This year, as “every company becomes a fintech company,” fintech surged into mainstream consciousness. The fallout from COVID-19 crippled the economy, depressed small businesses, and scrambled many people’s financial outlooks. But it also fueled a wave of innovation as fintech companies rose to the challenge.
For a glimpse of what’s ahead, check out The Big Ideas Fintech Will Tackle in 2021.
Access: “We decided to tackle the problem of paying for college and, more importantly, accessing higher education. We want to make it free and we want to make it accessible. And we’re hacking the system to make it that way.” a16z Podcast: Fintech for Gen Z and Millennials, Amira Yahyaoui, Mos CEO
API: “The importance of Plaid and the API market more broadly cannot be overstated—an entire generation of neobanks, lenders, and financial management tools has been made possible through programmatic access to bank transaction data. Now a new set of API providers are emerging that follow a similar pattern. Much as Plaid allowed consumers to make their bank transaction data available to fintechs, these new platforms are giving fintechs access to payroll, insurance, credit, and ERP data.” The Promise of Payroll APIs, Anish Acharya, Seema Amble, and Rex Salisbury
Banks: “At present, most banks are reacting to pressure to be virtual and digital—simultaneously shifting more than 90 percent of their employees to work virtually while operating on legacy, on-prem core banking systems that have not yet migrated into the cloud. As bank services become increasingly digital, the viability of the traditional bank branch model will be called into question.” The Post-Pandemic Outlook for Banks (May 2020 fintech newsletter), Kristine Lipscomb
Brand: “Brand permission and brand stretch are key concepts, particularly as non-fintech companies like Apple and Google start offering banking products and fintech companies pursue the concept of self-driving money. Though consumer attitudes toward online financial services are changing (remember how insane it seemed that people were giving Mint their bank credentials?), fintech products still face a higher bar for adoption than other types of consumer internet products.” Three Questions for Fintech Product Managers, Anish Acharya
Build: “Every step of the way, to everyone around us, we should be asking the question, what are you building? …There are always outstanding people in even the most broken systems—we need to get all the talent we can on the biggest problems we have, and on building the answers to those problems.” It’s Time to Build, Marc Andreessen
Credit: “It’s no secret that 62 million Americans are ‘thin file,’ meaning they have less than four credit accounts or less than six months of credit history listed on their credit report. Another 26 million Americans are ‘no file,’ with no credit history. As a result, when it comes time to apply for a mortgage, credit card, or other personal or business loan, getting a low interest rate—or getting approved at all—is difficult. So what are credit building products and what explains the recent interest?” The Allure of New Credit Builder Products (July 2020 fintech newsletter), Seema Amble
Cash: “There’s no question that the world will go cashless eventually. Accepting money electronically is better and much more efficient for the economy at large. But, at present, the fees are too high for both merchants and consumers.” NYC Bans Cashless Businesses (February 2020 fintech newsletter), Alex Rampell
COVID-19: “The emergence of COVID-19 suddenly catapulted the digitization of finance into overdrive—and scrambled many consumers’ typical budget. To examine what exactly has changed in the world of finance—as well as weird and noteworthy patterns of consumer behavior—we partnered with Glimpse, a software company that culls millions of online signals to identify surging trends.” Charting the COVID Effect on Fintech, Anish Acharya, Seema Amble, Rex Salisbury, Matthieu Hafemeister, and Lauren Murrow
Data: “Through sophisticated data science and machine learning, we can now unlock more data sources to better assess risk for people who lack sufficient data or are ‘credit invisible’ in the current system. Today, we’re swimming in far superior data (not just 5 factors!) than when our current credit-assessment systems were invented.” Every Company Will Be a Fintech Company, Angela Strange
Debit: “One of the most interesting trends we’re seeing is consumer fintech companies embracing and supercharging the debit card. When it comes to credit, millions of Americans have been burned or snubbed by traditional banks. Fintechs like Chime and Current are using this opportunity to make debit more powerful.” Reimagining the Debit Card, (August 2020 fintech newsletter), Matthieu Hafemeister
