Fiat 2021 Fintech Market Trends Report
Overview
Fiat Growth is the Fintech market’s leading growth consultancy
and operating firm with 30+ clients, 15+ employees and service lines
including Paid Growth, Partnerships, Influencer Marketing, GTM
strategy and other services. Our clients range from early stage
firms yet to be launched (Daylight, Greenwood) to large market
leading firms (Chime, Public) to publicly traded organizations
(Root, Moneylion). Our background as operators-turnedadvisors provides us with the opportunity to see a wide array of
emerging and evolving market trends in early stage companies.
Fiat Ventures is an emerging venture capital firm focused on
investing in early stage Fintech firms, the majority of which
we have already engaged with on the consulting side of our
business. Similarly to our advising practices, our ability to
effectively deploy capital provides us with the ability to see
a wide array of emerging trends in the Fintech space.
We’ve put together this market trends report
as a reflection of the different businesses,
investment trends and new entrants that we see
across the space. We hope you enjoy reading
as much as we enjoyed putting it together!
MACRO
Market Trends
Before diving into any Fintech specific trends
we want to call out a series of macro trends
impacting the startup and investment landscape.
- FINTECH’S EXPANSION INTO ADJACENT VERTICALS
Over the last two years
52%
of Americans turned
to one or more Fintech
companies
73%
of Americans feel safer in
managing their finances
utilizing technology
- ACCELERATED ADOPTION OF PRODUCTS
- ACCELERATING LAUNCH OF NEW FIRMS INTO EMERGING SUB-VERTICALS
At both Fiat Growth &
Ventures, we believe that
financial technology is a
powerful means of providing
greater access to tools and
services for previously
underrepresented markets.
Even today there are more than 65 million American
adults who are underbanked of which 63% are from
underrepresented minority households. We don’t
just feel that working with firms that share our values
is the right thing to do, but that it also presents
new opportunities that have previously been largely
ignored by financial service firms to date. Customers
in these underserved markets will be an important
consumer base over the next decade, and these macro
trends provide new opportunities to serve them.
FINTECH
Market Trends
These macro trends have created an environment
for continued innovation in the Fintech market
expanding both downward into new sub-verticals and
horizontally into new parallel verticals. While there is
increased saturation into these markets, companies are
still finding innovative ways to reach new customers
and to build deeper relations with existing customers.
We remain incredibly optimistic that continued
investment and innovation in the space will breed
a new generation of market leading Fintech firms.
The following are some of the key
trends we see in the emerging
Fintech market and some of the
companies that represent innovations
within those trends. Some of
these companies are names that
we’ve invested in and that we work
alongside, while others are market
leading firms that are close partners
in our ecosystem. Regardless of
our relationship, these are some of
the broader market trends that we
believe in and where we’re placing
investments of time and capital
today and in the coming months.
SOME OF THE TOP MARKET TRENDS
WE’RE WITNESSING INCLUDE:
- Fractional Ownership
- The Next Wave of Embedded Finance
- Affinity Fintechs
- Web 3.0
- Freelancer Focused
- Expansion of BNPLs into Services
- FINTECH MARKET TRENDS
There continues to be the emergence of firms focused on providing
retail investors with access to previously unobtainable assets.
This is important for both retail consumers in having access
to investments with higher/diversified returns, as well as asset
holders who are looking to tap into new sources of capital.
Examples of companies in this space include Here.co where you can invest in vacation rentals for as little as $500, Doorvest where you can take a similar approach to rental properties and Aqua who’s taking a similar approach toward PE investment assets. We anticipate seeing continued use cases with both digital (NFT, crypto assets) and physical (wine, art) in the coming years.
Examples of companies in this space include Here.co where you can invest in vacation rentals for as little as $500, Doorvest where you can take a similar approach to rental properties and Aqua who’s taking a similar approach toward PE investment assets. We anticipate seeing continued use cases with both digital (NFT, crypto assets) and physical (wine, art) in the coming years.
- FINTECH MARKET TRENDS
Banking-as-a-Service solutions was one of the first waves of Fintech
innovation making it easier to launch new digital banks and card
products through a single API. Today we see a new emerging
trend in embedded finance allowing Fintechs to offer different
solutions like lending, Insurtech and rewards through easy to
integrate APIs and white label solutions. Some Fintechs provide
embedded-first models while others first launched a B2C solution
and then created the ability to embed their solution after perfecting
their tech with consumers. These expanded service offerings will
become an increasingly important strategy as a way to capture more
customer lifetime value (CLV) across their target demographics.
Examples of embedded-first offerings include Spinwheel and Rightfoot which provide the ability to add debt repayment through easy to integrate APIs. We’re also seeing companies like Simplist, which is redefining the home mortgage shopping and lending space, offer both D2C services and brokerage products directly to the lenders they partner within their marketplace. Other companies like Breeze, Bestow and Trellis/Savvy, first offered D2C Insurtech solutions and then expanded to also offer white labeled and API solutions. As the Fintech space matures, we anticipate seeing more and more embedded solutions to provide the ability for any company to launch a variety of Fintech services more easily.
