New companies and existing players are creating new financial products that interact with your money. But if everything is becoming Fintech, what does this mean for our financial lives? How do we manage the increased complexity?
If you started 2020 with any doubt about the breadth of products or services financial technology might impact, the headlines in just the first few weeks of the year should make that trend abundantly clear. Already, we’ve seen:
For those keeping score, that’s an e-commerce platform moving further into financial services, a major card network acquiring one of the key infrastructure companies for fintech developers, and one of the oldest banks aligning significant resources to enable other companies to build banking products and services. These three established public companies are all placing bets on financial technology. And these headlines are in addition to last year’s launch of the Apple Card by Apple, checking accounts by Google, and banking services built into both Uber and Lyft.
This is all possible because the various elements of the banking technology stack have become modularized into services that can be combined by new brands and recombined into new products. This trend has been well described in part as Embedded Finance or the “Amazon Web Services” Era for Financial Services with the net hypothesis that:
For fintech founders and venture capitalists, the trend makes perfect sense. It should validate the commitment made through sweat and capital deployed to making finance better for more people and the financial system more efficient overall. But for the average person, as startups create new financial services and as existing companies add financial services, the net result is more and more products that interact with your money.
Let’s assume that this trend continues. That would mean that in addition to the current slate of offerings for financial services from the traditional players (i.e. banks) AND the products offered by new fintech startups (i.e. neobanks and others) powered by Infrastructure-as-a-Service, we will now ALSO find more and more financial services in the apps and websites you use for non-finance activity. For example, as a driver for Lyft, I can now deposit the funds I’ve earned on the platform into my Lyft Direct account and spend or withdraw them on-demand, instantly. It’s not that there is just a new brand offering you a product to fulfill your banking needs, it’s that the offerings will be EVERYWHERE.
What does this mean for me as a consumer? Is having pervasive financial services good for me?
The answer should overwhelmingly be yes! A new bank account tailored to my unique needs and desired features offered by a new player sounds great. Making my usage of a platform easier with less friction – awesome! In isolation, this is an improvement in interacting with your money. And that is particularly true if I am going from not having a bank account at all to now having one, regardless of whether it is a new offering or one that is connected to a platform I use.
But what happens when we combine these new services with an existing context? Or after signing up for Lyft Direct, my needs mature, and I add other accounts from traditional banks into the mix? All of the sudden I have a bank account, another with a cool new offering, and yet another account linked to a platform I use. Which one did I use for my Netflix subscription? What are my balances in each? And how do I move money between them? With more accounts, we are left with more cognitive overhead managing a system that increases exponentially with complexity.
There are clearly benefits to these new offerings existing. More consumers will gain access to accounts more suited to their needs. As with content, movies, and every other market impacted by the internet, wholly new products will be created and more offerings will be available even to the most niche demographics. An abundance of choice is good, but it also equals increased complexity.
How do we harness the advantages of pervasive financial products AND increase efficiency for all of our financial lives? The solution has to be through software that engages with all aspects of your “financial graph,” adding a layer of functionality that helps us manage our money wherever it might be. We need technology that abstracts away the complexity and automates the time-consuming.
As software eats financial services and “Everything becomes Fintech,” we need financial technology more than ever. Not just the kind that creates another account to manage, but software that spans accounts universally and makes your network of accounts work well together, so that your financial life is both simple and empowering.
As a consumer, you should be able to take advantage of new offerings that emerge from the AWS era of financial services and have all the accounts you might want. Fintech is resulting in more accounts, but your entire financial graph needs software too. That’s exactly what we are building at Astra – the automation platform for your money!