CEO at Kunai, a team of designers, developers and product managers who take ideas from napkin sketches to deployment at scale.

I have a confession. After finding out that the U.S. military has a task force for tracking UFOs, I’ve become a little obsessed with extraterrestrial life.

This curiosity is only further stoked by Netflix’s Alien Worlds, a series that uses scientific information about distant planets to imagine what kind of life may live on them. For example, exoplanet Atlas has three times Earth’s gravity, which actually causes air molecules to collapse and results in thicker air.

Atlas’ creatures, the show’s creators imagine, might include winged animals that live almost their entire lives in the sky, coming down only to lay eggs and die.

Sound fantastical? Perhaps a little, but I actually think this is a great analogy for fintech’s evolutionary history and current developments.

Early Life On Planet Fintech

On the planets in Alien Worlds, and even on Earth, planetary rules like environment and atmosphere dictate evolution.

Fintech innovation can similarly be boiled down to infrastructure and products. In this analogy, Planet Fintech has planetary rules (infrastructure) shaping unique life forms that adapt to these rules (products).

Planet Fintech was an analog planet until a few critical environmental changes in the 1950s, ’60s and ’70s. A computer processing revolution made batch processing and synchronized bank accounts across branches possible — an important infrastructure change.

This new planetary atmosphere gave birth to a novel creature on Planet Fintech: the credit card. However, with payment rails supplied by companies like Mastercard and Visa and developments like the mag stripe, this little creature began to change the environment that created it. (Full disclosure: Mastercard and Visa are customers of my company. We are a preferred partner of Plaid.)

The Financial Tree Of Life Grows Fast

Back in 1999, PayPal began offering electronic payments via linked credit cards and bank accounts. In those days, internet startups had to buy their own servers and configure their own routers before they could even write a single line of code. Then, they’d spend hundreds of hours dealing with payment authorization, user authentication, SSL certification and more.

The resulting new payment creature was clunky, but it was an innovative form of wobbly kneed life emerging on Planet Fintech.

By 2006, startups like Prosper and Lending Club were experimenting with marketplace lending. The term “fintech” formally emerged to describe these new, somewhat awkward creatures. Many of them did not survive, learning a hard lesson that better lending terms couldn’t outweigh a cheap and stable source of capital like that secured by previous species.

Increased Evolutionary Pressure Prompts Customer Centricity

Today, the rules of Planet Fintech are changing in another major way thanks to the various creatures that have evolved there. A major atmospheric change is infrastructure as a service, or IAAS.

IAAS is a prebuilt computing infrastructure available as a subscription. With it, startups no longer have to buy their own servers, configure their own routers or even write their own code. They simply set up an Amazon Web Services account, for example, and shortly after, a new fintech creature emerges.

This environmental change has fueled a Cambrian Explosion of sorts on Planet Fintech. In the early 2010s, creatures whose evolution depended on changes to infrastructure emerged en masse. Consumer deposit account provider Chime appeared in 2013, for example, thanks to a partnership with an infrastructure startup called Galileo.

Galileo agreed to create external APIs for Chime, which allowed Chime to easily roll out checking accounts that reached out to the 25% of the market that depends on check cashing services and payday loans to meet liquidity needs. In the new resulting environment, startups like Chime could focus almost exclusively on their customers rather than the tech hurdles of online banking. Both Chime and Galileo experienced massive success thanks to this work, and their story is only the tip of the iceberg.

Every Company Will Be A Fintech Company

With the help of IAAS providers like Stripe, Plaid, Finicity, Alloy and Symphony, many originally nonfinancial companies have made financial services a major source of revenue. This is possible when tech companies use deep customer information and niche industry knowledge to offer personalized financial services that other fintechs can’t touch. In the process, these companies become primarily fintech companies in practice.

This adaptation is about vertical tech companies everywhere leveraging their unique insights, networks, data and customer relationships to create successful fintech businesses. That’s the big evolutionary event happening now.

And it’s far from over; Planet Fintech’s rules are still changing. At the a16z Summit in 2019, Angela Strange explained why we should expect to see many more new products emerge in the years ahead and asserted that in the near future, every company will derive a significant portion of its revenue from financial services. Apple, Uber and Lyft are already well on their way.

The Future Of Life On Planet Fintech

We are still early in this revolution. Combined with the unexpected timing of a worldwide pandemic that evolved the relationship between regulators and fintech companies, rapidly shifted consumers to digital commerce, and accelerated digital transformation for financial institutions, the environment is ideal for continued evolutionary explosion.

Fintechs helped the government distribute checks to Americans and loans to small businesses. Last year, Square saw its direct deposit volumes triple from March to April, while Chime saw record signups, and mobile banking engagement rose 50% for traditional banks and credit unions in the first four months of the year.

We saw the launch of Stripe Treasury, which focuses on helping companies add financial features to their products. These types of solutions are making things easier than ever before.

When an environment changes, the life within it follows. These evolved life forms then change the environment in return. By thinking about the fintech environment and its products this way, we can better understand the evolutionary phase we find ourselves in.


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