The

Building
Blocks of
Fintech 2.0
 Index

/ Executive Summary 3

/ Introduction 5

/ Fintech 1.0 9
2

/ Drivers of Fintech 2.0 14

/ Building Blocks of Fintech 2.0 21

/ Implications & Actions 33

/ Summary 37
 Executive Conversations with leaders in the industry have led us to
think about the next generation of fintech: Fintech 2.0. The
Summary prior wave of financial technology focused primarily on digital
distribution of existing products and services. Now, we will see
how the industry shifts its activity and enables digitally native
financial services to be fundamentally reimagined from the
core out.

In this whitepaper we will take a look at the drivers setting the

The Building Blocks of Fintech 2.0

scene for the next era of fintech, and what we can expect to
see over the next five years.
3

Key drivers for industry leaders and experts to monitor for are:

/ The Macro Environment: The world that financial technology

resides in

/ Technology: The operational pieces of financial technology

/ Information: Dynamic data and algorithms driving decision making

/ Application: What financial technology is being used for

 Based on the considered
A
Assets & Central Bank Digital Currencies (CBDCs)
drivers, and the way Within three years, five of the ten largest economies
will have CBDCs in the market.
we are seeing fintech
evolve as a whole in Banking Technology Stacks
the next three to five B Within three years, banking tech stacks will be
predominantly cloud-based, with significant elements of
years, we have made the core processing being open-source based within five years.

The Building Blocks of Fintech 2.0

following predictions that
C
Commerce Experiences
4 will ultimately become Within five years, personalized cross-platform digital
algorithms or Super-Agents will represent 20% of retail
the Building Blocks of commerce transactions.

Fintech 2.0:
D
Data
Like Windows, Unix, Mac, Android and iOS today, data
platforms will become the new operating system as the
industry shifts from Big data and Good data.

E
Ecosystem
Within five years, fintech companies will take three
of the top ten slots of the most valuable companies.
 Introduction
What is next for fintech you ask? It is a sector
that is redefining itself. Not only did its
ability to have a positive impact on society Money20/20 was founded shortly after
truly come to light during the pandemic, it the global financial crisis of 2008, a time
is becoming intrinsically more connected to when leading financial institutions shut

The Building Blocks of Fintech 2.0

our economy than ever before. down or required government support.
Market opportunities opened up for
Money20/20 has the privilege of numerous new entrants including startups, new
5
private conversations with leaders across consortiums, and large companies from
all areas of the industry including banks other industries. Like upwardly mobile, hip
& financial institutions, startups, big tech neighborhoods such as SOHO or SOMA
companies, VCs, media, consultants, in large cities, the sector formerly known
analysts, regulators, academics and many as financial technology became known by
more. What began as a few conversations the moniker, Fintech. The term became
nearly a decade ago focused in the US, has widely adopted globally, and even legacy
expanded to thousands of conversations institutions adopted the term.
around the world. The goal of this paper is to
generate discussion and move the industry
forward rather than present a dogmatic view.
 Having survived the Fintech 0.0 Fintech 1.0 Fintech 2.0

past year, an increasing

number of conversations Beginning Year 2000 2010 2021

we have are looking World Population1 6.1 billion 6.9 billion 7.8 billion
beyond the pandemic.
Internet Users (#)2 361 million 2.0 billion 5.0 billion

The Building Blocks of Fintech 2.0

Internet Users (%) 5.9% 30.0% 64.1%

6
/ Fintech has become a vital part of Global GDP3 $22.6 trillion $33.6 trillion $87.7 trillion (2019)
the economy during COVID-19 and
will become even more critical. Global eCommerce
$61.5 billion $348.7 billion $3,605.6 trillion
Volume4
/ The industry will move beyond
distribution and marketing to Account Ownership
reimagine its core offerings. at Institution or Mobile 50.6% 68.5%
Money Service Provider (2011 World Bank) (2018 World Bank)
/ Just as the last downturn triggered (% pop age 15+)

the first era of fintech, the pandemic

accelerated digital adoption and 1 Source: Infoplease Pew Research Center, U.S. Census Bureau, International Database, United Nations Population
Division (World Population Prospects report)
triggered a new era, which we are 2 Source: Internet World Statistics (https://www.internetworldstats.com/emarketing.htm)
3 Source: World Bank (https://data.worldbank.org/indicator/NY.GDP.MKTP.CD)
calling Fintech 2.0. 4 Source: Edge by Ascential Retail Insight Database
 Let us take you on a
journey through the
different eras and stages
of fintech, before we
analyze those building

