Our 2019 predictions: scores on the doors
So about 350 days ago I made some predictions about how 2019 would shape up. Here I’ll break down how accurate, or not, I was. TL:DR - pretty damn accurate.
This time last year, I said it had been a hell of a year for fintech. Well let’s be honest: 2019 topped it. UK challenger banks are advertising on TV, winning millions of new customers and now heading off to try and conquer the US. The US is seeing a shift as new entrants come to market and the GAFA shadow looms even larger over the entire market.
Looking back on how I thought this year was going to go I’ve given myself a score, out of 11, for accuracy. So here we go, let’s get into it …
Open Banking...part deux (11/11)
Boom! Okay, maybe this was a slightly safe place to start but I got this one pretty much on the money.
“Open banking and PSD2 have been underwhelming in terms of impact in 2018 and that’s likely to continue over to 2019.”
Yep. Called it. As an industry we’re still talking about this but now realising that it’s a much longer-term evolution.
The quality of APIs is still dire and across the EU under PSD2 the picture is even worse. However, as I also suspected the challengers are leading the way when it comes to both retail and business offerings. It’s partly why the likes of Starling and Tide were awarded so much money from the RBS Remedies Fund and Monzo is gaining tens of thousands of customers every week.
The Empire is Striking Back (8.5/11)
Mostly right on this one.
“We'll see banks adopting the thinking, and propositions, of fintechs increasingly over the next year. There’ll still be more copycatting of fintechs by big banks – possibly to incumbents’ detriment if they don’t get their technology sorted out and if they don’t think more carefully about how they roll out features.”
We’ve seen it happening multiple times. Card-freezing is still ‘a thing’ and certain banks have spent a lot of money advertising it as a feature. And look, it’s a handy thing to have, I'm sure we’ve all used it. But it’s not changing the fundamentals of the digital banking experience.
It’s about mindset, culture, diversity of hiring and diversity of thought.
Others have rolled out new digital offerings that look and feel pretty underwhelming. Not bad in any real way, just confused services that feel like a bit of a missed opportunity to take back the initiative and narrative on who is creating the services customers will love.
I feel like I've been banging the culture drum a lot this year but it matters because creating truly digital financial services isn’t about technology. It’s about mindset, culture, diversity of hiring and diversity of thought. We’re still not seeing enough of this.
“I’m fully expecting a trend towards truly forward-looking banking that seeks to solve customer issues through integrated solutions.”
What we haven’t really seen yet, at scale and mass market adoption, is what I called out above… so I deducted points for this. But I believe this will happen as marketplaces mature and the wider consumer base gets more comfortable with different areas of their lives that open banking-based services can solve for.
The GAFA side shadow (11/11)
Damn, you know, maybe I should play the lottery!
“It’s likely that GAFA will work to increase partnerships and slowly take over my space in the financial landscape.”
Well, I nailed that part and then some. Apple’s collaboration with Goldman Sachs on its credit card was huge news this year, and rightly so.
Goldman gets to compete with Citi, Chase, and the others without being the lead brand
While on the surface this has all the hallmarks of a traditional white-labelled card in which a big bank (in this case Goldman Sachs) deals with all the boring stuff like regulation and risk and the non-FS brand takes on the marketing and distribution side, it's much deeper than that.
Goldman Sachs has successfully entered the retail market with Marcus, but in partnering with Apple they don’t have an existing business that they’re cannibalising, and Goldman gets to compete with Citi, Chase, and the others without being the lead brand. Wins all round.
Not to be outdone, Google also announced a digital account, codenamed Cache, in partnership with Citi, starting as a digital account for personal payments and bills through the Google Pay app. This is still in its infancy but you’d be unwise to bet against Google learning a hell of a lot about consumer behaviour, iterating and launching this service to a much broader audience.
Facebook also announced a new Pay service to its social network, Instagram and WhatsApp apps in the US. It’s designed for users making small payments, money transfers or online purchases. That feels like more of a Venmo threat right now but let’s see how it develops.
USA all the way (10/11)
I was right here but not entirely so I deducted a point. Marcus by Goldman Sachs goes from strength to strength but I’m being a harsh judge as a fair bit has happened that appears to be laying the foundations for an even bigger 2020.
“Without unified regulations, it makes it all but impossible for fintechs to compete in the USA without proving themselves elsewhere first.”
The regulatory environment isn’t any better but at least they’ve announced a real-time payment and settlement network, FedNow, that will allow for faster payments. In 2023... or 2024... That’s a lifetime away. The lack of a coherent framework remains the biggest inhibitor though, if you compare the US to the UK, Hong Kong or Singapore.
Chime in particular has become a bit of a poster child for US fintech.
While that hasn’t stopped VC-backed fintechs – Chime, Dave, Qapital, Tally and others – from making inroads and taking some mindshare, questions still remain. Chime in particular has become a bit of a poster child for US fintech. With more than 5 million users and some serious financial backing, they’ve just raised $500m and a valuation at $5.8bn. On the surface, impressive numbers, but as a business it’s not the same animal as, say, a Monzo.
There’s also the downside of scaling by using third party processors. When they fall over, so does the bank, as Chime found out the hard way. What will be fascinating to watch over the next 12 months is how Monzo, N26 and others fare as they look to expand and what impact that has on the local fintechs.
SMBs get some real love (8/11)
“We're going to see integrated experiences and truly forward-thinking finances for SMB's, where you can manage your cash flow, business and your invoices all from one place.”
Well this started to happen and the offerings are far better than this time last year. There’s still more to be done and this market segment is going to get a lot more complex. As the size of any SMBs increases and individual needs evolve, the product offerings themselves have to match it.
But I’m incredibly positive on this space and how this year has laid foundations for some major new initiatives. The winners of the RBS Remedies Fund have a huge opportunity and have committed to, on paper, some awesome services.
I can’t wait to see what Starling, Nationwide and others – such as the Tide and ClearBank collaboration – bring to market. The only downside is that we likely won’t see them in the hands of small business owners for another 12 to 18 months. But the trend is finally going in the right direction for this, historically, underserved segment.
So overall, not too bad. I’ll happily take that: nothing below an 8 and a couple that were bang on the money. 2020 promises to be a huge year for fintech and I’m super excited to do this again in 12 months’ time to see where we’ve got to.