Fintech: Morgan Stanley & OpenAI advisor bot; Neobank Monzo's launches digital investing
Morgan Stanley and OpenAI, the creators of ChatGPT, have teamed up to develop a generative artificial intelligence bot for its wealth management business.
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Hi Fintech Futurists —
Here is today’s agenda:
AI: Morgan Stanley to launch AI chatbot to woo wealthy (link here)
INVESTING: Britain’s $4.5B Digital Bank Monzo Debuts Investments Feature (link here)
LONG TAKE: Why $ billions are flowing out of Banks into Money Market Funds, and how startups can benefit (link here)
PODCAST CONVERSATION: The Techstars Web3 thesis and advice on building companies, with Pete Townsend Managing Director at Techstars (link here)
CURATED UPDATES
Digital Investment & Banking Short Takes
AI: Morgan Stanley to launch AI chatbot to woo wealthy (link here)
Morgan Stanley and OpenAI, the creators of ChatGPT, teamed up to develop a generative artificial intelligence bot for the wealth management business. The two firms met in 2022, and Morgan Stanley signed a deal last summer for preferred access for its wealth management product development. The fruit of their labor — an AI bot for wealth managers to use as a virtual assistant — is set to launch this month. The move comes after months of testing with approximately one thousand financial advisors.
The bot is able to find research or forms to provide insights and administrative support, and remove the need for bankers to scan in manual documents. In the future, it will be able to create meeting summaries, put together follow-up emails with next steps, manage the sales database, schedule follow-ups and provide advice on a range of topics related to client finances. You know, robot work.
There is a plethora of robo-advisors leveraging automation for investment advice. This solution, however, is different because it is geared at assisting advisors with administrative and insight support, instead of trying to pull them out of the workflow entirely. We think this makes sense, given the high-end nature of Morgan Stanley’s services, providing a human touch to nurture the relationship.
AI is important right both in Silicon Valley, as well as on Wall Street. JPM recently promoted Teresa Heitsenrether to become its Chief Data and Analytics Officer, with the aim of boosting AI adoption. Bank of America’s virtual assistant, dubbed Erica, has had over a 1B interactions since 2018, and Moody’s is working with OpenAI and Microsoft for an AI research assistant for its clients.
Morgan Stanley has indicated these AI initiatives are meant to expand the wealth division segment, which grew 16% in Q2 and added $90B in client assets. We believe AI will take a more prominent role in financial services, but the human touch will remain a differentiating factor for customer acquisition and emotional management. Incumbents that are able to leverage AI optimally for best performance and efficiency gains, while still maintaining an engaging, tailored and human-centred service will capture more share in the wealth management market of the future.
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INVESTING: Britain’s $4.5B Digital Bank Monzo Debuts Investments Feature (link here)
Digital banking continues to be a topic of focus. Monzo, one of the London-based neobanks that operates with a UK banking license, launched a digital investment product called “Investments” — its customers will be able to invest in a number of funds managed by BlackRock.
In the UK, digital investing platforms such as eToro, IG, and Freetrade are attempting to solve this as well, given the low adoption in the country. Fintech Revolut, which positions itself as a financial super-app but has struggled to obtain a license from the Bank of England, currently offers equity and crypto trading capabilities to its 30 million users. Freetrade offers commission-free and fractional share investing to 1.4 million customers as part of its entry-level subscription plan.
Founded in 2015, Monzo last raised $500MM in 2021 at a $4.5B valuation. Revolut was valued at $33B in 2021 but has recently seen multiple investors like Molten Ventures and Schroders reach for the scissors with write-downs of ~40% on their investments. This is indicative of the broader recalibration of valuations that the fintech industry has been experiencing. Klarna, once Europe’s most valuable startup, saw a down round in 2022 cut its valuation cut to $6.7B — an 85% drop from a year earlier. Throughout 2023, investor attention has been more keen on profitability rather than growth, though the former continues to be a challenge for many neobanks.
Elevated interest rates in the UK, currently at 5.25%, and abroad have served as a boon for banks, particularly net interest income (NII). Monzo and other neobanks have been able to reap the rewards of their banking licenses with the ability to invest deposits — Monzo posted $200MM in net income on deposits of $7B. Notable UK fintechs with a UK banking license include: Starling Bank, Kroo, Stripe-competitor Adyen, which secured a license this week, and Zopa.
