2016 Predictions


Hello. It’s me. As we kick off 2016, look for consolidation as private companies are forced into the arms of larger players, along lines of last week’s purchase of Jemstep by Investco, or the acquisition of Yodlee by Envestnet, BillGuard’s purchase by Prosper or BlackRock’s acquisition of FutureAdvisor.

It’s incredible how much is written – still – on Robo’s being “on fire” when the facts are so different. Look for capitulation in 2016, among startups in the robo advisor category and continued dominance by a handful in the lending space.

Robo advisors are private, so it’s hard to know how much case they are going through but the themes of recent news (e.g. lowering investment limits) suggest we may see one of the bigger players disappear in 2016, if not 2017.

This development is not specific to digital wealth management, so consolidation and capitulation is my prediction for all areas of FinTech.

pac manIn 2016, look for consolidation within the most crowded areas (e.g. alternative lending, robo advisors) with too many ‘me too’ companies. Look also for some acceleration of Product innovation at bigger firms, as they try to respond to the to FinTech startups who’s captures headlines over the last few years.


Advisors: Where the Action Is

The real story is slow demise of the big name firms like Merrill Lynch and Morgan Stanley, as they lose top advisors and clients to RIA’s (not robo advisors).

Less covered by tech media, look for RIA’s to continue to take share from brokerage firms, even as firms like Morgan Stanley explore automated investment services.

What’s behind Morgan Stanley reportedly planning to introduce its own ‘robo advisor’ service is not competing with Betterment, but trying to stay relevant and nimble as it loses share to RIA’s that offer better services, products and technology.

FinTech industry followers are better served to listen to Michael Kitces and Bill Winterberg rather than read press releases from robo advisors.

Financial Data Comes to the Cloud

Is Market Data as exciting as marketplace lending or mobile payments? Maybe not, but it deserves attention, especially as one innovator, Xignite, behind Wealthfront, Betterment, Personal Capital, Motif and StockTwits –is looking to shake up an industry.


I recently sat down with the Founder & CEO of Xignite, Stephane Dubois, in San Mateo. He noted how robo advisors were among early clients of xIgnite, but that his target market now includes larger financial institutions.

I asked him whether xIgnite was like Stripe for the market data world? My rationale was Stripe has been successful in payments in part due to its focus on developer community.


Dubois saw the parallel, noting that xIgnite is focused on API’s, innovation and targets developers, while financial data incumbents (e.g. Thomson Reuters, Bloomberg, S&P) often seek to sell products, not delivering the actual data clients want.


But he emphasized Xignite targets both developers and businesses (both startup and larger companies at this point in the growth trajectory). As Dubois expressed it, xIgnite’s goal includes growing its business through enabling more responsive front-end tools for financial institutions, and helping it slash back-end costs.

Is Xignite the Stripe of the market data world?

From my experience at Morgan Stanley, I think there’s opportunity. Although there is a lot of focus on controlling market data expense, in light of reduced profits in many trading areas, executives such as Morgan Stanley’s Ken Brady are smart and strategic, looking to control expenditure but also enable the business.

Focus on the Apps, Not the Integration

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This illustration from xIgnite captures the essence of its value proposition and also highlights one issue for large financial institutions.

Banks do a good job managing their third-party expenditures and risk; teams focused on partners on Wall St. (ranging from Operations, Market Data, Tech Risk, Vendor Risk, Corporate Services, COO Teams). What big banks can learn from startups is to focus on the apps, not the integration (and using xIgnite can help with that approach).

Morgan Stanley legend Merritt Lutz jokes that in a post Dodd-Frank world, you can find a risk officer hiding under every desk on Wall Street. But the red tape on risk and expense  management, has slowed down execution. Clients using Morgan Stanley Online can’t see basic portfolio performance reporting online, in contrast to most of its competitors.

As a result, wealth management units of banks suffer from too long development cycles. Instead of navigating bureaucracies, expense approval and risk teams, developers should be able to focus on apps and the data they need to serve clients.

Bigger banks should be more API-centric approach and embrace Agile in order to enable faster time-to-market on Wall St. and compete with FinTech firms.


Final thoughts on 2016? I’m looking forward to incumbents moving faster, adopting API solutions like Xignite, during consolidation since as one executive from J.P. Morgan Chase said, ‘Do we really need 1,000 mobile wallet startups?’

I also don’t foresee any big IPO’s in the FinTech space, given the state of the markets, although SoFi and Stripe have all the right pieces in place. For now, I can see Financial Technology Partners being busy with lots of deals focused on the middle market.

