Happy New year!
21 is an archetypal number with several patterns associated with it. The gospel of St. John has 21 chapters, the apostle Paul wrote about 21 sins, and Jesus Christ appeared in 21 places in Palestine to confirm his resurrection. Some claim that 21 is a symbol of maturity and perfection (in the context of the Bible).
Those that believe in guardian angels, interpret 21 as the time for new beginnings and changes.
From a mathematical perspective, 21 is not a prime number but a compound number and the product of 3 and 7. Of course, seven is well known as a spiritual number (7 heavens, 7 chakras, etc) which may be the reason 21 is considered an important energy symbol linked to fulfillment, completion, success (as per Deepak Chopra).
Let’s also not forget that 21 is the 8th term of the Fibonacci series.
2021 (adding the numbers equals 5); 5 is the number of transformation.
In the financial world, there are clear signs of new beginnings, changes, transformations that are underway. These are predominantly associated with potential new ways of governance which originate from large-scale disintermediation of the existing structure of markets and also from increased use of open-source infrastructure on which to build products and services.
Visible changes (at a very early stage) can be spotted in areas like programmable money, private digital money, and new forms of alternative investments. Increased experimentation with Central bank digital currencies, with corporate tokens, with tokenization of non-fungible items like art, sports cards, or personas.
The next generation of the internet, Web 3.0, can only be built on open-source infrastructure and with fairer governance mechanisms that are more inclusive and based on more collaborative processes.
Let’s always keep these longer-term trends in mind as they are underway. It is not our job to time them. We can only observe that we are at the beginning. Beginnings are always slow and then suddenly there is a Tipping point, an inflection point, a seemingly random setup that accelerates the adoption.
For now, let’s look at what is going on within the existing setup which works in a very familiar way. When I think of the investment landscape, it is clear where investment products are being manufactured and how they are distributed and accessed by end consumers (individuals or institutional). Fintech has impacted these processes in several different ways. It has lowered the cost of accessing investment products (Robo investing, zero-commission trading, crowdfunding of all sorts) and in some cases also the cost of administering investment products (via APIs and DLT). Fintech has broadened access to new distribution channels (via APIs) but not changed essentially the distribution mechanisms.
Fintech has improved considerably customer experiences (micro-investing, mobile-only investment service, 24/7, etc). It has enabled partnerships with BigTech and e-commerce and between incumbents and between Fintechs. Revenue sharing and subscription models have been on the rise as Fintech has led to the emergence of ecosystems and platforms as the winning business models.
In the traditional investment subsector, last year we saw consolidation through M&A with two major deals standing out, Morgan Stanley buying E-Trade and Schwab buying TD Ameritrade. We also saw significant funding for standalone robos, with Stash reaching $300mm total funding. In addition, the large established players, accelerated integrations of wealth management divisions with their consumer banking activities, a much-needed move as grown-up fintechs build fuller stacks which have the built-in agility that incumbents lack. Bank of America, Morgan Stanley, and Goldman Sachs are three big ones that have made strides in these directions.
I wrote in detail about all of the above in my weekly blogs in 2020 (check them out here).
In the Western world, all the digital trends in the investment world continue to favor the adoption of investments by the consumer directly. End consumer continues to be serviced like a Prince. As I listened to insights from Stash and Plum at the December Finimize Summit 2020, it became even clearer that both in the US and the UK, the digital transformation in investments is predominantly about Fintechs being really close to end investors-consumers.
WealthTech is more about bringing closer the end investor to investments. It is less about DIY — Do It Yourself — and more about Smart integrations towards a holistic financial wellness approach. No more silos between Consumer banking and investing.
Plum is the UK AI savings analog of Stash. With their extra $10mm funding this past summer, they plan to expand in Spain and France. With 1mm customers in the UK, their goal for 2021 is to grow to 5mm customers in Europe.
In France, Plum has already connected via API to bank accounts of Banque Populaire, BNP Paribas, Caisse d’Epargne, Crédit Agricole, Crédit Mutuel, HelloBank, Société Générale, and Revolut. So any customer of these banks can use the Plum brain for savings, bill mgt, and investing. The business model is an inexpensive subscription model with three tiers, free, £1 per month, £2.99 per month.
Mentions: Plum, Stash,
, Bank of America, Morgan Stanley, and Goldman Sachs.
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