I’m not necessarily sold on the product's personality testing aspect, it does highlight the more personalised approach we’re seeing apps in the PFM 2.0 space take.
One of the things we tend to see in many apps that incorporate some PFM element is that they tend to go straight to the “what are you saving for?” question vs taking into account a person’s relationship to money. Again, not sure if a personality test is the best approach to this, but it does highlight that we’re going to see things get more personal (in a good way) in the world of money management.
☝️ Things You Should Know About
🤷♀️ How US Customers’ Attitudes To Fintech Are Shifting During The Pandemic →
COVID-19 changed how we interact with financial services and these survey results from McKinsey highlight some of the major changes we've seen across the US for the March - November 2020 period.
To summarise the results, fintech (as noted above) is hitting the mainstream. We’re not only seeing more adoption from the segments we’d expect but we’re also seeing adoption from new demographics that you might not have expected to become avid users of fintech products. For example, Paypal’s fastest-growing segment during the height of the pandemic was people over 50!
I highly recommend checking out the report, it’s well worth a read.
🇳🇬 How Fintech And Serial Founders Drove African Pre-Seed Investing To New Heights In 2020 →
There’s no doubt 2020 was a breakout year for African fintech. Paystack’s acquisition by Stripe felt like it was a big moment for the growing Nigerian startup ecosystem. Having said this, and as the article notes, there are a lot of fintechs players (especially in the infrastructure space) worth keeping an eye out for in 2021. There is no doubt 2021 is going to be a big year for fintech in a number of countries across the African continent.
Alternative assets have been running hot. Everything from sports cards to vintage video games have been on an absolute rampage recently with new record prices being set for them at what feels like every auction. In this regard, it’s probably no surprise that we’re also starting to see virtual assets like NBA Top Shots mooning.
NBA Top Shot is a particularly interesting story in the world of virtual assets. The company is a JV between the NBA and Dapper Labs (the company behind Crypto Kitties). As you’ve probably guessed, ownership of these digital assets (basically video clips, referred to as ‘moments’) is tracked on a blockchain. When a token represents a unique asset they’re referred to as non-fungible tokens (NFPs). NFPs have also proved to be popular in the digital art community, where there have been some monster sales of late too.
The rise of NFPs seems to be aligned with the general rise in prices across the crypto market. It’ll be interesting to see if NFPs, like NBA Top Shot, continue their steady rise or whether they go the way of Crypto Kitties.
🎧 Podcast Recommendations
Here are this week’s podcast recommendations. Enjoy👂
The Anatomy of the Swipe with Ahmed Siddiqui → Ahmed Siddiqui is probably best known for his excellent book, Anatomy of the Swipe, and in this ‘pod he discusses his time at Marqeta and how he went from fintech n00b to author of the most approachable book on payments out there.
Jen Ross - Always Questioning the Narrative → In the spirit of the $GME craziness going on at the moment I thought I’d throw this podcast with Jen Ross into the mix. Jen is a former short seller and in this ‘pod, she chats about what it’s actually like to hold some diabolical short positions. It’s a long one, but well worth a listen — if just for the Tesla short chatter.
❤️ Show Some Love For FR
📈 You can check out Radar, an open database of Australia's fintech ecosystem. You can find it here → 📡 SideFund Radar
📧 Feel free to reach out if you want to connect. I'm me@alantsen.com and @alantsen on the Twitters.
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🙏 What did you think of this week's issue of FR?
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