Debt: “The fact that people are actually talking publicly about their debt is a new behavior. In the past, spending was public but debt was private. For the first time, debt is starting to become a public conversation.” The Holy Grail of Social + Fintech, Anish Acharya
Employment: “It is a strange anachronism that workers receive health benefits through their employers, but not financial benefits, even though the employer is their primary source of income. Now employers are increasingly offering holistic, employee-aligned benefits like earned wage access and savings accounts, all powered by payroll APIs.” The Promise of Payroll APIs, Anish Acharya, Seema Amble, and Rex Salisbury
Education: “We’re seeing a change in how education is being offered. It’ll be interesting to see what traditional education looks like, as well as the necessity to pay for traditional education versus, say, a coding boot camp or skills-based training. Alongside that, we’re seeing things like ISAs pop up.” a16z Podcast: Fintech for Gen Z and Millennials, Seema Amble
Emotional: “Most product managers mistakenly focus on functional outcomes. It’s actually much easier to impact users’ cognitive and emotional outcomes.” Three Questions for Fintech Product Managers, Anish Acharya
Fintech: The Big Ideas Fintech Will Tackle in 2021, Alex Rampelll, Angela Strange, Anish Acharya, Seema Amble, Rex Salisbury, and Matthieu Hafemeister
Fractional: “There’s a trend around fractional ownership, driven by a category of companies that includes Rally, Otis, and Mythic. They will take some asset—be it a classic car, a culturally significant item, a Magic card, or a case of wine—and they’ll functionally securitize it. And then you, as a user, can purchase shares of that asset. So on the one hand, you actually have a piece of equity, a share in something that is theoretically valuable. On the other hand, you have the status of owner that is valuable in a more emotional sense.” The Holy Grail of Social + Fintech, D’Arcy Coolican
Fraud: “The fact is that I don’t think limiting fraud or finding the fraudsters is all that challenging or all that expensive to do. And so even if the amount of fraud is limited, I still think that from a matter of morality, we as a society should go after the people that have stolen money from deserving businesses.” a16z Podcast: Pandemic Relief and Fraud, Naftali Harris, Sentilink CEO
Free: “Many fintech products are designed to appeal to the millions of consumers who have understandably shunned mainstream banking. Square’s Cash App, for example, provides free banking services without a minimum balance requirement and does not charge overdraft fees. Such efforts could be even more effective if the government were to provide a number of free banking options to those who visit government websites. Want to get your check instantly next time? Get a free account here.” Government Systems Are Strained by COVID. Fintech Can Help. (November 2020 fintech newsletter), Angela Strange
Future: “In the not-too-distant future, I believe nearly every company will derive a significant portion of its revenue from financial services. Every company, even those that have nothing to do with financial services, will have the opportunity to benefit from fintech for the first time.” Every Company Will Be a Fintech Company, Angela Strange
Gen Z: “How do you expect the most educated, the most intelligent, but also the most cynical generation to trust banking institutions? There is an incredible, beautiful change in consumer behavior among Gen Z, which has probably the biggest bullshit detector of all consumers. So if you are trying to trick the user in some flow or some ad, that just doesn’t work anymore.” a16z Podcast: Fintech for Gen Z and Millennials, Amira Yahyaoui, Mos CEO
Government: “When it comes to connecting 10 million small businesses to the largest stimulus package in history, the government has a distribution problem. The government is becoming increasingly reliant on the help of fintech to enable the discovery and distribution of aid and benefits. Just last week, companies including Paypal, Square, and Intuit were tapped to assist the government with its coronavirus relief program.” Fintech Can Solve the Government’s Distribution Problem (April 2020 fintech newsletter), Anish Acharya
Growth: “If you looked solely at the stock market, the economic view would seem oddly optimistic. Since March lows, you’d see a record-breaking 45+ percent increase in the S&P. That narrow lens would indicate a seemingly strong economy and tremendous growth momentum. However, the stock market is rarely a good indication of what is actually going on in the economy.” Assessing COVID-19’s Impact Through the Banks (July 2020 fintech newsletter), Matthieu Hafemeister
