Every Company Will Be a Fintech Company

This is an abbreviated version of a presentation I gave live at the a16z Summit in November 2019. You can watch a video version on YouTube. Download the slide deck here.

In the not-too-distant future, I believe nearly every company will derive a significant portion of its revenue from financial services. In this post, I’ll delve into the infrastructure that’s enabling this transformation and, more importantly, how that’s going to fundamentally change banking as we know it. Every company, even those that have nothing to do with financial services, will have the opportunity to benefit from fintech for the first time.  

Startups will be able to launch companies faster and more cheaply. Existing financial services institutions will be able to introduce new products quickly—and spend less on IT maintenance. And most importantly, this means more choices, better products, and lower prices for consumers.

First, let’s take a brief look at the state of the banking industry today. A survey by the World Economic Forum found that just 28 percent of the millennial and Gen Z generations trust their banks to be fair and honest. That is a far cry from providing delightful products.

Meanwhile, the more than 50 percent of Americans who live paycheck to paycheck often experience an entirely different financial services system. Though they’re likely to need financial services more, they have fewer options, and those offerings are much more expensive. Collectively, the majority of us definitely don’t love our banks.

Why has the status quo persisted for so long, despite extreme levels of customer dissatisfaction? While innovation in any industry is hard, innovation in financial services is particularly difficult. Many of these existing institutions have been around for more than 100 years and have a large brick and mortar retail footprint. As a result, it’s hard to cut costs and roll out new products quickly—think about the many long-term leases and thousands of employees that need to be trained across the country. 

While many of these institutions may have billion-dollar-plus IT budgets, at some of the larger banks, 75 percent of those dollars is spent solely on maintaining existing products. This is a highly regulated industry, with multiple regulators across state and federal. It has a very complex infrastructure. So while this is a big opportunity for startups, there are huge challenges, too.