Examples of embedded-first offerings include Spinwheel and Rightfoot which provide the ability to add debt repayment through easy to integrate APIs. We’re also seeing companies like Simplist, which is redefining the home mortgage shopping and lending space, offer both D2C services and brokerage products directly to the lenders they partner within their marketplace. Other companies like Breeze, Bestow and Trellis/Savvy, first offered D2C Insurtech solutions and then expanded to also offer white labeled and API solutions. As the Fintech space matures, we anticipate seeing more and more embedded solutions to provide the ability for any company to launch a variety of Fintech services more easily.
- FINTECH MARKET TRENDS
The first wave of Fintech brought along the Chime’s and SoFi’s who serve
a large audience with a diverse set of products. The market today makes
it really difficult for emerging Fintech’s to compete with these first wave
leaders, especially given increasingly rising customer acquisition costs
(CAC). To overcome these barriers to entry, we see emerging Fintech’s
focus more on creating “for us, by us” businesses geared to serve a specific
demographic, primarily who have largely been underrepresented to date.
This strategy provides the ability to both attract new customers at reduced
CACs but to also build a stronger affinity toward their brands and the
ability to cross sell services in the future (CLV). As more consumers
become comfortable engaging with financial services online, we anticipate
continuing to see emerging Fintechs reaching these new markets.
A few examples of digital banks serving a specific target audience are Daylight, which is building a platform for the LGBTQ+ community, Greenwood which is doing the same for African American and Latinx consumers, and Cheese which focuses on the Asian community. Similarly, Sigo Seguros is an Insurtech providing auto insurance to Latinx consumers on an all-Spanish platform and through an easy to use mobile interface. Some incumbents might argue that these markets are small (TAM), but may miss the value that can come from strong loyalty and a higher willingness to take on additional products. This becomes increasingly easier to offer as embedded solutions become more abundant.
Affinity Fintech’s aren’t just focused on customer segments, but can also span causes, age groups and lifestyles. For example, Dorothy focuses on providing instant relief following natural disasters, and digital banks like Aspiration and Atmos help turn your banking solution into a positive impact to climate change. Another example of affinity banking is the emergence of teen/parent solutions. Companies like Copper Banking and Step provide financial literacy for teenagers and parents alike. Lastly, companies like EarlyBird and Little Honey Money provide Fintech solutions for new parents and their communities who want to support them.
A few examples of digital banks serving a specific target audience are Daylight, which is building a platform for the LGBTQ+ community, Greenwood which is doing the same for African American and Latinx consumers, and Cheese which focuses on the Asian community. Similarly, Sigo Seguros is an Insurtech providing auto insurance to Latinx consumers on an all-Spanish platform and through an easy to use mobile interface. Some incumbents might argue that these markets are small (TAM), but may miss the value that can come from strong loyalty and a higher willingness to take on additional products. This becomes increasingly easier to offer as embedded solutions become more abundant.
Affinity Fintech’s aren’t just focused on customer segments, but can also span causes, age groups and lifestyles. For example, Dorothy focuses on providing instant relief following natural disasters, and digital banks like Aspiration and Atmos help turn your banking solution into a positive impact to climate change. Another example of affinity banking is the emergence of teen/parent solutions. Companies like Copper Banking and Step provide financial literacy for teenagers and parents alike. Lastly, companies like EarlyBird and Little Honey Money provide Fintech solutions for new parents and their communities who want to support them.
- FINTECH MARKET TRENDS
It’s no secret that 2021 has continued to bring the emergence of digital assets
into the forefront of broader technical discussions and retail investment.
What’s unique about this bull run compared to those of the past are the
real use cases that are being realized primarily in the adoption of NFTs
for digital representation of ownership and DeFi / Staking for alternative
forms of high yield in a record low interest rate environment. As adoption
continues we anticipate the continued emergence of crypto first companies
and well as most all Fintech’s needing to broaden their crypto strategies.
One of the biggest trends we’ve seen is in the decentralized finance (DeFi) and Staking space providing outsized yields compared to traditional financial products. Companies like Donut, Burst and Eco are providing the ability for retail consumers to access these types of returns without needing the technical understanding of managing assets, custody and liquidity. Other firms like Circle, Zero Hash, APEX Clearing and Gemini are working to provide embedded solutions so any Fintech can more easily provide digital assets to their consumers.
Another major trend that’s built real world utility in the digital asset space is the emergence of non-fungible tokens (NFTs) or one-of-a-kind digital assets. This technology provides the ability to own a piece of digital artwork on platforms like Async, owning digital trading cards like NBA Top Shot or broader marketplaces like OpenSea. Firms like DapperLabs, which owns NBA Top Shot, see the opportunity to own a large swath of the NFT ecosystem including gaming, trading and collectibles. This is a small sample of a very broad and growing ecosystem, and we anticipate seeing more and more companies emerge to provide access to new assets, investment products and access through fractional ownership platforms like Fractional.art.