Help: “Many fintech companies have stepped up to help consumers and small businesses through the pandemic. That effort includes disbursing stimulus checks, distributing Paycheck Protection Program (PPP) loans to businesses, providing access to unemployment benefits, and offering data and infrastructure assistance. Here’s a comprehensive—but by no means complete—list of fintech companies helping those impacted by COVID-19.” 35 Fintech Companies Aiding in Coronavirus Relief, Seema Amble
Homeownership: “I call these companies the new guard of homeownership. They’re fundamentally rethinking how we access a home. The nuance here is that they’re not only providing use, experience, and access, they’re also adding a fourth dimension: a return on your financial investment. We’re at the start of a wave that is going to fundamentally change the way consumers purchase, and ultimately own, a home.” A Novel Path to Homeownership, Adena Hefets, Divvy Homes CEO
Insurance: “One in 10 Fortune 500 companies is an insurance company, but all of those companies were started back before World War II. Not only is our current insurance system outdated, but from a consumer’s point of view, it’s also highly inconvenient: I purchase my asset (house, car, lease on an office), but then I have to go somewhere else to buy insurance. It would be natural and highly advantageous to be able to embed insurance at the point of purchase.” The Big Ideas Fintech Will Tackle in 2021, Angela Strange
Investors: “Today, more companies are finding ways to connect and engage with retail investors, parlaying that relationship into a competitive advantage. Since these investors are financially married to the success of the company, they can be effective advocates in fostering brand loyalty and trust within their communities. In some cases, this shifting power dynamic is happening at a deeper level: businesses are turning their most loyal customers into investors.” Retail Investors Are Becoming More Than Shareholders (October 2020 fintech newsletter), Matthieu Hafemeister
Jobs: “Having just one job for life, that’s over. People are going to have multiple jobs in their career—and maybe multiple jobs at the same time—and they won’t necessarily have to congregate in the same city centers. The way that we work and the way that we make money is going to change dramatically.” a16z Podcast: Fintech for Gen Z and Millennials, Anish Acharya
Kids: “As more and more companies offer financial services, fintech and non-fintech companies are making a play for the loyalties of younger and younger customers. This means that your kid’s first bank may someday look more like a debit card with loyalty points for Robucks, rather than a piggy bank.” Fintech Makes a Play for Gen Z (July 2020 fintech newsletter), Angela Strange
Lending: “COVID-19 has prompted a scramble in the world of online SMB lending, as delinquencies pile up. But the resulting shift is correcting long-standing issues in small business lending around distribution and risk selection. Two new lending models—embedded loans and lending layered with other financial products—offer a streamlined application process and faster approval than traditional SMB loans.” Better Models for SMB Lending (August 2020 fintech newsletter), Seema Amble
Local: “Fintech is default local, not default global. Unlike software or a social network that can be “turned on” in any geography, fintech products must receive local regulatory approval, offer local payment methods, and work with local bank partners—all of which takes time, talent, money, and oftentimes a significant, dedicated team. Additionally, over the last 10 years, local fintech players have emerged around the world, posing formidable competition for foreign entrants.” Big Fintech Players Seek Partners to Go Global (June 2020 fintech newsletter), Seema Amble
Mortgage: “Residential mortgages are one of the largest asset classes in the world, with over $10 trillion in debt outstanding—10 times more than credit cards and student loans. And, of course, a functioning mortgage market is hugely important to the health of the American economy. Rates are now at an historic low, falling below 3 percent for the first time in history and driving origination volumes to all time-highs.” What Rocket Mortgage Can Teach Us About the Future of Financial Services (July 2020 fintech newsletter), Rex Salisbury
Neobanks: “The U.S.-based neobanks that have seen the most traction to date have largely focused on underserved or unbanked consumers, those typically not sought after by big banks, since high servicing costs make low balance accounts unprofitable. So why are neobanks now taking an active interest in prime consumers? The calculus is obvious: They’re betting they can lure these profitable customers away from incumbent banks with substantially better bundled perks.” Neobanks’ Plan to Woo Prime Customers: Better Bundles (January 2020 fintech newsletter), Rex Salisbury