Still, Monzo reported a $124MM loss for FY23. While we like that the user base has grown to 8 million customers, the digital investing pivot could prove to be costly. FY22 already painted a less than stellar picture of profitability with a 56% YoY increase in operating expenses and a 7x YoY increase in credit loss expenses.
Convincing users to pay an annual 0.59% fee — a 0.14% fund fee and a 0.45% platform fee — when there are commission-free trading options may also prove challenging. Global daily trading volume has also taken a hit across European and U.S. equities, so trading revenue may not have a meaningful contribution in the short term.
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The Fintech Blueprint Office Hours
Office Hours is a live, non-recorded roundtable that provides our community the opportunity to interact with the Fintech Blueprint team, our esteemed guests, and each other.
Topic: Let's Talk About Finding True Innovation
When: Thursday, 21 September at 11:00 AM ET (8:00 AM PST / 4:00 PM BST).
Guest: Scott Abrahams, the current EVP Channel Partnerships at Mastercard. With over two decades of experience in people leadership, Scott has managed substantial teams, with up to 300 individuals under his guidance. He brings an entrepreneurial spirit to his career, embracing a growth mindset that fuels his approach to work.
Host: Bo Brustkern, CEO, Fintech Nexus.
Learn from Scott's experience, ask your burning questions, and get a peek into the future of channel partnerships at Mastercard.👇
Blueprint Deep Dives
LONG TAKE: Why $ billions are flowing out of Banks into Money Market Funds, and how startups can benefit (link here)
In this article, we delve into the complex perceptions and impacts of interest rates in the financial ecosystem, emphasizing their influence on the fintech and crypto sectors.
Detailing the shift of assets from bank deposits to money market funds (MMFs), we suggest this transition has been propelled by better returns and flexibility offered by MMFs, alongside evolving fintech integrations which facilitate easier asset movement. The piece also discusses the implications of these shifts on fintech companies who are integrating cash returns into their products, pointing out regulatory considerations and the role of innovations like tokenization in blending traditional finance with emerging financial technologies. Lastly, the article urges fintechs to focus on aligning their products with the real-life goals of their customers, instead of merely offering investment returns.
PODCAST CONVERSATION: The Techstars Web3 thesis and advice on building companies, with Pete Townsend Managing Director at Techstars (link here)
In this conversation, we chat with Pete Townsend - Managing Director at the Techstars Web3 accelerator.
Pete is an early-stage startup investor, advisor, non-executive director, and podcaster. He has 28 years’ global experience at the startup and enterprise level with companies such as BNP Paribas, Fidelity Investments, Coinbase, and has invested in 25+ web3 and fintech ventures around the world. He is based in Dublin, Ireland and helps early-stage ventures get their products to market, get traction with customers and raise funding.
Webinar for fintechs, software platforms and marketplaces
How Managing Global Fund Flows Makes International Expansion Much Simpler
Join us for an insightful, 30-minute webinar where we explore how marketplaces, fintechs, and software platforms can drive market expansion and transform the way customers manage global fund flows
👉 September 21 at 11am ET. In this 30-minute session, we will discuss:
• Key global money movement challenges that hinder market expansion
• How platforms can unlock new market opportunities and build new revenue streams
• Best practices from industry experts on how fast-growing companies like Public.com and Ramp are expanding their operations to international markets
Curated Updates
Here are the rest of the updates hitting our radar.
Payments
⭐ BNY Mellon launches open banking payments service - Finextra
⭐ JPMorgan Chase to offer online payroll services as it steps up fight with Square, PayPal - CNBC
Visa launches global cross-border money movement package - Finextra
Xbox to Launch the Xbox Mastercard, Its First-Ever Credit Card in the US, Issued by Barclays - PR Newswire
Flutterwave launches CBN-backed Swap, partners Wema, Kadavra to make speedy FX available for Nigerians - Nairametrics
PayPoint delivers Pay by Bank - Finextra
AI
⭐ Ant Group unveils finance-focused AI model - Technode
Financial Operations
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Just to flag an error: Monzo's pricing for the new investment product is 0,59%/year (not monthly)
Love that Morgan Stanley is using AI to streamline and make their business more efficient. As someone who has worked in a bank, that paperwork is no joke!