The Building Blocks of Fintech 2.0

blocks of Fintech 2.0.
The first era, beginning in the year 2000,
7 represents the world of the dot com boom,
a time before fintech became known as
fintech. We’ve dubbed this era Fintech 0.0,
and it was a time when internet connectivity
and monetary transaction accounts were still
limited to upper echelons of society. The next
era, we’ve called Fintech 1.0, commenced
after the global financial crisis when internet
penetration blossomed from 30% at the
beginning, to 60% by the end. The majority of
this was driven by large developing countries
such as China and India.
 So where are we now?
Where does Fintech 1.0 end,
and Fintech 2.0 start?

The Building Blocks of Fintech 2.0

The average internet user was a younger,
Fintech
0.0
urban elite American with a bank account
and multiple credit cards. Today, the majority of
8
people worldwide have
The average internet user was middle or upper internet access, and access
Fintech
1.0
middle class American or European, also with
a bank account but fewer cards. to electronic money services
either through financial
At the dawn of Fintech 2.0, the average institutions or mobile
Fintech internet user is a working class Asian where a
2.0 mobile money account or digital wallet is their money. We will also certainly
primary financial vehicle.
see how digital will progress
into becoming the primary
method of shopping.
 Fintech 1.0
Coming out of the financial
crisis of 2008, banks pulled
back from several markets,
opening up opportunities

The Building Blocks of Fintech 2.0

for new entrants. Prior to this, technology innovation tended to focus on adding
complementary services to existing financial products. For example,
internet-based rewards programs were integrated into credit cards,
9
services increased security for internet transactions and peer-to-
peer services were primarily add-ons to existing accounts.

Fintech 1.0 opened opportunities for non-financial brands. Typically,

early startups positioned themselves as direct competitors to legacy
solutions. They unbundled banking products and services to provide
a more accessible offering to consumers. Startups focused on being
really good at one thing and typically had one primary offering.
However, the improving economy enabled banks to strengthen,
which caused startups to experience the difficulties of scaling. It was
at this point that both banks and fintech companies recognized the
value in collaborating and partnering with each other, most often
with distribution agreements.
 This era focused on Fintech thinking and talent during this
time came from two different sources:
exposing existing
financial infrastructure to / The typical entrepreneur, usually from tech
hubs like Silicon Valley, who saw financial
new digital technologies services as a market ripe for disruption.

The Building Blocks of Fintech 2.0

and distribution channels
/ The ex-bankers and financial industry
like financial apps, digital technologists, often from financial hubs
wallets, and alternative
10

like New York or London, who saw an

lending marketplaces. opportunity to reinvent products or
themselves, beyond traditional structures.
 Financial
Payments Banking Lending Investment Insurance
Sector

Typical / Access to new / Access to new / Access to new / Investment product / Access to agents
Problems products products products access & selection
/ Product complexity
/ New use cases / Fees & terms / Credit history / Trading state
complexity / Servicing
/ Servicing / Pricing & terms

The Building Blocks of Fintech 2.0

Solution / Digital wallets / Banking & PFM / Alternative data / Investment apps / Marketplaces
Examples apps
/ Vertical solutions: / Marketplaces & P2P / Robo-advisors / Insurance apps
11 P2P, x-border, / Neobanks
recurring / Lending apps / Fractional / Advanced analytics
investment
products

