Automation will be the end of banks as we know them (link)
- Fintech companies breaking up the old guard by focusing on specific things that banks have done and doing them better. Average consumer now has numerous financial relationships, each with a clear-cut purpose
- Post 2008, banks faced heavy scrutiny and pulled away from risk, left significant gap in marketplace but banks are doing better now, and established ones are copying the innovations from fintech but with greater scale / cheaper cost / better distribution from substantial customer base
- Only defensible long-term strategy from fintech is automation – customer matched with ideal financial institution
- Once automation reduced enough friction in the financial industry, banks become a utility (storage for currency, moved place to place). Fintech companies use data expertise to make decisions for people. i.e. banking becomes intelligent service
- Fintech companies need to weave intelligent automation into product experience
The Fintech Revolution (link)
- Venmo (payment transfer), Lending Club and On Deck (lenders)
- Not properly tested in downturn, and doesn’t match security or convenience of bank
- Will reshape finance in three ways:
- Cut costs and improve quality of financial services (unburdened by regulators, legacy IT systems, branch networks, or need to protect existing businesses)
- Assessing risks in creative ways (i.e. kickstarter using crowd knowledge, avant using machine learning)
- Diverse credit landscape, and fewer mismatched maturities and leverage (i.e. match borrowers and savers directly vs taking short term liabilities like deposits and turn them into long term assets like mortgages)
2019 looks to continue another lights-out year for fintech startups (link)
- Matrix FinTech Index (Top 10 publicly traded U.S. fintechs quietly surpassing $100 in total market cap); this year grew 50%, far outpacing financial service giants in S&P500
- In 2017 only 3 fintech exits in the U.S. over $100mm, totaling $700mm in value
- In 2018 $7bn in value, more than half of value came from GreenSky IPO but also significant number of M&A events as incumbents acquired more fintech companies to stay competitive
- GreenSky $4.4bn (May 2018)
- Avalara $1.4bn (June 2018)
- Kensho $550mm (April 2018) onto S&P
- LevelUp $390mm (Oct 2018) by Grubhub
- Clickpay $218mm (April 2018) by RealPage
- Maestro Health $155bn (March 2018) by AXA Group
- Stripe currently most valuable fintech company $20bn valuation, followed by coinbase, robinhood, sofi, credit karma, oscar, circle, plaid, mozido, avant, gusto, affirm (respective order, median ~3bn TEV)
- Around 40 fintech companies currently who have raised more than $100mm in funding, but not unicorn yet
- Still early stages of innovation, with unicorns, 40 around brink of unicorn, inspiring wave of more interesting fintech companies as early employees go on to start their own companies in value creation (very optimistic)
PR management firm Cision is acquiring Falcon.io to expand into social media marketing (link)
- Falcon.io last valuation was in 4/2017 for $52mm, growing rapidly. Probable price paid ~$122mm. Falcon competitors include Sprout Social, Hootsuite (~$800mm TEV companies)
- Cision market cap ~$1.2bn, provides press release distribution, media monitoring, other PR services to businesses. Aims to build one-stop shop for customers to manage all their communications needs from one platform
- Idea = cross-selling Falcon capabilities to Cision’s customers
Social media for the first time tops newspapers as a news source for US adults (link); (report)
- 1/5 US adults say they often get news via social media, slightly higher than the share who often do so from print newspaper (~16%); in 2017 split was equal
- Overall, TV is still the most popular, but has declined since 2016. News websites are the next common followed by radio, social media, and print newspaper
- Split by age group, pretty intuitive: older adults (65+) 5x as likely as 18-29 year olds to get news from TV. Of 65+, 85% get news from TV often, 50-64, 65% get news from TV. Age gap huge for social media, but in other direction. 18-29 are 4x as likely to get news from social media than 65+
An economist explains what digital technology means for the future of popular culture (link)
- Fear was harder for creative industries to make money, thus threatening continued product creation with rise of digitization but found to be not entirely true. [New risk is threat of technological gatekeepers – allowing few players i.e. Spotify, Apple, Google, Amazon, etc. to decide what’s greenlighted]
- Two counterpoints:
- Currently much cheaper to produce and distribute content
- Hard for creative gatekeepers to figure out what’s going to succeed or not. Higher n = more % of success. By relaxing distribution bottleneck, more opportunities for content to reach more people, higher overall revenue (more chance for independents to succeed)
- Fun facts:
- USA Today best-seller list self-published books went from 0 to 15% after Kindle (50% in romance category). Success is not cannibalizing elevated traditional consumption however. NYT Notables list 0 self-published
Nat's Corner 