It's difficult to argue any industry has faced more disruption by innovation than financial services. Virtually all former analog banking services now boast digital, api-first solutions powered by Fintech startups carrying heavy bags of capital.
Whether it's building credit through rent payments with Pi√±ata, mortgaging with Better, stock-back rewards with Bumped, or buying crypto through Venmo's partnership with Paxos, one thing is certain. There is little in our financial lives free from the interoperation of this burgeoning industry.
For perspective, follow the mind-bending piles of cash gushing into this industry. Per CB Insights, in 2021, one in every five dollars of funding went to a Fintech company, which accounted for 21% of all funded ventures. This $132 billion raised was more than 2.5x greater than the year before. Deal size was double than in 2020 and in Q4, there were 14 deals per day.
Button's partnered deeply with Fintechs since inception, helping partners such as Cash App, Acorns, Samsung Pay and Drop with everything from rewards and card-linked offer programs to user acquisition. To help make sense of these numbers and see where the industry's headed next, I sat down with Fiat Growth's Founder and Fiat Ventures GP, Drew Glover.
Fiat Growth operates a consultancy and venture arm specifically focused on Fintech. They work with over 30 different early and late stage Fintech startups that operate in lending, banking, investing, crypto and much more.
DOR: 2022's starting off with immense volatility in the market - interest rates, inflation, supply chain, Ukrainian invasion - What do you see as the major theme B2C FinTechs will tackle this year?
DG: Access. It's currently the golden age of Fintech in large part because Fintech has unlocked easy access to banking and financial products for a new generation of users, as well as millions of those who have been historically under/unbanked.
Take the process for buying equities just 10 years ago. You first had to find a broker - an intimidating endeavor in of itself - only to be charged prohibitively high trading fees. Everything has changed with the advent of Fintechs like Robinhood and Public and Betterment who have democratized equity ownership. These startups even forced legacy trading platforms - Fidelity, eTrade - to drop trading fees, making it simple for everyday folks to participate.
DOR: Last year saw more VC funding and deal flow into Fintech than any other industry. How do you see growth and product teams creating differentiated products?
DG: While there's definitely saturation in certain sectors, I remain incredibly optimistic that continued investment and innovation in the space will breed a new generation of market leading Fintechs. That said, there are several standout trends me and team believe will continue to rise above the white noise in 2022
DOR: Since we first spoke web3 has exploded. How's Fiat looking at this space from an agency/marketing and venture perspective?
DG: Decentralized finance (DeFi), Staking and NFTs have provided outsized yields and new ownership models compared to traditional financial products that's quickly spawned a new sector of financial technology companies. We anticipate continued emergence of new companies in this arena as well as broader adoption from legacy financial platforms.
The amount of Fintechs that have cropped up that democratize access to these products and returns is endless. Donut, Burst and Eco, to name a few, allow high-yield returns and simple onboarding processes for everyday consumers. Circle, Zero Hash, APEX Clearing and Gemini provide embedded solutions so Fintechs can easily unlock digital assets for their consumers via API. This all goes to show that if you‚Äôre a Fintech there is countless means of incorporating crypto in your platform.
Non-fungible tokens (NFTs), one-of-a-kind digital assets, deserve their own section entirely. This technology affords the ability to create rarity and ownership in the digital world. Think artwork, or trading cards like NBA Top Shot, or even new digital governance models operated through DAOs. DapperLabs, which owns NBA Top Shot, see opportunity for expansion into new products and owning a large swath of the NFT ecosystem including gaming, trading and collectibles. This is a small sample of a broad and expanding ecosystem, and we anticipate continued innovation and emergence of new companies unlocking access to a new form of asset entirely.
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