The chart above illustrates

financial sectors, the
typical problems faced,
and solutions created.
 / Entrepreneurs and financial industry
experts seized the opportunities they
saw, and began building for market
disruption. Incumbent pullback
opened a myriad of opportunities,
such as finance for small and medium
businesses, and enterprises, with lending

The Building Blocks of Fintech 2.0

an area of particular interest where
digital distribution enabled upstarts to
/ Consumer financial services: iPhone
12 efficiently reach customers.
and Android smartphones changed
the game for consumers. Form factors,
user experiences and data perspectives,
changed opening up new distribution
channels, but also placed financial
services, specifically payments, in the
crosshairs of industries like big tech,
retail and telecom.
 All this activity increased investment into
the sector. The chart below illustrates the
dramatic growth in fintech investment.

Investment in fintechs by
investment year (2008-2019 $b)

With initial hotbeds of activity in mature

The Building Blocks of Fintech 2.0

economies, fintech disruption expanded
across sectors and geographies. Like how
13
mobile telephony grew fastest in areas
with limited landlines, fintech exploded in
markets with limited banking and financial
services penetration. Industry leaders in
mature economies saw this activity and
further accelerated their own. For example,
Ant Financial saw success in opening
investment accounts for the middle class in
China, leaving existing banks and financial
institutions to rethink assumptions that
these services are only of interest to elite
or higher tier customers.

Source: Deloitte Center for Financial Services' analysis of Venture Scanner data
 Drivers of
Fintech 2.0
We have come a long way
since Fintech 1.0. Moving
from the unbundling to

The Building Blocks of Fintech 2.0

rebundling of products
14
and services and now a
step further, where fintech Let’s dig deep into the drivers that are
impacting, and powering, the next phase
becomes intrinsically more of the fintech sector. From economic
connected to the economy. disruption to changes in behavior like the
evolved use of phones and tablets. The
opportunities available to the industry
are ripe for the taking.
 Key Driver Elements Fintech 0.0 Fintech 1.0 Fintech 2.0

The key drivers for entering this new era Economic

Dot coms Financial Crisis Pandemic
we have defined as Fintech 2.0 include: Disruption

Macro Consumer Myth Banks =

Legacy = Benefit Govt. = Stability
/ The Macro Environment: The world that Environment Busted Soundness
financial technology resides in
Regulatory View Gatekeeper Savior/Facilitator Catalyst

/ Technology: The operational pieces

Consumer Laptop/
PC/Laptop Smartphone/IOT
of financial technology Devices Smartphone

The Building Blocks of Fintech 2.0

/ Information: Dynamic data and Technology Connectivity Wired/Wi-Fi 3G/4G 5G
algorithms driving decision making
Enterprise Centralized/ Cloud/ API /
15 Centralized/ API
Architecture Integrated Decentralized
/ Application: What financial technology
is being used for Edge Capability Read Read / Write Execute

Information Data Offline Big Data Control / Privacy

Analytics Asynchronous Predictive Real Time

eCommerce Catalogs Marketplaces Experiences

Application Media Atoms Files Streams

Finance Market Legacy Service Legacy Native

 / During the Fintech 0.0 era, the big
economic disruptions were dot coms
and consumers recognizing that a
legacy wasn’t always a benefit.

/ During Fintech 1.0, the economic

disruption of the financial crisis led
to a reassessment that banks were
always sound.

The Building Blocks of Fintech 2.0

/ Looking ahead to Fintech 2.0,
Fintech 2.0 will enable digitally native financial services to be
the pandemic has forced many
16
fundamentally reimagined from the core out. This means that:
to question assumptions that
governments equal stability. 1. Technology will be used to build digitally native financial rails,
optimized for new use cases rather than simply distributing
existing services.

2. New products will need to communicate simplified value

propositions and disclosures via phone screens or smart speakers.
Fine print will become passe.