2016 should offer a few surprises. I look forward to telling you about them.

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Are Banks Boring?

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Last week I attended Yodlee’s incubator, ynext’s Demo Day in Palo Alto. Yodlee’s ‎Chief Strategy Officer, Joe Polverari, said it decided to launch ynext to learn how to innovate better by drawing on the creativity of entrepreneurs and startups.

IMG_1109His words reminded me of a comment from a top venture capital firm partner that focuses on FinTech: ‘Banks are simply unable to innovate, as they are structured.’

Some have even gone further saying “banks are boring.” Recently a NY-based VC gave me a high five after I told him I’d left Morgan Stanley.

I’ve worked at both startups and banks, so know firsthand that each place can be exciting or not depending upon the role, team and culture.

It fashionable to say FinTech is booming (and seems every day I see a new post  noting investment is 3X higher now than it was). The pundits praise the innovators – and predict the demise of traditional banks, citing surveys on Millennials who want to “cut the cord” with banks.

cap1logoBut yet the very first FinTech company was Capital One, the US bank. Its founders, Nigel Morris and Richard Fairbank, pioneered the idea of an individual credit card rate and product, putting technology at the center of its business strategy. Today Capital One’s innovation lives on in everything from its culture, products, work spaces, and units like Capital One Labs.

Having met with Capital One Labs a couple of months ago, I’ve seen first hand how the bank’s ethos, leaders (including SF-based Skip Potter) embrace innovation, creativity and Agile development.

It’s easy to forget that Merrill Lynch pioneered the Cash Management Account (not a startup); Barclays and Vanguard played big roles in revolutionizing low-cost efficient investment products like ETF’s (though robo advisors get a lot more press). In short, banks are not simply ‘desert islands’ of innovation.


Nor are banks indifferent to the underserved. One case is point showing a focus on innovation and the underserved is next week’s EMERGE 2015 forum in Austin. This event is co-sponsored by the Center for Financial Services Innovation (CFSI) and American Banker.

The event bring 700 leaders together to network and advance innovations for the financially underserved—with consumer needs front and center.

FinTech-focused venture capital firm, Core Innovation Capital recently wrote that “if past years are any indication, content and programming will not disappoint.”

I hope the event gets well covered in the press, but it’s too bad some fintech startups seem to garner lots of PR, no matter what their agenda.

If past years are any indication, content and programming will not disappoint at EMERGE 2015

I find it disappointing that certain startups tout solving so-called problems of engineering graduates from the nation’s most elite colleges not paying a lower rate for their loans vs. community college students.

There’s a role for credit scoring and risk-based pricing, yet we shouldn’t be fostering redlining or limiting focus on the elite. The innovators who developed new pricing for high-potential recent grads should think more about inclusion.

Case in point was a party at a venture capital firm last week in Silicon Valley. There were a lot of very smart people, connected people, and wealth – but there wasn’t a lot of diversity.

I’m positive about the positive aspects of tech firms in financial services (e.g. giving value to younger people vs. a time-in-rank culture). But we can all reach for a higher standard of serving the bottom line and so-called double bottom line.

android pay

For example, the recently announced Android Pay (like Apple Pay) is convenient, secure, but not really a game changer. Startups like LendUp or Acorns, on the other hand, show innovations can go beyond client solutions to benefit the wider society at large.

So let’s all up our game and aim a bit higher.

Key Themes: API’s & UX



I’ll keep it brief, since I have guest blog post on Yodlee’s web site this week.

In it, I discuss a couple of themes I see as important to startups and incumbent players in financial services: the growing role of open API’s and UX (or focus on the user experience), a traditional strength of consumer Internet businesses like Yelp.

I’ll reiterate few points. Although API’s have been around for many years, my experience is that big banks have seldom focused efforts on them for internal or third-party integrations due to security, being slow to adopt modern development frameworks, and a need to focus on legacy systems. That simply needs to change.

I recently spoke with Joe Floyd, a principal at Emergence Capital about FinTech. We agreed many functions of financial services companies risk being disrupted by startups (such as LendingClub) and the role of API’s.

We envisioned – in the context of today’s mobile solutions and app-centric world – a world in which the user grants permissions to their financial apps – just as you allow apps like Twitter to access your contacts.

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In this world, your financial apps – which may be from your bank or not – e – might have the ability to see your bank balance and move money between accounts. Solutions would focus on the user’s priorities, e.g. budgeting.

I also met up with former work colleague working in customer experience strategy at Wells Fargo. While Wells Fargo excels at this area, he was open about how far the bank has come.

