Unicorn fintech startups like Robinhood, Acorns, Revolut, Monzo, N26, Betterment, SoFi, Lending Club and others will all converge on the same multiple financial product offering across lending, banking, payments and investments. This is driven by the need to cross-sell new revenue in order to justify high spending on customer acquisition. Large financial incumbents will be following the same bundling playbook through their mobile apps, intensifying the progress of Goldman Sachs, JP Morgan, UBS, DBS, BBVA and Santander along this axis. Tech and finance (as well as incumbents and startups) will all be pursuing the same customer-centric solution for the digital consumer. Great for the customer.
As a result, customer acquisition costs will rise and the digital model will become more competitive as servicing costs commoditize at a cheaper price point. What we mean is that if everyone -- including large operating businesses -- will understand how to market to and serve Millennials, driving away the arbitrage opportunity Fintech companies have had to date. As a result, at least one unicorn will implode when the cross-sell does not materialize. Most likely this will look like a devaluation of the equity component in the capital stack, such that new money is raised to maintain profitable marginal operation, but the hundreds of millions already invested in the business are mere sunk cost.
New revolutionary entrants will use channels that are foreign to existing Fintechs and financial incumbents, like video, Twitch, Discord or AR/VR. One example would be credit-as-a-service, similar to Stripe payment-as-a-service, built into a B2B customer journey. Another would be native payment systems for digital experiences and environment. Yet another idea could be social currency within chat streams for video gamers. It will be foreign territory for many, and the key to success is correct market timing balanced with adoption.
Source: Images from Pexels, 2019 Keystone Predictions Deck