3. Channels will adapt to consumer behaviors rather than vice versa.

4. Consumer permission and intent of data will become more

important than the data itself.
 Fintech 2.0
& The Macro
Environment
Consensus is growing / Companies will continue to partake in public dialogues:
that last year’s stunted

The Building Blocks of Fintech 2.0

Governments worldwide struggled to balance safety, the economy,
economic activity will flip order, and flexibility. We were forced to look inward, but to also think
17 to aggressive growth and of the broader community, bringing new thinking to a company’s
relationship with consumers as well as employees
that fintech will continue
to be an enabler. / Regulators acting as catalysts for stability and growth will continue:
From a regulatory perspective, banks have gotten used to stress
tests, and regulators have worked hand-in-hand with firms to enable
supply chains to operate and commerce to flow.

/ Authenticity will be critical to business success:

Companies should be bold but thoughtful with growth initiatives.
Emerging from the pandemic, one of the first initiatives is laying
out roadmaps and bringing employees along on the journey. While
expectations from companies have increased, being inauthentic
will ring hollow and leave one at the starting gate.
 Fintech 2.0
& Technology
Technology trends and
market timing present
a rare opportunity to

The Building Blocks of Fintech 2.0

/ Capturing context will be critical:
reassess core infrastructure. For smartphones and IOT, this could be analyzed from on-device
18
We understand that sensors. This changes the idea of a centralized decision maker, but
technological disruptions 5G improves both latency and bandwidth. The former helping with
mission-critical applications, the latter helping with creating more
will continue to accelerate. engaging applications.

/ Revolutionizing experience:
Cloud and decentralized architectures in conjunction with more
powerful APIs will trigger a revolution that few people see, but
everyone experiences.

/ Optimizing efficiency:
Back office projects with front office visibility will be a sweet spot as
efficiency becomes a key metric for investors and users experience
a key differentiator for consumers.
 Fintech 2.0
/ Living on the Edge:
Bandwidth and edge computing improvements enable

& Information information to be executed in place rather than being sent back
centrally. Companies capitalizing most effectively can create more
efficient and magical user experiences.

Information and results / Shifting data from being a sledgehammer, to a scalpel:

are becoming more Data overload, breaches and errors have alerted consumers and

intrinsically connected. regulators alike to the dangers of data. Control and privacy efforts

The Building Blocks of Fintech 2.0

will shift focus to quality over quantity.
Organizations across
19
the board will need to / Working in real time:
Changing computing and data architectures will make analytical
level up their approach models more dynamic, adaptive, and shift towards real time
to information to not fall decisions.
behind competitors or / Empowering your ‘CFO’ of information:
the industry. Companies need to evolve their view of information from
operational to financial - linkages will become even tighter. The
financial asset analogy extends with all the appropriate controls,
reporting, risks, ethical issues, and opportunities such as “Who is
the ‘CFO’ of information and are they at the table?” This role will
be crucial moving forward, particularly with regards to incumbents
as they have large quantities of data that they aren't actively or
strategically using as a competitive advantage.
 Fintech 2.0
& Applications
/ Taking advantage of other sectors to compete:
Remove those more Ecommerce is moving from marketplaces to seamless experiences
conventional thoughts and spanning digital and physical. Fintech solutions could provide a

knowledge you had about competitive advantage. For example, while new streaming media

The Building Blocks of Fintech 2.0

services seem to be launched monthly, a micropayment or crypto
financial services. Its fit based service could be differentiating.
into the economy should
/ Developing a digitally native infrastructure:
20

be challenged to compete Finance will shift from adapting existing infrastructure to

effectively in the new world. developing digitally native finance infrastructure. This could have
dramatic implications for treasury and wholesale payments on
the enterprise side, and ID and fraud management on the
consumer side.

