Once Upon A Time In The World Of Fintech...

The USA 2023 Show Story

Foreword

Humans think in stories.

Instead of the usual themes, we’ve decided to tell a story about the world as we see it. You can think of each chapter as a “theme” of sorts, but it all ladders up to the story.

We do this to help you organize your thoughts for the submission process and we also hope it acts as a guide for the direction we see the most important conversations developing.

It’s not a prescription.

Don't feel constrained in your submissions by the story as we set it out. In unprecedented times we want to hear unprecedented ideas. The following was written before the dominos started to fall in the Banking Sector in March. It holds up pretty well considering one of the craziest months in recent memory, but let’s be real, there is no way to know what's going to happen next.

At Money20/20, we started the year with one overarching prediction for 2023. It was simply, "Who The F Knows." We're not going to start acting like we can read the tea leaves now.

That’s where you come in. You’re the hero of this story. We need heroes right now.

Hit us with your best,
ZAP

ZAP Signature

Chapter 1 - Trust & Uncertainty

Trust(lessness) & Regulatory Reckoning

Trust
Trust is hard to build and maintain in the world of finance. Only 2% of Financial Services Brands fell into the “strong,” trust category according to Forrester Research in 2022.

We all feel the gaps in trust as we talk with family members, friends, and co-workers.

Fraud - the ultimate violator of trust - has been rampant on multiple fronts. Corporate fraud from Wirecard to FTX and so many more.

Despite the media obsession around these grotesque stories, the real problem isn’t being discussed in the mainstream.

Fraud in the financial industry itself is rampant.

We’ve talked plenty about the Wirecard and FTXs of the world, but the systematic problems lie elsewhere; identity.

Identify theft in all forms. Synthetic fraud problems. AI fraud issues. Now there’s even, “friendly fraud.” Real KYC’d customers using their real identities and acting openly as bank customers, but finding creative ways to do chargebacks and finding loopholes to defraud their financial institution. It’s rampant.

The only thing more vigilant than the creativity of the fraud community - yes, sadly, it’s a community - is the astonishing number of companies attacking the problem from all sides. Startups, Centaurs, Unicorns, and Established Incumbents alike are struggling to solve this problem at the root.

Firms are attacking the problem from all angles, but it’s not something one firm can solve. The industry is doing its best to cope, but we have to work together as an industry, share data, and solve the problem at the root.

There are glimpses of sunshine and hope shining through the clouds. Hope is coming in unique forms this time around.

Hope is coming in the form of regulatory clarity for portions of the ecosystem. Sounds boring, but the clarity (or lack thereof) could signal the largest value unlock or destruction in the history of the US economy.

How we regulate what are now bleeding-edge technologies will establish the next Super Powers of the World.

Hope on the horizon comes paired with a regulatory and policy reckoning looming across large pockets of the industry. It’s not clear how this will manifest, but the industry is waiting with bated breath to see what unfolds.

The reckoning will come in the form of new policies applied to shut down novel bad practices and establish clear best practices as well as existing policies and regulations being applied in novel ways towards these new-fangled financial debacles.

Uncertainty has held back and stifled the industry as a whole. Clarity alone will increase the speed of innovation and give firms the comfort to start investing and building again.

It’s time to stop swimming around inside the problems of the past, but to learn from them and move forward.

These problems have to be solved at the root, at the base infrastructure level.

Chapter 2 - Creative Destruction & A Technological Renaissance

Rebuilding trust at the root requires a technological shift to accompany the policy and regulatory shifts. A technological renaissance even.

As the aforementioned technological renaissance progresses, the innovator's dilemma is rearing its ugly head again. There are questions about the tech empire’s ability to continue to “copy, acquire, and kill.”

Less robust, seemingly inferior solutions are entering the market and gaining real traction as these tech empires of today struggle to keep up with bleeding-edge technology. The concept of disruption is coming back into the fray.

Not as the widely misused buzzword, but actual disruptive innovation as defined by the late, great Clayton Christensen:

Innovation that creates a new market and value network or enters at the bottom of an existing market and eventually displaces established market-leading firms, products, and alliances.

Blockchain is one such technology that’s been searching for its place in the world. It’s lacking in some ways compared to the status quo, but a hundred times better in others. Despite the crypto headlines, it’s finding real traction with use cases that provide utility to the world at large.

The blockchain is just one example ofin this new wave of disruption.

Real Use Cases

New heights are being achieved in the worlds of Machine Learning and Artificial Intelligence (ML/AI).

Embedded finance is reaching a tipping point in the hype cycle and is starting to prove real use cases with sizable revenue attached. Banking as a Service isn’t dead. It’s just growing up.

New policy and technology in open banking are finally reaching a boil. Quantum computing is going to take years and then happen all at once.

With world-changing technologies on the horizon, how can we hope to be prepared?

These technologies and new business models aren’t just the focus of up-and-comers. Incumbents are moving in fast - both public and private. The uptake of stablecoins by major banks and governments alongside the general shift towards a more interoperable financial future across the globe is signaling this shift into an age of both infrastructure and the aforementioned second phase of disruption.

Fintech has been “important” to financial institutions for a long time, but we’ve surpassed that. Fintech is no longer its own thing, wearing a hoodie, hanging by itself in the corner.

Fintech’s growing up.

Fintech and Financial Services are now one and the same.

We await your tweets in disagreement.

Chapter 3 - Age of Fundamentals

Returning to an Age of Fundamentals After an Age of Momentum

You might’ve read some sense of exuberance in Chapter 2. You read that correctly, but the definition of exuberance requires some unpacking in this context.

The exuberance of recent years has set an expectation that as long as companies - of any size - were showing growth in just about any major metric then they’re worthy of continued funding and increased stock prices.

It was an age of momentum.

Economic fundamentals and reality took a back seat. We went atmospheric as an industry and an economy. We were out of this world and now we see the recalibration required for atmospheric re-entry.

Suddenly, we find ourselves in an age of fundamentals.

A path to profitability will no longer be an afterthought. It will be one of the first.

Centaurs (cos with $100M in Annual Revenue) are starting to look a lot more attractive than Unicorns (cos with valuations over $1,000,000,000). The unicorn obsession is fading unless it's backed by Centaur metrics. Real revenue, real profitability, and more than a good story.

Chapter 4 - It’s Time to Build (Utility)

Building Utility

Not only is the expectation returning to real revenue and sustainable profit margins, but the market is also signaling a need to focus on building utility.

The age of the shiny object in financial services is on pause. We’re entering an age of infrastructure that may not even be noticeable to the average consumer. We refer to this wave as invisible innovation.

Sometimes the real work gets done behind the scenes.

Many of the largest opportunities in the world of finance exist outside of the hot trends gracing the pages of TechCrunch.

The Infrastructure Investment Act and the CHIPS and Science Act have countless opportunities for financial infrastructure and even consumer companies to step in to solve problems. Many of the opportunities are big hairy audacious goals, but how does solving a key piece of the American puzzle not inspire one to SPRING out of bed in the morning?

There will be, without a doubt, numerous world changing companies being founded right now. It might be a downturn, but that means it’s time to build. It’s time to go on offense and double down in the murky times…responsibly.

Go forth, build, and create value for the world!

Ready to Make the Best Business Move in 2023?

Join 13,000+ power players from across the whole money ecosystem including banks, payments, fintech, tech, retail, policy, and more.

Need a helping hand? Check out our convince your boss template letter.

Get In On The Action