Money20/20 USA: One-time Adversaries Are Now Allies (Sort of)

The fintech sector has long cultivated a reputation of producing nimble, aggressive companies on a shared mission to disrupt the financial services industry. They’re the ones using cutting-edge technologies like A.I., machine learning, and the blockchain to lure businesses and consumers away from the Big Banks and seize market share. But the atmosphere at this year’s Money20/20 USA was decidedly less competitive and more cooperative — a détente born out of economic necessity, particularly for startups and early-stage fintechs.

“There has definitely been a market contraction in 2022, whereas last year FinTech had an incredible boom,” said Dan Van Dyke, Vice President, Content (Head of Financial Services) at Insider Intelligence. “The multibillion-dollar VC bubble has burst.”

According to CB Insights’ State of Fintech Q3’22 Report, fintech funding fell 64% year-over-year (YoY), with $12.9B raised across 1,160 deals in Q3’22. It’s the sector’s weakest quarter since Q4’20 — a 38 percent decline quarter-over-quarter (QoQ) as the economy continues moving toward a recession and investors deploy less capital. CB Insights also reports the average deal size this year is down 38% from 2021.

When we asked Van Dyke whether he, too, felt a warming of relations between former adversaries during Money20/20, he couldn’t help laughing while touching the lapel of his navy blue suit jacket.

“I’m wearing a suit, but if you look around, you see a lot of people wearing jeans, a visual reflection of the fact that the lines between the two sectors are blurring,” he said. “The bankers are dressing like the fintechs and the fintechs, to a certain extent, are dressing like bankers. It’s representative of how the fintech sector is maturing.

“Broadly speaking, I think it is a good thing that we’re seeing more partnerships and less direct competition. That will accelerate our progress in critical areas like advancing financial inclusion.”

Fintech companies may need to partner with the Big Banks to grow their businesses as venture capitalists tighten their purse strings. But it’s not a one-way street. Even the largest multinational financial services companies benefit from partnering with fintech. They gain the ability to quickly launch new products and services that meet the wants and needs of their business and consumer customers without having to develop them in-house. One example is Earned Wage Access (EWA), a technology that commanded the Money20/20 spotlight.

EWA products give people access to their already-earned wages in between paychecks. One of the most common scenarios EWA developers described at Money20/20 was the consumer tapping into their earned wages to avoid incurring overdraft fees or interest for missing a bill in between pay periods. They gain that flexibility without suffering predatory lenders’ high fees or disrupting their employers’ payroll systems.

Companies implement EWA solutions to offer EWA as an employee benefit, but that’s not the only model. Atomic isn’t trying to take banks out of the EWA equation. Just the opposite, in fact. It has tailored its solution to enable financial institutions to offer competitive EWA options and boost customer loyalty and grow direct deposit acquisition.

“We give financial institutions the huge opportunity to provide an EWA solution to their customers when they need it most, rather than charging a fee for an overdraft or charging an account fee for services they don’t render,” said Lindsay Davis, Head of Markets at Atomic, a company CB Insights included on its 2022 Fintech 250 ranking.

Fraud prevention was another top-of-mind issue at Money20/20, with good reason. The American Bankers Association reports that criminals increasingly deploy automated bots to deluge bank websites with rapid-fire log-in attempts into customer accounts. Once they secure valid credentials and gain account access, they’re free to conduct fraudulent transactions, transfer funds from accounts or initiate new credit applications.

Thwarting fraudsters is a top priority for all financial services organizations. That’s why Conor Burke, CTO & Co-founder of Inscribe, spent his three days in Las Vegas running from one meeting to the next.

Inscribe automates the parsing, classification, and data-matching processes on application documents. Its sophisticated AI models are trained on millions of data points to look for signs of digital tampering, evidence of forgery, and other suspicious activities that too often go undetected by the human eye.

Burke said the sense of urgency financial services organizations feel towards protecting their customers from fraud alleviates any hesitations they once had about partnering with fintechs.

“Not long ago, if (the technology) wasn’t wasn’t built internally, they didn’t want to hear about it,” he said. “But we’re seeing them grow more receptive to integrating APIs that help them address issues like thwarting fraud. They’ve become much more comfortable collaborating with fintech companies and using data from outside sources.”

But while a spirit of cooperation prevailed at Money20/20, it was also clear the desire to disrupt the old guard still fuels fintech founders like Marwan Forzley, Co-founder and CEO of payment services provider Veem, another CB Insights 2022 Fintech 250 honoree. The company’s API makes sending and receiving business payments worldwide as easy as sending an email.

“We give our users alternative solutions to traditional banking and accounting services, but in order to do so, we know we have to cooperate with a number of players in the market,” he said. “We are big fans of integrating what we’ve built into somebody else’s environment, so we’ve teamed up with companies like Q2 and Finestra on the banking side and Quickbooks and Netsuite on the accounting side to deliver everything our users need to manage their payment processes.”

David Brear, CEO of consulting firm 11:FS has been on both sides of the fintech-financial services relationship. He’s held senior leadership positions at some of the world’s biggest financial services companies, including Lloyds Bank, Aviva, and Gartner. He also led the creation and market establishment of the challenger business bank Mettle for Natwest in the UK, and has been at 11:FS for almost seven years.

He pointed out fintechs need access to the big banks’ enormous global customer bases, and the banks need the fintechs help in overhauling their outdated product development and delivery processes.

“The banks are set up in monolithic team structures, like the mortgages team and the savings team, but today customers are looking for products that cut across these silos,” he said. “Fintechs know how to do that. Fintechs and established financial services organizations are the catalysts for change in the industry. That benefits customers because they’re getting a better level of service.”

A big “thank you!” to everyone who took the time to meet with us during the hectic three days at Money 20/20 USA. Follow the links below to connect with them on LinkedIn:

• David Brear, CEO, 11:FS, and Co-host of the Fintech Insider podcast
• Conor Burke, CTO & Co-founder, Inscribe
• Lindsay Davis, Head of Markets, Atomic
• Marwan Forzley, Co-founder & CEO, Veem
• Dan Van Dyke, Vice President, Content (Head of Financial Services), Insider Intelligence

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