/ Adapting product and services:

Companies will need a deeper understanding of how their
value proposition fits into customer situations across the supply
chain. As an analogy, soda brands produce syrup for bottlers
and restaurants, and bottles for stores and consumers. Adapting
products and services to meet customer situations, will be critical.
 Building Blocks
of Fintech 2.0 While we all had expectations about industry
direction in 2020, the pandemic obviously
forced everyone back to the drawing board.
As members of the live events industry, we
experienced a trillion-dollar industry that was
put on full halt, but as members of the fintech

The Building Blocks of Fintech 2.0

community, we experienced an industry
that was accelerated to hyperdrive. As we
21 enter a post-pandemic world, we recognize
that predictions can have high degrees of
uncertainty. Having experienced the pandemic,
we also recognize that not planning for
uncertainty dooms one to dustbins of history.
 The Building Blocks of Fintech 2.0 presents to you five
predictions for the fintech industry in the next few years:

A Assets & Central Bank Digital

Currencies (CBDCs)

Based on our unique place

The Building Blocks of Fintech 2.0

in the industry, we’ve taken
a first conjecture of what the B Banking Technology Stacks

world of fintech will become.

22

Over the next three to five years, we predict

a number of changes that will likely impact
C Commerce Experiences

the entire sector and beyond. Our intention

was to straddle the line between audacity and
reality to generate thought and discussion
which can pave the way for better days ahead.
D Data

We have organized these predictions into

building blocks, which also implies that each
organization will need to create a structure
that best fits their situation.
E Ecosystem
 A Assets & CBDCs

Prediction:

The Building Blocks of Fintech 2.0

Within 3 years, 5 of the world’s 10
largest economies will have Central
23

Bank Digital Currencies (CBDCs) in

the market.

Probability: 9/10
 A

Sweden

Canada Russia
Lithuania

Switzerland

Eastern

The Building Blocks of Fintech 2.0

Caribbean
Tuinisia

The Bahamas China

UAE
Saudi Arabia
Cambodia

"There is a
Senegal
24 Thailand
Venezuela Singapore
Ecuador

growing focus Mauritius

on CBDCs." Uruguay South Africa

According to the World Economic

Forum more than 40 central banks
CBDCs can complement worldwide are experimenting with
currency in circulation, enable blockchain technology.

diversified payment formats, and Paving the path to production

allow for the exchange of tokens

Interest Research Experimentation Implementation
in central bank money.

Source: Accenture
 Motivation for issuing a general purpose CBDC:
A view from 66 central banks
Distribution

The Building Blocks of Fintech 2.0

2

25

Financial Monetary Financial Payments Payments Payments Others

stability policy inclusion efficiency efficiency safety/robustness
implementation (domestic) (cross-border)

Average 25th-75th percentile

Emerging market
Advanced economies
economies
Source: Bank of International Settlements
 The telephone was invented in
A 1876 and for over 100 years, it was
a tightly controlled ecosystem,
which most would call a monopoly. For the
last few decades, the ecosystem has opened While CBDCs raise security and
up to new technologies and participants sovereignty concerns, they could in
enabling things like smartphones, which truly fact increase security, transparency,
were science fiction not too long ago. Currency and control. Sometimes referred to
and payments appears to be following a as programmable money, they enable
similar trajectory. automated treatment due to use

The Building Blocks of Fintech 2.0

case, participant, or time, delivering
Central banks across geographies, size and incremental economic value. CBDC
26 type are investigating digital currencies. The implementations will vary with most
new wave of digital currencies is different developed economies issuing tokens
from mainstream electronic payments, which backed by their governments while
are digital shadows of traditional currencies. several emerging economies will issue
Electronic payments today are account-based, tokens backed by cryptocurrencies like
usually requiring post-transaction settlement Bitcoin & Ethereum.
where actual value is moved across accounts.
This new generation of currency issued by
central banks will be token-based, where the
transaction is the settlement. These initiatives
will build upon the work of blockchain-based
cryptocurrencies such as Bitcoin and Ethereum.
 B Banking Tech Stacks

Prediction:

The Building Blocks of Fintech 2.0

Within 3 years, banking tech stacks
will be predominantly cloud-based,
27

with significant elements of core

processing being open-source
based within 5 years.

