December 21, 2015
Many of my colleagues in the industry are sharing their perspectives for 2015 and their crystal predictions for 2016. LTP co-founder Amit Goel has recently published his comprehensive review and the LTP 2016 Prediction Podcast continues in its second and third act for the season. Many others will add their words of wisdom.
My attempt here is to summarize what stands out for me in The New Global FinTech as we wrap up the year, not curated scientifically, but rather as observed personally and subjectively, of course with the benefit of hindsight.
In keeping with the tradition of Top Lists, but now comparing apples and oranges, we are calling it The Top X of 2015:
Top FinTech Disappointment of 2015
This one is not in the same category as failures or accidents, rather a genuinely sad disappointment. Along with all the good things that came with the Apple Pay announcement and launch in the Fall of 2014, viz. focus on experience, partnership with major financial institutions and retailers, integration into Apple Watch, etc., there were high expectations from Apple, and as with anything that has a high expectation, it results in a larger disappointment when that expectation is not met. The brightest minds in the industry had opined on what Tom Cook had predicted would become the defining moment of 2015. Of course there are some things that Apple and partners were able to do that nobody else can even compare with: involve all major FI incumbents, jump start tokenization, enable in-app TouchID payments, etc. Apple has also set the bar high for the inevitable competition. However, I was hoping for more education, more promotion, more value added features beyond payments and electronic receipts, more integration with other enablers such as location and proximity, and an open NFC stack for other apps and wallets to use the new hardware. The lack of these has resulted in the tepid consumer adoption of Apple Pay that we sense so far.
Top Breakout FinTech Sector of 2015
After the IPO of Lending Club in December 2014, the alternative lending space has not looked back! Prosper, SoFi, Lending Circle, Avant Credit and many others come to mind as players who are positively benefiting from the upward draft and contributing heavily to the space with sustained innovation and technology investment. Lending as an industry is as old as the human race, and the venerable financial institutions who have managed this activity for humankind have allowed this category to slip out of their expensive white gloves. The new lending-focused FinTech companies are able to offer better products at lower costs using technology and with a better appreciation of what Gen M and millennials really need and want. And despite the burgeoning number of players, there seems to be room for everyone, with even some non-tech focused non-bank lenders cleverly benefiting from the rising tide.
Top FinTech Resurgent Group in 2015
Let’s face it. The grand old banks got drunk with their home-brewed Madira for decades, and they must be thanked by their younger FinTech disruptors for benefitting from the banking that sneaked out of the banks’ vaunted vaults. The banks have not been unique as an industry to find themselves in this situation. Other large proud industries have seen this happen to them or have done it to themselves, most notably the mobile network operators. The difference is that while the MNOs (barring a few exceptions, such as in Canada) totally crumbled under the burden of their own heavy DNA as it relates to FinTech, the big banks on the other hand, seem to have accepted the reality around them, many have learned new tricks rapidly and most of them have embraced the brave new world of open innovation with open arms. It’s quite a comeback for many of these large, global, proud institutions, and we should salute the thought leaders in this group who have made it happen. Many names come to mind, and here’s a few: Barclays, Citi, Wells Fargo, JPMorgan Chase, Santander, BBVA, USAA.
Top Potent FinTech Segment in 2015
The word potent borders on hype, so I am using it deliberately. Yes, there is great promise, but there’s also great lack of understanding. It’s been fascinating to see how quickly the mainstream white-shoed establishment has embraced this renegade communication protocol; however, that very herd mentality gives me reason to pause. We have also seen the potential for blockchain to be used outside payments and even outside financial services. There is an increasing appreciation of the difference between cryptocurrencies and blockchain, even while there will be those who scoff of attempts to dissociate the two. This momentum in activity and the volume of dialogue easily makes this segment the most potent one to expect great things from, even though everything might not be crystal clear just yet.
Top FinTech Anti-climax of 2015
Softcard (previously known as Isis) spent gazillions of their MNO investors’ dollars in less than 5 years. Then, Google bought Softcard assets for a basketful of goodwill in early 2015. They, i.e. the MNOs, deserve ample credit for the vision of seeking US-wide mobile payments compatibility, tapping into their deep pockets and mandating NFC chips in device requirements; unfortunately however, the end result of their endeavors was the great atrophy due to great incompetence.
