Long Take: Learnings from Microsoft & Visa integrating personal financial data into Excel, and the open ecosystems of Google Sheets and MetaMask
Hi Fintech futurists --
This week, we look at:
Microsoft Excel integrating Plaid, and what that means for the financial planning of over a trillion in assets
Google's structural tech advantage with Sheets APIs, and Chrome winning the browser wars
MetaMask's example of what portable browser money looks like, turning open banking PSD2 concepts into a true open finance industry
As a neobank, you would dream of these numbers.
At $13 billion of revenue and 800 million users in 2016, Office 365 roughly generated $20 per user. That's like Monzo, but with the user foot print of Ant Financial.
You might think the comparison is daft. But let's dig a bit deeper. Excel, and spreadsheets more generally, are the default behavior for managing personal finances. Even for financial advisors, who are supposed to be the precise niche leveraging financial planning software, Excel is the default "do nothing" option. If you are not paying for digital wealth software as an advisor, you are doing it in Excel.
The below data comes from Financial Planning magazine's Tech Survey 2020. See the bottom category (20% of advisors) not using any of the industry's core technology. If we assume this audience controls $2-5 trillion of assets across investment management custodians, we would estimate $500 billion to $1 trillion of assets sitting in Microsoft Excel today.
Here's another fun spin.
About 90% of advisors use Document Management software. This is for things like account opening, saving compliance information, and sharing key legal documents with clients. How many clients, do you think, would prefer to use niche wealth management document management solutions, and how many would like to use Google Drive? As a historic comparison, here's Dropbox reaching $1 billion in revenue. We haven't heard of a single financial services-dedicated equivalent doing the same.
The takeaway is that in the long run, solutions preferred by end users are overpowering solutions preferred by institutional clients.
Another way to put it is that features which institutions find compelling, such as heavy compliance, deep workflows, enterprise support, and backwards compatibility with 40 year-old software, are orthogonal to features that consumers find compelling, such as simple interfaces, availability in the Apple app store, and social media connectivity. See Credit Suisse launching its own neobank. We also don't mean to revisit the thesis of "consumerization of enterprise" as it is well-defined -- people bring their phones to work, and work IT has to adapt. But we do want to point to some behavioral hacks.
Taking enterprise software and making it feel well designed and delightful is one approach. In Fintech, this has meant new payments, banking, lending, and portfolio management Web2 software companies. But the other approach is just to take the main consumer destinations, and embed finance there. With APIs and Open Banking, this is of course happening. Yet, you could take even more "boring" destinations and enable finance there! This is exactly what Plaid (now Visa) has done with Microsoft and Excel.
Go To Your Customer
You can download an Excel template, which permissions Microsoft Office to interact with your bank accounts and pull transaction and balance history. Mint.com and other personal financial management tools (e.g., Personal Capital) have been doing this for over a decade. We wonder how much of the traffic to those destinations uses the native reporting, versus downloading the data and plugging it into a personal tracking spreadsheet.
Reminder: Envestnet acquired Yodlee for $660 million to get consumer data into its financial planning and portfolio management tools. Envestnet's interfaces are just fine, and are the place where financial advisors make decisions on behalf of clients. Data aggregation was intended to be a value-added service delivered by professionals.
But this strategy can now be significantly undercut by the high tech firms (Microsoft, Google) that control the default financial management interface -- the spreadsheet. And it is smart for Visa, which gets returns to scale from being a network rather than being a service, to commoditize aggregation such that anyone, anywhere can access their personal financial data.
Does this cost 50 bps per year on all your assets? No. It costs the mere subscription cost for Office, which is less than $100 per year. The data interpretation and categorization are done by Visa and Microsoft, leveraging machine learning on (what is likely) the largest consumer banking data set in the Western world. Remember that Microsoft also own LinkedIn, thereby having the potential ability to combine the business and the financial graphs into a single whole.
Think now about those financial advisors representing $1 trillion of financial planning performed in Excel. If we were Plaid (and in particular Quovo), we would be working as hard as possible on getting Excel planners to somehow get permissioned access to the data of their customers. If you think this is a stretch, let us remind you of a company called Bloomberg and its Excel plug-in.
It's tough to size precisely the revenue attributable to spreadsheet stock data subscriptions, but let's just say it powers a portion of the market between a few $ billion of equity research revenues and a few $ dozen billion of data distribution revenues.
Whether we like it or not, much of financial analysis today still happens not in the software maw of hard-coded logic, but in the rows and columns of spreadsheets run by human analysts.
Your Finance Browser
Google has been smart to open up integrations into Google Sheets, which is both a (1) browser- and (2) cloud-native competitor to Excel. In winning the browser wars, Google has an advantage in building its own cloud software, optimized to run quickly and efficiently. For example, we offer the personal experience of Gmail always being a little bit better on Chrome vs. Firefox or IE. It doesn't crash or leak memory nearly as much when running in the browser of its parent company, and we have to believe that is no accident.
The finance industry has not moved over to Google from Microsoft just yet. Many incumbents still require dedicated hardware, managed private clouds, or their own server farms. In part, this is due to interpreting outdated regulations with outdated frameworks. In part, the digital transformation of this data and workflow management is thankless, expensive work that no CEO wants to undertake. Yet the future looks like all financial services on large tech cloud providers. And thereafter, all on blockchains.
Does the bank still control the financial data of its customers, even when that data sits in a tech company cloud and is pulled into personal financial management spreadsheets on the tech company office software? If Plaid integrates into Google, then the full power of the open Web is in play. Companies like Zapier can interconnect a Google speadsheet into thousands of other integrations. Zapier plugs into productivity software, the social networks, email infrastructure, and most other things you can imagine. All of a sudden, robotic process automation sits in a consumer's hands, alongside their financial data.
Even more powerful, of course, would be to bring this financial data into the Google Pay wallet as well as its browser. Having Google aggregate your net worth and enable you to take payment, savings, and investment actions from the interface from which you view the world is far more meaningful than squirreling away the experience in your bank account. In some form with a focus on merchants, this is already in progress.
From a consumer standpoint, we can point to crypto-wallet MetaMask as a guiding experience.
MetaMask is a mobile app in Android and iOS and a browser extension with over 4 million downloads. A user of the extension will have permissioned their crypto-assets to be managed from this interface. Imagine a Plaid extension in the browser that also allows you to take financial actions, like those powered by open banking APIs mandated by PSD2, across digital marketplaces. Any crypto-enabled website or application (at which you point your browser) will interact with MetaMask, both for detailed permissions to take actions, as well as for interacting with your financial assets across multiple accounts.
Users never fill out a single credit card form or account opening action. All of it is already embedded in your wallet, which is embedded in your browser, which is embedded in your hardware, which is in your hands, which is tied by machine learning to your scanned fingerprint or facial recognition.
Financial data and functions are being liberated from the banks, and integrated into spreadsheets. From spreadsheets they can travel to the open web, and become a competitive edge for browsers and cloud services. From there, they may end up empowering users directly -- which is already the case for some of the more innovative parts of our ecosystem today.