Probability: 7/10
 B

Simplified Market
Structure of Consumer
Banking Infrastructure Customers of banks and
Credit Unions that are
> $100b in assets $10-$100b $1-$10b < $1b

Provision

The Building Blocks of Fintech 2.0

# of Institutions 30 123 966 9397
Share of assets 62% 17% 12% 9%

If you wanted to buy music, the only

Middleware and Independent CRM +
28 choice used to be to go to a physical store, customer analytics Digital warehouse

purchase a physical recording, bring it home

Digital banking
and play it on a specific type of device. / Q2
Dominant Providers
/ Fiserv
These constraints and hurdles might have Digital banking services / DI/NCR
/ Jack
/ Alkami
enabled greater control, but limited usage / FIS
/ Kasana
and how much music could be part of our
lives. Digital formats, online stores and Utility functions

streaming services have enabled music to Challengers

become part of our entire lives, on-demand. International US Startup

/ Temenos / DH / Finxact
Banking has a similar opportunity to break Core processing
Purchased
software or / Finastra / CSI / Neocova
in-house
out of physical constraints and become a / SAP / COCC
more pervasive and embedded service. / CUSOs

From Financial Health Network

 B
Cloud Native
Visualised and Software-Defined Everything
Applications

Banks large and small have reassessed and revamped core

processes and operations due to lockdowns and limited physical
access. Affecting both staff and customers alike, processes needed Internet
High-density Server Farms Applications
to be digitized quickly and relevant data needed to be accessed
and updated in real-time. Core processing, traditionally built on

The Building Blocks of Fintech 2.0

mainframes and centralized systems to maximize control and
security, traded off speed and flexibility. Leaders of organizations Internet Web Site
moving trillions daily now speak candidly of technical debt and Multiple Distributed Servers Hosting
29
operational efficiency.

We have entered a world where computing at the edge is as

important, if not more important than the center. Cloud-based Client Server Applications
Large Individual Servers
systems are the workhorses of big tech, and banks will need to
move in this direction to keep pace with capabilities, efficiencies,
and expectations.
Multiple Distributed Desktop Applications
The black box of core systems is being exposed, also representing Servers
opportunities for open-source systems to play a greater part. While
open source technologies have been a major force in general
technology, they’ve had limited adoption in financial services. Terminals
Similar to how APIs, open-source will simplify development. Terminal Access to Mainframe Applications

Source: O’Reilly Media

 C Commerce
Experiences

The Building Blocks of Fintech 2.0

30 Prediction:
Within 5 years, personalized
cross-platform digital algorithms
or Super-agents will represent 20%
of retail commerce transactions.

Probability: 5/10
 C

By 2026, global
ecommerce sales
will reach over $6t

The Building Blocks of Fintech 2.0

31

Source: Edge by Ascential Retail insight database

 C
As commerce becomes experiential,
segmented, and embedded with both
physical and digital use cases, the key
Televisions used to require physically consumer value proposition shifts
going to the device and turning knobs from things like product assortment to
to watch content, which was limited to personalized algorithms. These algorithms,
“broadcast at that moment”. Remote

The Building Blocks of Fintech 2.0

portable across platforms, acting like agents,
controls enabled action-at-a-distance will have purchasing, borrowing and payment
which in conjunction with cable and capabilities embedded inside. Incorporating
32 on-demand services, enabled broader current context and future plans, digital
selection. Smart home devices provide agents will use AI and predictive analytics
access to services like shopping, with consumer permission. Digital agents
calendars/timers, media, light/appliance will process data from web bots, IOT devices,
controls, knowledge search and much consumer behavior and preferences, and use
more with a single interface. predictive algorithms to make decisions and
drive action.

Is your Instagram showing

you that gift your partner
hinted at yesterday?
 D Data

Prediction:

The Building Blocks of Fintech 2.0

Like Windows, Unix, Mac in the
past and Android and iOS today,
33

data platforms will become the new

operating system as the industry
shifts from Big data and Good data.

