Page 28 - GS161201

Views
What is Money20/20
Part Two
By Brandes Elitch
CrossCheck Inc.
I n the first article of this two-part series on Money20/20
2016 ("What is Money20/20 ? Part One," The Green
Sheet, Nov. 14, 2016, issue 16:11:01), I endeavored
to explain why this show is important for anyone
in the payments business. I almost said "payments eco-
system," but if I hear that phrase one more time, I will
lose it. Yes, one hallmark of the new world of payments is
dumb names and cutesy phrases not heretofore seen in a
world dominated by large, conservative, buttoned-down,
commercial money center banks. I'll get to the banks in a
moment, but first, I'll address the big picture.
One interesting comment about Money20/20 came from
Jeff Kagan, who said, "Many companies in this changing
space were there. Interestingly, there were also plenty
of historic leaders who were not there. This was a clear
indication to me that the change sweeping over the
banking and payment world is impacting everything.
Every company needs to be a player, or they risk becoming
irrelevant to the customer."
Another Money20/20 attendee said, "Every 20 years,
something really important comes along, and this is it."
What this means at this juncture is that while about 40
percent of the planet today doesn't have a bank account
(and hence has limited options other than cash), new
technology and solutions will bring big changes. In a few
years, almost everyone will have a smartphone or mobile
device, and everyone will be, or could be, connected to
send and receive payments anywhere in the world for
same-day settlement for low cost. This is revolutionary.
28
Trends to watch
Here are some trends I spotted at the show (with 400
exhibitors, undoubtedly I missed many others).
• The financial scale of this industry is impressive.
Six years ago, roughly $2 billion was raised in
what we call fintech today. Compare that with the
almost $19 billion raised in the first three quarters
of this year. Not everybody will be a winner, but
some significant new products and innovations
will come from all of this.
• The replacement of legacy systems is on every-
one's mind. I hadn't realized this is happening
in pockets, and there are individual segments of
fintech. One big one is "insurtech," which has to
do with the way insurance is sold and marketed;
this is a huge market. Another is "regtech," deal-
ing with compliance and regulatory issues, the
number one concern of financial institutions to-
day. There is "healthtech" for medical companies,
and "edtech" for those in the school business. Oth-
ers are emerging.
• Everyone is interested in cross-platform interop-
erability. In addition to venture capitalists, there
are "incubators" and "regulatory sandboxes" to
foster multiple constituencies working together. A
sandbox carves out a regulatory exception for in-
novators to test new products.
• Cash management tools for small and midsize
businesses are becoming viable. Until recently,
only large enterprises used treasury management
products from their banks. Now small banks and
even nonbanks offer electronic invoicing, open ap-
plication programming interfaces, online lending,
factoring, account reconciliation, and business-to-
business products. A big problem for small busi-
nesses is that commercial banks have curtailed
their lending activity, which has curtailed the eco-
nomic recovery. Online lenders are rushing in to
meet this need, which is a very good thing.
• There is a shift to online purchases and to online
payments. My company works in the auto dealer
space. Look at what's going on today with Ama-
zon and Chase here. Amazon is launching a new
portal for Hyundai that will allow for an on-de-
mand test drive program at its dealers. Amazon
also heralded that European buyers can buy a Fiat
from Amazon without going to a dealer (dealer
structure is different in Europe than in the Unit-
ed States). Chase is partnering with TrueCar to
help people find cars online and apply for loans. I
won't elaborate on the success of eBay Motors, or
Craigslist, where, as a car collector, I buy my cars.
It's an addictive experience.