Three trends coming out of Money20/20

We’re well past 2020, but fintech’s iconic conference, M20/20, is still humming with opportunity and the future.

Coming out of the event, after 100+ conversations, three themes stood out.

1. A search for underserved categories

As Adam Nash told me: “in fintech, we’ve handled everything from spending to saving to lending. Yet there are many other needs that the same disruptive forces can unlock.”

In many ways, the first wave of fintech digitized individual product lines and fragmented the bank. The other, reassembled it. Yet many parts of the ecosystem are still largely offline.

Adam’s new company Daffy.org (short for Donor-Advised Fund for You) focuses on making giving a habit, helping members set aside money for charity, one such undisturbed category.

Even within sub-sectors where a lot of venture capital has flowed, there is white space. Alex Tong, an investor with Information Venture Partners shared that within the crowded insuretech space, “there are only a handful of providers that deal with Life & Health.”

Of course, it is not only certain verticals that are underserved, but also certain customer segments. For example, “99% of international students in the US are left out of traditional lending options due to the lack of a US citizen co-signer. By leveraging new data sources and reducing the cost of serving customers via digital platforms (vs. physical branches of example), FinTechs are able to address previously unserved or underserved customer segments, says Manu Smadja, CEO of MPOWER Financing, a LendTech to promising international students in North America.

Some new categories also appear. Climate change is causing pain points across the spectrum – insurance companies are trying to better understand their risks, borrowing their exposure, for example. Cyber ​​risk similarly changes the risk exposure for insurers. New categories are emerging to serve this space.

2. Localize a global story

Fintech has become a global startup category, with unicorns around the world. In certain markets, fintech is the dominant startup category. For example, I previously wrote that the majority of unicorns in sub-Saharan Africa were in fintech.

Yet, despite the industry’s global importance, the winners remain largely local.

As João Del Valle, CEO and co-founder of Brazilian fintech unicorn EBANX noted, “it is a continuous climb to maintain multi-regional payment platforms. To support more card schemes and alternative payment methods in Chile, to do tax administration in Argentina , while keeping up with regulatory changes in Colombia, Brazil, Mexico and so on, all at once. There are many local specifics you need to consider in order to provide consistent services. Some pillars are a must: deep and constantly evolving knowledge, strong local teams and genuine relationships with local partners. This is our model, this is what we live by.”

If anything, fintech complexity may increase. When it comes to payments, for example, we are expanding rapidly from the world of Mastercard and Visa. Brazil has launched PIX, a real-time payment network. Others follow, for example in Colombia with Minka. India has pioneered the universal ID scheme Aadhaar with a set of APIs, including fintech, built on top.

This globalization increases complexity.

“Local expertise is incredibly important in fintech platforms, especially when it comes to accurate identity verification. There are huge differences in identity verification data as it is created and stored locally within the different phone, credit head and public data sources by country,” said Johnny Ayers, founder and CEO of Socure. “Data usage, storage, retention and regulatory and privacy requirements vary from country to country, adding to the complexity. Region by region and country by country, local expertise is required to ensure that organizations not only meet legal, regulatory and privacy requirements , but also maximizes the performance of customer conversions and fraud detection within the specific country or region framework.”

3. Putting fintech into embedded

Everyone in fintech talks about embedded-this and embedded-that. Apparently, your future bank account may be with your gardener or dentist.

This is, of course, hyperbole. Greg Cohen, CEO of Fortis, says the rise in embedded payments comes not only from the emphasis on customer experience, but also the digital transformation movement. In the past, software companies were the only ones who could benefit from embedded payments, but as more companies become digital first, more will be able to benefit. Embedded payments will help drive this movement, helping companies rethink their business.”

Where embedded fintech will succeed will be when it is part of an existing customer experience, adding value to it. As Chris Dean, CEO of Treasury Prime, an embedded fintech provider, explained it to me, “Imagine construction vertical software. Suddenly a contractor can have a bank account integrated with their supply chain needs and subcontractor portal. All transactions, lending and insurance driven by same fintech engine. The same approach works across multiple verticals.”

While not all financial services will be embedded, it will have an important role to play when it is additive to the ecosystem and convenient to use.

Bonus theme: Back to camelnomics

In recent years, the fintech focus has been hyper-growth. But sustainability is more important than ever.

We’ve seen it in the headlines. Even the biggest fintech players have had layoffs. Stripe laid off 14% of its workforce and Chime (a company I invested in at a previous firm) laid off 12%.

While the underlying models are strong, the world has changed. Greg Cohen of Fortis explained: “We are moving past the era of growth for growth’s sake and into an environment that must be hyper-focused on meeting customer needs. In other words, it is more important than ever that companies solve real-world problems.”

An observable shift is a conversation that moved directly into the camel’s camp: with a focus on sustainable unit economics, controlled combustion and a long-term view. Joao Del Valle told me: “Unit economics have always been crucial, but companies trumped reality by raising more capital to sustain revenue growth and delaying this important discussion about business sustainability. Now growth capital is scarce and investor conversations will be focused on the very topic of was previously underestimated: unit economics.”

In this year’s M20/20, the story was not about growth at any cost. It was about managing costs and planning for a bright, sustainable and robust long-term future.

And further

Ultimately, the existence of continued unserved segments and categories, a growth in complexity in several local markets, and the rise of embedded will create opportunities for the segment. Camelnomics will mean that the innovations will be lasting.