Probability: 7/10
 D

Mankind began as hunter gatherers, but agriculture helped create

civilization as we know it today. Early agriculture helped people
cultivate and grow food rather than depending upon chance.
Civilization increased odds in their favor by increased application
of science and technology until we achieved factory farmed mass
production. The result of this was a system maximizing calories

The Building Blocks of Fintech 2.0

but not necessarily health, which led to the development of higher
quality, lower quantity agriculture often referred to as organic.
34

1
Hunter Gatherer
2
Early Agriculture
3
Systemic & Scientific
4
Factory Farming
5
Organic Farming
Agriculture
 D

The business usage of data follows a similar

trajectory with initial data projects being
haphazard and depending upon chance.
Computers enabled the cultivation of

The Building Blocks of Fintech 2.0

small-scale data, moving on to rudimentary
analytics, then to AI and Big data today.
Looking ahead, there will be a shift from Big
35
data and Good data driven by consumer
desire for control, regulatory desire for
safety and business desire for ROI. Access
to Good data will drive the greatest value
creation in the ecosystem.
 E Ecosystem

Prediction:

The Building Blocks of Fintech 2.0

Every company will not be a fintech
company, but the ecosystem will
36

expand dramatically as it becomes

a more critical part of the economy.
Within 5 years, fintech companies will
be 3 of the top 10 slots of the most
valuable companies.

Probability: 7/10
 E Cash usage by country
Percent of cash used in total transactions by volume, %

Emerging markets 2010 Emerging markets 2020

The Building Blocks of Fintech 2.0

37

Source: McKinsey Global Payments Map

 E Cash usage by country
Percent of cash used in total transactions by volume, %

Mature markets 2010 Mature markets 2020

The Building Blocks of Fintech 2.0

38

Source: McKinsey Global Payments Map

 E
Businesses aren’t immune to the rules
of fashion. Market cheers and jeers shift
with simple comments from a banker,
entrepreneur, or regulator, removing the
veil of rationality and logic from cash flow
models and comparables. We have all seen the influence

The Building Blocks of Fintech 2.0

History repeats itself with fads such as powerful tech players have
conglomerates, financial supermarkets, had on crypto and the market
and technologies. These fashions, though,
– it only takes a simple Tweet.
39

are like good jokes, where there is a kernel

of truth in seemingly audacious reactions.
The kernel of truth here is that digitization
of the economy is moving fintech value
propositions from nice-to-have to must-
have. Market reactions including increased
investment, sales and valuations can be
viewed as rational or insane depending on
perspective. It does appear that fintech is
following trajectories of other industries
moving from the periphery to center stage.
 Honest self and market assessment

Implications are the first steps towards identifying

strategies and actions with achievable

& Actions goals and long-term competitive

advantage. For this discussion, we will
break down strategies into three broad
groups: product leadership, customer
intimacy, and operational excellence.

While leaders expect all three, one

The Building Blocks of Fintech 2.0

Whilst our specific predictions might usually rises above the rest in terms of
not eventually come to pass; things what makes an organization unique.
40 will continue to change. Businesses, Additionally, many organizations are a
consumers, regulators, technologies, collection of smaller organizations that
and others, all experienced major could fall into different groups.
disruptions, and transformations
this last year and will continue to do
so in the near future. Determining
implications and specific actions for
the future ahead needs to be done
individually rather than collectively.
 Product Leadership
Don’t be afraid to fail. Product leadership
in fintech requires providing engineering
teams license and freedom to use new
technologies creatively. In the context of
fintech, the definition of failure also needs

The Building Blocks of Fintech 2.0

to be more nuanced. For example, missing
financial metrics might be acceptable while
41 raising regulatory scrutiny would not.

Product leadership strategies are most

likely to emerge from startups and big
tech because of their technical nature.
This is also the most fruitful strategy when Fintech 2.0 opens opportunities for new products as well
pursuing emerging markets where there as fragmenting existing products delivered in a new way.
are fewer established players and a greater Hot button topics for product leadership include:
opportunity to set the rules of the game. / New privacy, control & security models

/ Technology interfaces & containerized services

/ Open source & industry initiative partnerships

 Customer intimacy in fintech requires sales and account

Customer management teams armed with data and insights to simplify

complex financial needs.