Top FinTech Duh Moments in 2015
It was unfair to criticize Google for anything they did in the payments and commerce space before the Softcard acquisition: after all, they were the first to take bold steps on NFC contactless payments, first major player to offer a proxy card with a mobile wallet, first and only player to offer email-based P2P payments, first to convince a big bank and a big payment network to offer a tech-branded payments product, and perhaps a few other firsts…but that does not absolve them of the first Duh moment when they bailed out the US MNOs. The other Duh moment of separating Android Pay from Google Wallet was also a delayed acknowledgement that Apple had the right idea with Apple Pay (even though it was not named iOS Pay). Finally, when Google recently announced P2P transfers using mobile numbers, my first reaction was: Duh, didn’t they have this already?
Top FinTech Sigh of Relief in 2015
The posterchild of payments innovation - the company that democratized card acceptance, the company whose founder could have raised billions of dollars even without an idea, the company who some feared would become the next PayPal and some made fun of because they couldn’t speak the payments language, the company that went through big high-profile down rounds in its pre-IPO life, and almost-pivoted several times in a few years - finally had an IPO in 2015 and gave up it’s spot on the The FinTech Startup I Want to Be When I Grow Up pedestal. Even though i never directly worked with Square, and even though the fate of the company in the long term remains uncertain even as a listed entity, the IPO was a long-overdue recognition of the role that Square has played in catalyzing payments innovation in general. And of course it allows Jack Dorsey to go back as CEO to that other company that caused some other people to heave a sigh of relief 2 years ago.
Top FinTech Geography in 2015
In the beginning of the year, I would chuckle at the new mobile wallet companies mushrooming in India. Then there was the e-commerce wave, which continues to rise. We also saw new proprietary wallets launched by the e-commerce companies. In the Fall of this year, LTP was asked to cover FIBAC, a leading banking conference hosted by the IBA and FICCI. I also had an opportunity to talk to a number of chief executives of the largest Indian banks, and I came away impressed with their clarity of thought and ability to articulate how they would work with the FinTech disruptors. The numbers speak for themselves - number of startups, their valuations, the sizes of their funding rounds, etc. - but what I have now realized is that this FinTech explosion in India is not an Indian re-enactment of US propositions, rather many of them are India-specific innovations, unique and intrinsic to the Indian ecosystem.
Top FinTech Question Mark in 2015
MCX, with or without CurrentC
Why MCX still exists is a mystery! MCX has served its purpose, and very well too: the coalition of the top US retailers influenced legislation that resulted in historic legislation to regulate debit interchange. Of course, not everyone in the industry agrees with the outcome, but the retailers got what they wanted, for the most part. Now, building a technology product that depends on big and small vendors, that too a complex mobile technology proposition for consumers with high expectations, in competition with financial incumbents on one side and tech giants on the other side, is a daunting task! Even more daunting is the fact that MCX is a JV that has seen a delayed first CEO hire and a CEO change in its seemingly endless pre-launch lifespan. We know what happens to joint ventures. Finally, it’s about DNA - retailers excel in operational optimization, supply chain management, understanding of in-store (and now online) experiences, not in building new technology products. Many in the coalition have realized that: some are working with Apple Pay; others have launched their own mobile wallets. So, what’s the purpose of MCX? Maybe there is some other grand design they are working on...it’s still a question mark!
And now the best FinTech story of the year...
Top US FinTech Under One Roof in 2015
Early Warning, with Payfone, Authentify & clearXchange
Early Warning (EWS), the joint venture of the top US banks has assembled a fantastic set of assets, either via acquisitions or investment, under one thoughtful umbrella. These entities are great businesses even stand-alone, and the power of synergies makes the overall collection more valuable than the sum of its parts. With Payfone, EWS gets mobile authentication; with Authentify, biometric authentication, and with clearXchange, it gets P2P capabilities across US banks. In addition, with the latest news of a partnership with Fiserv, the group will have additional coverage in bill payments and other services. All this firepower amassed in the past year also leads to high expectations for 2016. Will we see secure, mobile-authenticated real-time payments across most US banks for an affordable fee of $1 or less in the coming year?
Finally, I couldn’t resist - one last thing!
Top Digital Destination for The New Global FinTech in 2015