Open source: “Any company should be able to compose a customized financial solution to meet the unique needs of its customers. With today’s banking-as-a-service players, we are only partially there. The ideal solution will support modular development and an ability to plug into legacy environments. The same transformation occurred in cloud computing, with the introduction of programmatic, open source building blocks.” Investing in Moov: Open Source Financial Services Building Blocks, Angela Strange
Online: “The shift toward online banking has been accelerated by COVID: At Square, direct deposit volumes grew three times over from March to April, up to $1.3 billion; Chime saw record signups. And traditional banks and credit unions witnessed a 50 percent increase in mobile banking engagement since the beginning of the year.” COVID-19 Drives Digital Acceleration in Finance (May 2020 fintech newsletter), Rex Salisbury
Partner banks: “Partner banks, chartered institutions that provide fintech companies access to banking products, have exploded in recent years—by our count, their ranks have grown more than five times over the past decade. We aim to provide greater visibility into this interconnected and expanding ecosystem: the partner banks, the fintech companies, and the many services these partnerships afford for small businesses and consumers.” The Partner Bank Boom, Rex Salisbury and Anish Acharya
Payroll: “Just as Plaid has opened the door to a new wave of fintech integrations, payroll-connected APIs are poised to vastly improve underwriting, upgrade employee-provided financial benefits, and streamline and scale consumer and enterprise fintech companies alike.” The Promise of Payroll APIs, Anish Acharya, Seema Amble, and Rex Salisbury
PPP (Paycheck Protection Program): “Honestly, I was frustrated after PPP came out and so much of the focus was on a handful of big companies that got money and were essentially shamed into returning it. There was far more focus on that issue than on the fact that tens of thousands of companies that were eligible weren’t getting the money, and that a disproportionate number of them were owned by Black or Hispanic owners because they lacked traditional banking relationships or there weren’t banks participating in the program in their area. That, to me, is a much bigger tragedy than a couple of burger chains getting money they shouldn’t have.” a16z Podcast: Pandemic Relief and Fraud, Bharat Ramamurti, member of the COVID-19 Congressional Oversight Commission
Process: “An IPO is far from perfect, but the cynical narrative that evil investment bankers are intentionally underpricing traditional IPOs to steal from companies is almost completely false. To understand why first requires taking apart the IPO process, how stock markets work, and what the “price” of a stock means.” In Defense of the IPO, and How to Improve It, Alex Rampell and Scott Kupor
QR Code: “During the first wave of lockdowns and social-distancing measures in March, many predicted that 2020 would be the year that QR code payments would finally see broad U.S. adoption. It made sense: a no-touch QR code is safer than contact payment methods like cash or cards. So why hasn’t QR code payment caught on?” Will COVID Make QR Code Payments Go Mainstream? (November 2020 fintech newsletter), Matthieu Hafemeister
Real Estate: “Productivity seems just as high, if not higher. Therefore companies are saying, ‘Hey, why don’t we just have everyone work from home?’ That obviously has massive implications on commercial real estate. It has an impact on housing. What does that do in terms of portability, and almost arbitraging housing cost versus employment income?” a16z Podcast: Real Estate in a Pandemic: Homeowners and Buyers, Alex Rampell
SaaS: “Fintech is driving the next evolution of vertical SaaS. While early vertical SaaS companies such as Mindbody, Toast, and Shopify typically started by reselling financial services (primarily payments), they are now embedding financial products beyond payments directly into their vertical software.” Fintech Scales Vertical SaaS, Kristina Shen, Kimberly Tan, Seema Amble, and Angela Strange
Social: “We anticipate the emergence of new fintech products that are social+: those that have more utility when you use them with others, creating a functional (and often emotional) incentive for users to help drive distribution. There are a number of exciting companies that are catalyzing this change already—Stir, Braid, Commonstock, Public, and Yotta among them. Not only do multiplayer products have built-in growth levers, they make activity around money—investing, financial planning, even saving—more engaging. Fun, even!” The Big Ideas Fintech Will Tackle in 2021, Anish Acharya
