Marqeta is a fintech startup, which develops the modern card issuing infrastructure necessary to fuel the mass adoption of digital banking. The company has assessed the main trends most likely to impact fintech during 2020.
The Marqeta executive team has put together their fintech predictions for the coming year and beyond. Omri Dahan, Chief Revenue Officer, Marqeta, Jason Gardner, Founder and CEO, Marqeta, and Vidya Peters, Chief Marketing Officer, Marqeta, provide Digital Journal readers with their thoughts for the coming year.
After a decade of unbundling in financial services, a great rebundling is coming
According to Omri Dahan: “Over the last 10 years in financial services, the mantra seems to have been: why buy the whole album from a big bank, when you can go directly to fintech for each of the singles? New market disruptors have attacked every profit pool that traditional banks came to hold dear: mortgages, consumer lending, investing, deposits, cards.”
He adds that: “We’ve seen some rebundling in the market, but this is going to accelerate dramatically in 2020, concentrating around superior user experiences. Think about the journey of Square’s Cash App, it started with a simple P2P transfer service that was incredibly simple and users loved. The Cash App today incorporates pieces of competitors like Chime (debit card), Groupon (rewards), Robinhood (trading) and Coinbase (bitcoin). There are a lot of disruptors in market who have built up a huge constituency by picking one service and offering a superior user experience. We’re going to see these companies break out into new adjacent products to increase the utility they’re providing their users.”
Tech giants will continue launching banking products without becoming banks
Dahan turns his attention to the role of the major technology companies in the fintech space, noting: “There’s been a longstanding narrative that tech giants will become banks, and with Google announcing it will begin offering checking accounts in 2020, some may see this as finally coming true. But what this development shows us is that there’s a path to market now for tech giants to offer banking products without becoming banks at all.”
Further with Alphabet, Dahan indicates: “Google is looking to partner with Citigroup and Stanford Credit Union, taking advantage of the backing of an FDIC-insured settling bank and new modern technology platforms to create a modern banking product within the Google customer experience, without the same bureaucratic burden. I think in 2020 this will become an attractive model for other major tech giants, allowing them to innovate in the rapidly evolving digital banking space and providing in-demand services for their users. At a macro level, this will further push banks into more of a utility and bring into question the power of their brands with consumers.”
Americans continue to look at fintechs for banking solutions vs. traditional banks
Focusing on the U.S., Vidya Peters sees the country as a fertile space for fintech developments: “New fintechs, driven by shifts in technology and a war chest of venture capital, have been able to drive change in the market quickly. According to TransUnion data, 40 percent of personal loans in 2013 were originated by banks with just 5 percent coming through fintechs.”
She adds further that “within five years, fintechs were issuing 38 percent of loans, and banks just 28 percent. There are now dozens upon dozens of fintechs competing with banks on every part of their traditional service offering: wealth management, investing, small business, payroll, merchant services, and so on. An industry like investing has been upended by Robinhood, who now has over 6 million users and has driven banking giants like Charles Schwab, TD Ameritrade and E-Trade to also start offering commission free online trades, and competition has only heated up since with Square’s new stock trading option in its popular Cash App.”
Peters ends by noting how: “Every nook of the banking industry now has several fintechs competing inside of it. Competition is heating up and consumers are only getting more comfortable exploring new options.”
More large financial institutions look to make fintech investments or acquisitions
Peters turns her attention to market consolidation: “CNBC reported in September of this year that investments by large institutions in fintech was up 180 percent in 2019. Goldman Sachs, Citigroup and J.P. Morgan have all been incredibly active this year across the last few years. As new fintech entrants continue to disrupt these companies’ product portfolios, these investments will only increase.”
What this means is : “These larger institutions are not set up to innovate as quickly or aggressively as new contenders. When you add in the popularity of mobile, and the increasing consumer demand for an increasing array of new services, and the writing is on the wall that the giants in the market need to be active to keep up. Building your own tech stack has been shown to be a road fraught with peril, so legacy institutions will look to partner, acquire and invest with new entrants to future proof their businesses.”
More hyper-targeted digital bank start-ups will be announced
Jason Gardner looks for some potentially big startup announcements for 2020: “Banking used to be a commodity, with very little competitive differentiation between providers in what services were offered. You could open an account, get a credit card and apply for a loan, with your ability to borrow money governed by a strict set of criteria used industry wide. But with the proliferation of new technology (such as modern card issuing and payment processing) new banks can tailor their products to very specific constituencies.”
In terms of examples of this, he finds: “Grasshopper Bank launched in May, a new digital bank targeting VCs, entrepreneurs and startup CEOs, providing a specific set of banking products tailored directly to their needs. There’s digital banking tools targeting teens, like Current and Greenlight, digital banks for people interested in investing social causes, like Aspiration, and digital banks for the traditional underserved, like GoBank. Smart entrepreneurs are going to continue to use new technology to serve new niches in the market and this will only speed up in 2020.
Perception of Calibra will flip on its head when it launches in 2020
Gardner closes the predictions by considering Facebook and its planned cryptocurrency, Libra: “Facebook’s plans for its Calibra digital wallet and new global cryptocurrency Libra have taken a beating in 2020, as regulators around the world raised security, privacy and oversight concerns. Facebook’s predicament has been a clear indicator of the difficulties that arise when you’re first in any space. Facebook is trying to do something big and complicated and have dived headfirst into a difficult path.”
In terms of drivers, Gardner analyzes that “Money is speeding up to meet the pace of technology and Calibra would be the most advanced realization of a seamless global vision for how we transact. The company has stayed the course and answered questions head on, wearing the toll of being a trailblazer. I predict after initial speed bumps, Calibra will launch as planned next year, and after a year of bad press, perception of the new currency will become considerably more positive.”