Our talk reinforced my view that banks are seldom naturally strong at UX, given their focus on annual budgets, long development cycles, and numerous stakeholders.

Case in point: Contrast your average bank’s user experience with what you see at Betterment. Check out its web site or try its service and you’ll see why they’ve been called the “Apple of Finance.”

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Yet banks can – with their deep understanding of client needs – achieve similar UX  success by being more agile and user-centric.

As a glimpse of what it might be like, imagine instead of Microsoft Word, Excel and PowerPoint, your team uses modern collaboration tools, like Asana or Slack (winner of last week’s TechCrunch Crunchie award).

Cue video!


Tuesday Recap: Money 20/20


Money 20/20 continued today, starting with a keynote by Ken Chenault, longtime CEO of American Express. What was interesting was both how much Ken embraced disruption, and versed he seemed in technology and  his views on prospects that many conference attendees would be seeking to take market share from American Express. Beyond noting he welcomes competition, he stressed that he was not at all afraid to cannibalize his own business in order to reinvent AMEX.

Chenault said he “could care less” if plastic eventually goes away – eliciting a strong response from the audience, and sees AMEX as poised to continue to succeed in today’s more digital world. He also said he was disappointed to see Dan Schulman leave American Express to run PayPal, but expressed confidence he had a deep bench on his management team.

Chenault was excited that American Express was part of launch of ApplePay, and dismissed a question asking whether Apple could eventually disintermediate them, saying he doubts Apple sees that as their core business and seemed fairly unconcerned about MCX and CurrentC. I think that both sentiments are correct, although it is early stages of the game.

Next up was Tom Taylor, VP of Amazon Payment Services, extremely compelling speaker, and lot of the session was dedicated to a case study of a UK retailer, AllSaints, that essentially does everything (design, make & sell its own clothes; design, build and operate all its stores and web site using its own people) except for its strong partnership with Amazon.

Another good session was on payments for affiliate networks, marketplaces and direct sellers. Bill Clerico, CEO of WePay made good points about how handling marketplaces are very different from traditional e-commerce, with the need to manage the risk of buyers and sellers.

Another session — wittily called Planet of the API’s: Making Banking & Payments Programmable — explored how API’s can change how consumers will interact with their banks. Zach Perret of Plaid spoke on how creating an ecosystem of bank API’s could lead to all kind of new end-to-end experiences with online services that would not necessarily come from your bank.

While Yodlee CEO Anil Arora said he doesn’t see the need for every bank to publish its own API’s — it’s just a technology he said, and doesn’t solve anything in itself (and of course, his company has built out integrations with over 10k financial institutions, a source of competitive advantage for Yodlee).  But Perret of Plaid took an alternative view, saying that Plaid expects to see at least 10,000 new start up’s / apps leveraging bank API’s over the next couple of years.

There were a couple of other good sessions today: Turning the topic to lending and the changing world of credit, there was an good discussion of alternative credit markets, with a roundtable featuring Ken Lin, CEO of Credit Karma, Aaron Vermut, CEO of Prosper Marketplace, Mike Cagney CEO of SoFi and others.

Key take away is that these companies are all solving for different issues in the current credit marketplace, where some find it difficult to obtain credit, or overpay due to market inefficiencies. Most agreed peer-to-peer term is overused, and emphasized use of risk models, data, and fact they acquire customers in new and traditional (direct mail!) models, just with a different mix.

The last session of the day was a debate on ApplePay, featuring Jim McCarthy, Global Head of Innovation and Strategic Partnerships at Visa, and Jim Smith, EVP and Head of Digital & Direct Channels at Wells Fargo, among others.

Jack Stephenson, SVP of First Data, commented on the “reality distortion field” attributed to Steve Jobs, being a factor, on some level, in that he’s never seen anything as big and complex come together until this effort to work with Apple.

Jim Smith said his team had been looking “for some time” for the right model for mobile payments, and were excited to be involved in the launch of Apple Pay, which will bring together banks, card networks, merchants and the right security model.

But many said it’s still early in the game, and Google Wallet will continue to evolve, with some noting that partnerships with biometric firms and other changes leveling the playing field, while adding the media were “missing the point” with MCX vs. Apple Pay story, a view supported by the team at Paydiant, the Boston-based software platform behind MCX.

A fitting end to the recap for today’s events at Money 20/20 – an event that some said might as well be called ApplePay 20/20 – with the day’s chatter commenting on the fact that Money 20/20 had just been bought by a European company (no word on whether the payment would be made in Bitcoin).