Stimulus: “The largest stimulus package in history provides $350 billion to assist small businesses, but the last mile of identifying, adjudicating, and disbursing assistance without a sea of fraud is a new challenge, one that the government is wholly unprepared for, and for which technology is the needed answer. Now.” Small Businesses Depend on the Stimulus Package. The Stimulus Will Depend on Fintech, Alex Rampell
Students: “Student debt in the U.S. now totals more than $1.6 trillion. And 7 in 10 college seniors are graduating with debt. So I do think that Gen Z in particular views their parents and to some extent millennials as a cautionary tale.” a16z Podcast: Fintech for Gen Z and Millennials, Lauren Murrow
Trading: “Over the past few months, the major brokerage platforms have seen significant growth in both trading volume and new account creation, much of it by young and first-time traders. Of course, a number of new trading platforms have cropped up over the past 5 to 10 years—including Robinhood, Stash, and others—that appeal to millennials and Gen-Zers with commission-free, mobile-first, easy to use products. Older brokerages are feeling the threat.” Online Brokerages Compete for New Millennial Investors (May 2020 fintech newsletter), Seema Amble
Underwriting: “Many incumbent lenders are constrained by rigid credit models. Miss a payment? You’re now a significantly worse credit risk. In contrast, many newer fintech lenders use additive models, such as cash flow underwriting or additional signals, to develop a deeper understanding and longer-term view of each consumer’s unique financial situation. By providing more flexibility, these fintech lenders may enable their customers to come out better on the other side.” For Fintech, A Heightened Sense of Purpose (March 2020 fintech newsletter), Angela Strange
Vertical: “In a world of increasingly generic product experiences and rising acquisition costs, fintech companies are pursuing a marketing advantage through vertical banking: services tailored to specific customer communities.” Fintech Pursues Vertical Banking (November 2020 fintech newsletter), Anish Acharya
Wealth: “Last month, the SEC adopted amendments to the definition of ‘accredited investors,’ which determines what types of investors can invest in different offerings. While the previous rules took a wealth-first approach to accreditation — meant to ensure that individuals could sustain losses, should their investments fail to materialize — this new, broader definition adds an element of investor sophistication.” What the SEC’s New Accreditation Definition Means For Startups (September 2020 fintech newsletter), Matthieu Hafemeister
Yield: “We called 2019 the year of high-yield savings accounts, as companies including Betterment, Wealthfront, SoFi, Robinhood, and Credit Karma pursued prime customers. However, the collapse of the Fed funds rate to near zero caused fintech companies to likewise drop their yields. Now a new category of companies is emerging that delivers high yields via a different vehicle: crypto securities lending.” An Emerging Model for High-Yield Savings (July 2020 fintech newsletter), Anish Acharya
Zero: “There are a couple likely factors behind the piqued interest in brokerage accounts. When interest rates are low—they dropped to zero in March—returns on bonds and savings accounts are low and cash yield is zero. Thus, investors spend more time looking for alternatives to invest more of their capital into the markets.” Charting the COVID Effect on Fintech, Anish Acharya, Seema Amble, Rex Salisbury, Matthieu Hafemeister, and Lauren Murrow
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Alex Rampell is a General Partner at Andreessen Horowitz where he focuses on financial services.
Angela Strange is a general partner at Andreessen Horowitz, where she focuses on financial services including fintech infrastructure, insurance, real estate, and increasing financial inclusivity.
Anish Acharya Anish Acharya is an entrepreneur and general partner at Andreessen Horowitz. At a16z, he focuses on consumer investing, including AI-native products and companies that will help usher in a new era of abundance.
Seema Amble is a partner at Andreessen Horowitz, where she focuses on SaaS and fintech investments in B2B fintech, payments, CFO tools, and vertical software.
Rex Salisbury Rex is a partner on the fintech team at Andreessen Horowitz. He also runs Cambrian, a 3,000+ member community for founders and product leaders in fintech with chapters in SF and NYC. He previously worked in product and engineering at Checkr & Sindeo, automating background checks and mortgages, ...
Matthieu Hafemeister Matthieu Hafemeister is a partner at Andreessen Horowitz focused on early stage fintech investments. Matthieu joined the firm in 2017. He first spent time on the a16z Corporate Development team, working on late stage investments across verticals and helping portfolio companies raise downstream capit...