Fintech’s Funk Smells Like Teen Spirit

Observations from the Fintech Snark Tank

If you were between the ages of 14 and 21 in 1991, you may remember the release of Nirvana’s Smells like Teen Spirit, which debuted in September of that year. The song launched the band to superstardom and became an anthem of teenage angst for millions of disenfranchised Gen Xers.

Today, these Gen Xers are in their mid-40s to early 50s, and many (if not most) have jobs, families, and maybe even children of their own who are experiencing teenage angst.

In other words, these Gen Xers have become disenfranchised – or more simply put – functioning members of society.

What does Nirvana mean? Smells like Teen Spirinot related to fintech?

There are parallels between what the disenfranchised youth of the early 90s (and every generation before and after for that matter) experienced and what today’s fintech is going through.

Fintech Funk: From hero to villain

For the past 10 years, fintechs have been the fair-haired child who could do no wrong.

Like children who are told they can grow up to be president, fintechs have been hailed and heralded as white knights who will solve the problems of financial inclusion, financial inequality and financial illiteracy. Fintechs have had a “superiority complex:”

“There is a notion that pervades the fintech industry that fintech startups are somehow more ethical than legacy banks, or that there is a fintech ethos that separates fintech from banks and somehow makes them morally superior .”

That veneer cracks. Fintechs are seeing massive reductions in valuations, cutbacks in funding and layoffs. According to a Forbes article titled In Fintech, 2022 is shaping up to be the year of layoffs:

“Rising interest rates, concerns about an impending recession and a precipitous decline in venture capital have prompted fintech entrepreneurs to aggressively reduce spending. Every corner of the fintech industry is feeling the pressure, from investment apps and digital teen banks to back-end trading software and insurtech outfits.”

Throughout this spring and summer, well-known fintechs announced cutbacks:

In addition, Forbes identified nine other fintechs that recently cut jobs without any announcement or public reporting of layoffs.

However, the low point for fintechs may have come in the last couple of weeks when Acting Comptroller of the Currency Michael Hsu warned:

“The encroachment of fintech into the traditional financial sector creates more complexity, and the rise of unregulated fintech will be the driving force of a financial crisis.”

Ouch.

Fintech’s Funk Smells Like Teen Spirit

The fintech “revolution” looks a lot more like an “evolution” at this point, reminding me of how we progress from child to teenager to young adult to adult (although, admittedly, some of us don’t quite make it last stage).

Although fintech is not quite in its teens yet, fintech is experiencing teenage angst.

Alex Johnson, author of the popular Fintech Takes newsletter, agrees:

“The parallels to teenage angst are strong. Spending money like it’s going out of fashion and then having to lay off employees = blowing your meager savings and having to move back in with your parents. Problems with regulators = my parents don’t understand me. Getting fintech- your company acquired by a bigger company (or god forbid a bank) = getting your first real 9 to 5 job and realizing that work sucks.Seeing the rise of Web3 and having a bunch of young talent missing to work with something cool = realizing that younger people think you’re boring.”

Maybe Teen Spirit doesn’t smell so bad

Although the Nirvana song grew to become the teen angst anthem for Gen Xers, few truly understand the reference to “teen spirit.”

The song’s video shows the band playing in what looks like a high school gymnasium, and during the song, students see the band tear up and destroy everything in the gymnasium.

For years I thought “teen spirit” referred to the energy generated by the teenagers in the mosh pit in the video, and I couldn’t imagine that it smelled very pleasant.

The reference to “teen spirit” in the song is actually a reference to “Teen Spirit”, a deodorant. According to Joe Queenan:

“The phrase ‘smells like teen spirit’ had been scrawled on the wall of Kurt Cobain’s apartment by Katherine Hanna, the lead singer of the band Bikini Kill. Hanna wrote this as a joke because her bandmate Tobi Vail, who was Cobain’s girlfriend at the time, was a fan of Teen Spirit deodorant.”

So I guess teen spirit doesn’t smell so bad after all. And – despite the funk it’s currently in – neither does the fintech industry.

Except it’s not really an “industry”.

Just as teenagers are part of humanity (as hard as it is for parents of teenagers to accept), fintechs are not an industry unto themselves – they are part of the financial industry.

Rebellious teenagers often threaten to start their own society, only to grow up, get a job and become part of the established society. Similarly, the key to fintech’s development is to take its part in the existing financial system – not to start a new one.

Each new generation grows to adulthood and brings new ideas, norms and attitudes to the society it eventually joins. And – believe it or not – many of the older generations adopt these ideas, norms and attitudes (if you don’t believe me, ask your mother or grandmother how often they use Facebook or Instagram – you won’t like the answer).

Ironically, though the OCC’s Hsu warned about fintech intervention into the traditional financial sector, fintech’s assimilation into the sector is exactly what fintechs and banks – and their customers for that matter – need.

Ten years from now, we will look back at 2022 and realize that this was the year that marked the end of the Neobank era and the transition of fintech from teenage angst to young adulthood.