Intimacy This method of competitive strategy is most likely to ring true with
banks and financial institutions from the establishment. Decades
of customer relationship history are not easily replicated. In
mature markets, both B2B and B2C, customer intimacy is a more
defensible strategy.

The Building Blocks of Fintech 2.0

The flip side is that companies often overestimate the value of
their brand to customers. As an example, while consumers are
42
members of several loyalty programs, there might only be one or
two that engender true loyalty. Disruptive times in particular, force
customers to reassess their relationships and habits.

Fintech 2.0 changes expectations from your existing customer

base but also brings new customer segments who will drive
future growth. Hot button topics for customer intimacy include:

/ Data platforms & advanced analytics

/ Partnerships to increase customer contact & engagement

/ New UX and improved CX

 Operational
Excellence

Operational excellence in fintech requires business models that

intelligently filter, categorize, and aggregate tasks at large scale and

The Building Blocks of Fintech 2.0

low cost. Since fintech is a regulated sector, all competitors strive
for operational excellence, but certain players are better suited. For
43 example, fintech infrastructure providers like processors and core
tech providers are more likely to excel here. Large global banks can
often make a strong case for operational excellence as the primary
competitive strategy. Just as all players strive for it, all will need to
negotiate changes in this area.

Fintech 2.0 changes the value chain and how services can scale.
Hot button topics for operational excellence include:

/ Regulatory and compliance rationalization

/ Partnerships to streamline operations & improve quality

/ Rearchitecting platforms
 Summary
The next era of fintech is the cloud to core processes being open-source based, how data
going to be special. We will and can be better used to create efficiencies and better quality
services, as well as the future of our currency.
are going to see incredible
changes that will move the Our intention is to straddle the line between audacity and reality to
generate thought and discussion which can pave the way for better

The Building Blocks of Fintech 2.0

needle for the sector. days ahead. Each organization will need to create a structure that
Since Fintech 1.0 significant developments best fits their situation.
44
have occurred, in particular over the last 18
Money20/20 brings you the sharpest vision of where the future
months where fintech has played a critical
of fintech lies and some of the new ideas shaping it. From
role in simplifying financial services and
entrepreneurs, to technologists and those in the financial services
making them accessible during COVID-19.
industry, we call on you to voice your thoughts on how you foresee
As we enter a post-pandemic world, we
the next era of fintech. Join us at MoneyFest, online and at
recognize that predictions can have high
Money20/20’s 2021 shows, in person, as we come together as a
degrees of uncertainty, but we have taken a
community to take this discussion further.
first conjecture of what the world of fintech
will become. Our predictions impact the
sector and beyond. We have seen how
conversations are steering toward the way
in which products are being developed from
 Authors
This paper was written by

Sanjib Kalita, Editor in Chief at Money20/20, along with

Scarlett Sieber, Chief Strategy & Growth Officer at Money20/20,
David Davies, Chief Content Officer at Ascential,
and Duncan Painter, Chief Executive Officer at Ascential.

The Building Blocks of Fintech 2.0

45

A Note from Sanjib Kalita:

“10 years ago a VC firm in California asked me for perspectives on Market disruptions are a fertile time for the
innovation in payments. I created a document highlighting 5 key financial industry innovation because the
trends and 15 example companies/initiatives. A $1,000 investment industry collectively pauses and reassesses.
distributed equally across back then would now be worth over The experiences over the last year led me to
$400,000 -- an 82% 10-year CAGR. To put that into perspective, perform a similar exercise to the one I did 10
the Dow Jones Industrial Average and NASDAQ Composite CAGR years ago, but this time with a refined view
are about 10% and 14% respectively over that same period. on trends and a broader view. I hope this
helps challenge and refine your thinking
about the world ahead.”