Chloe's Money 20/20 Observations: Growing Pains
#BaaS #Lending #Credit #B2BBNPL #EmbeddedFinance #Fraud
I survived Money2020 😴🥱 This year’s theme can be summarized in two words: growing pains.
Fintech is Still Growing
Growing pains only exist where there’s growth, and yes, fintech is still growing. After the market collectively gained more rationality this year, businesses were still getting done during the conference, and new products and new partnerships were announced left and right. To put things in context, on the equity side fintech venture funding in 3Q 2022 reverted to ~2019/2020 level, which was still substantial. Further, on the debt side, structured debt new issue volume is on pace to overtake 2019 and 2020, only trailing that seen in 2021. The underlying thesis of fintech remains intact; fintech is here to stay and grow.
Next Frontier: Lending and Embedded Lending
2022 is the year fintechs re-discovered lending. Lending is no longer a four-letter word; lending is in vogue now due to its promise of top-line AND bottom-line growth. Lending popped into almost all of my conversations at the conference. Many new lending businesses and products are being built; fintechs with existing lending products are motivated to scale the products into their main P&L engine. Wonder how your company can start lending or scale your existing lending products? Drop me a note 👇🏼
Pain in the BaaS
Yes BaaS is still growing, and yes, BaaS is running into growing pains with regulators and customers. Not surprisingly, some of the most attended sessions I saw were regulation-related.
After years of zealous growth, the quality of growth and the quality of service now matter more than ever in BaaS. Poor-fit customers will churn; poorly run programs will sunset or be re-platformed; poorly managed compliance programs will stand out now more than ever. I still believe there’s a place for BaaS as a business model, just that BaaS is not for everyone. Now’s time for each company to revisit whether they truly need intermediation, and if so, from whom.
Fraud/KYC/KYB vendors were hot
As fintechs continue to move financial services online, across borders, and as fintechs accelerate the pace of money movement, fraudsters are also getting more digital while committing more complex types of fraud faster. New and faster fraud require new tools to fight them; this year fraud/KYC/KYB vendors occupied much real estate on the conference floor.
Pictured: Unit21 swags
B2C were not; Pivoting to B2B
It’s a sign of the times. When the market focus shifts to unit economics and profitable scaling, companies sort themselves onto a new path to stay relevant. B2C fintechs from several spaces are pivoting to B2B-PFM, credit building, and lending-and the success of these pivots remains to be seen.
Related, in an environment of M&A and consolidation, pivoting to B2B could make such companies attractive acquisition targets.
What did you see and hear at Money 20/20? Leave a comment below.