One of the biggest trends we’ve seen is in the decentralized finance (DeFi) and Staking space providing outsized yields compared to traditional financial products. Companies like Donut, Burst and Eco are providing the ability for retail consumers to access these types of returns without needing the technical understanding of managing assets, custody and liquidity. Other firms like Circle, Zero Hash, APEX Clearing and Gemini are working to provide embedded solutions so any Fintech can more easily provide digital assets to their consumers.
Another major trend that’s built real world utility in the digital asset space is the emergence of non-fungible tokens (NFTs) or one-of-a-kind digital assets. This technology provides the ability to own a piece of digital artwork on platforms like Async, owning digital trading cards like NBA Top Shot or broader marketplaces like OpenSea. Firms like DapperLabs, which owns NBA Top Shot, see the opportunity to own a large swath of the NFT ecosystem including gaming, trading and collectibles. This is a small sample of a very broad and growing ecosystem, and we anticipate seeing more and more companies emerge to provide access to new assets, investment products and access through fractional ownership platforms like Fractional.art.
- FINTECH MARKET TRENDS
The emergence of the “gig economy” gave way to a new platform
for individuals to drive income. Work that was once considered
passive has become a way for users to not only earn on a full time
basis, but also excel professionally. This is further spurred by the
emergence and hyper growth of influencer (TikTok, Instagram)
and collectible (StockX, Rarible) markets. Now as Gen-Z,
dubbed the “side hustle generation”, enters the working world,
we see an increasing focus from Fintech’s looking to support
their growth and financial well being in this new economy.
An example of a Fintech company that’s currently providing a multitude of tools for freelancers is Lili Bank. Through this single platform consumers can bank, save, plan and protect their businesses. Other platforms like Boost are building “Quickbooks for the side hustle generation” and a variety of other reimagined services that were originally built for W2 employees. Lastly, companies like Avibra and Bennie are reimagining benefits for both individuals and small businesses alike. These are just a few examples of companies serving this growing sector.
An example of a Fintech company that’s currently providing a multitude of tools for freelancers is Lili Bank. Through this single platform consumers can bank, save, plan and protect their businesses. Other platforms like Boost are building “Quickbooks for the side hustle generation” and a variety of other reimagined services that were originally built for W2 employees. Lastly, companies like Avibra and Bennie are reimagining benefits for both individuals and small businesses alike. These are just a few examples of companies serving this growing sector.
- FINTECH MARKET TRENDS
Affirm, Klarna and Afterpay represent the first wave of Fintech’s
to propel the “buy now pay later” (BNPL) sector into mainstream
adoption. While these companies primarily focused on the CPG
and consumer goods space, we are starting to see this same model
expanding into other previously untapped markets. Some prime
examples where innovation is taking place are in the Healthcare and
Legal Services sectors. These areas are ripe for disruption since there
aren’t many available options for consumers, and service providers
aren’t financing specialists. BNPL services can help create a better
environment for both providers of services and their consumers.
Violet, a BNPL solution for Healthcare bills, plans to launch in early 2022 with a network of over 800 hospital systems. LawPay is a firm providing payment and BNPL services to the Legal space, and recent announcements indicate that Affirm plans on launching into the same space in early 2022. Other companies like Plentina, which was originally a cross border remittance service, have pivoted to offer BNPL services to emerging markets. While the consumer retail space is crowded, we anticipate seeing the continued emergence of BNPL products into service sectors with high costs, high friction and limited technical innovation behind their payments solutions.
Violet, a BNPL solution for Healthcare bills, plans to launch in early 2022 with a network of over 800 hospital systems. LawPay is a firm providing payment and BNPL services to the Legal space, and recent announcements indicate that Affirm plans on launching into the same space in early 2022. Other companies like Plentina, which was originally a cross border remittance service, have pivoted to offer BNPL services to emerging markets. While the consumer retail space is crowded, we anticipate seeing the continued emergence of BNPL products into service sectors with high costs, high friction and limited technical innovation behind their payments solutions.
Thank You
These examples certainly aren’t all encompassing of the
breadth of trends and innovation taking place in the Fintech
and financial service markets. We continue to be excited
about the new emerging verticals spurred by developments
in cloud computing, AI/machine learning, Web 3.0, 5G
networks and evolving web language standards.
We want to give a BIG thank you to the many entrepreneurs,
mentors and investors in our network who provide us with
the ability to see across so many new and exciting trends.
If it wasn’t for you, we wouldn’t have the opportunity
to have this type of insight into emerging trends.
We’d love to hear your thoughts. It’s exciting
to continue to see new shapes and forms
of innovation in the Fintech space, and to
know that we’re still only getting started!
-The Fiat Growth & Ventures Team