BBVA to sell chocolates on Amazon, while gamer hardware co Razer tries banking in Singapore; plus 12 key Fintech developments
Hi Fintech futurists --
In the long take this week, I continue on the thread from last week to show how weird and interesting the banking industry has become in 2020. We have BBVA partnering with Amazon to become a vendor of chocolate. We have a competition in Singapore for 5 new banking licenses, with applicants including gaming hardware company Razer, ride-hailing superapp Grab, telecom Singtel, among insurance companies and venture funds. Is it all nonsense? Or is there logic to the chaos?
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Anyone watching Fintech over the last decade has recognized an increasing shift of power from product manufacturers to the platforms where those products are sold. In the case of Amazon, Google, and Facebook -- finance is just a feature among thousands of others. I've made this point since 2017, when Amazon launched lending into its platform. Brett King has been a bit more generous in the categorization, calling the shift "embedded banking". This means that banking products are built into you life's journey, not accessed in a separate customer center location. The financial API trend is a tangible symptom of this vector.
So let's start with the assumption that this is roughly correct. Risk and capital live in various touchpoints across other apps, integrated through APIs. The other part of the framework to remember is -- who is able to deliver infrastructure and customers? For a future-of-payments report earlier in the year, Autonomous Research looked at the following key players as determinants into the equilibrium of payments services in a geography: (1) public and national banking, (2) private financial networks and markets, (3) telecommunications companies and hardware provicers, and (4) web/mobile apps and social networks.
These four power centers are each able to deliver financial products at the level of the individual, but depending on risk aversion, industry maturity, and cultural preferences have varying levels of power and influence across geographies. In Kenya, the telecoms had a unique advantage in building out a mobile currency across an underserved market. In China, mobile apps took on the challenge of creating a new method of commerce and banking as State-run enterprises focused on large institutions. In the US, national and private banking entities have enforced a strong oligopoly across services, which is slowly being melted by the tech firms.
So let's say you are BBVA, and you were *way* early to spend over $100 million on a Fintech bank acquisition, now your offering looks like this.
Then this is what your digital channels look like -- New Year, New You? Spain’s BBVA looking to sell financial services on Amazon. As I understand the news, BBVA will become a vendor on Amazon to first sell non-financial goods and services in order to get acquainted with the channel. Those goods are: a Michelin three-star restaurant’s recycling project, and Rocambolesc, chocolates and sweets crafted by a high-end confectioner. It's weird, super weird! But I like it. Without learning how to do the thing, all you have are strategy consulting PowerPoints.
In a comparable vein, the Monetary Authority of Singapore is planning to grant 5 new banking licenses to new companies in 2020. Of those, 2 are full bank licences that permit retail banking, and 3 are meant for wholesale banking. This has kicked off a bunch of public company and private equity-back bids by various consortia to stand up new banking power-houses. Here are a couple of the ones that crossed my RSS reader:
Ant Financial applies for Singapore digital banking licence. This multi-billion dollar Chinese fintech company, built on the success of Alibaba as an E-Commerce platform and social network, is trying to become a wholesale bank.
Temasek-backed firm leads consortium to vie for digital wholesale bank licence. A public financial company (Sheng Ye Capital), a capital markets firm (PhillipCapital), and an artificial intelligence software player (Advance.AI) are trying to build a data-driven "next generation" SME bank. Also, Temasek is the investment fund for the government of Singapore.
Razer Fintech leads consortium in digibank bid. Ok, this one is led by a hardware gaming company (Razer), targeting the youth market. It also includes an insurance company (FWD), an Internet company (LinkSure Global), venture fund Insignia Ventures Partners, a vehicle wholesale marketplace Carro, and the founders of a large supermarket chain (Sheng Siong).
Singtel, Grab Team Up To Launch Digital Bank In Singapore. On of Asia's largest telecoms (Singtel) and South East Asia's ride-hailing-super-app (Grab) are joining as the two bidders as well.
Let's visualize these four entrants on our strategic map from before.
This is the current state of play -- just for a banking license in Singapore! Every single consortia is a mix of multiple types of companies and customer segments. Further, in several cases, there are no traditional Wells Fargo-like financial services providers at all. What most of them do have, however, is a large customer footprint and a brand that clients love. Razer is well known and "cool" in the gamer market. Grab is the local version of Uber. It's the equivalent of something like Orange becoming a bank. Brands will increasingly grow financial product polyps on their audiences.
To approximate reality, we have to add dimensions to this example. For example, expand the licensing question from Singapore across geographies -- Europe, UK, US, Latin America, Africa, China. Or, expand the product segments from banking to investing and wealth management, to more complex lending like home or auto financing, or to various versions of insurance. This single starting point, however, highlights just how dynamic the ecosystem has become, and how non-linear and surprising the outcomes will be. Did you ever expect 2020 to start with this company applying to be a bank?
Featured Interviews, Podcasts, and Conferences
We Made No Progress, Other Than All the Progress We Made. An op-ed for CoinDesk about the 2019 year in review.
Xtiva WEALTHTECH TRENDS 2020. Check out this deep report across wealth tech about what the next year can look like -- my contribution was to discuss how digital assets will start making their way into more traditional portfolois.
Fintech used to be a back-office support function, now it's defining an industry. Check out my Op-Ed in Investopedia about the history and future of financial technology.
Key Fintech Developments
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