Will 2018 Be the Year of the Bank of Amazon? Experts Weigh In

Will 2018 Be the Year of the Bank of Amazon? Experts Weigh In

Maybe more M&A, IPOs and bigger push by technology companies
Fintech companies raised $4 billion in 3Q, on pace for record

By Julie Verhage, Selina Wang, and Jennifer Surane December 12, 2017, 2:00 AM PST

For the financial technology industry, 2017 will be defined as the year that the threat of tech giants grew stronger, artificial intelligence cemented its importance and some startups applied to become banks.

What to look for in 2018? Maybe more mergers and acquisitions, initial public offerings and deeper forays by Amazon.com Inc. and Facebook Inc. Here’s a wrap from industry experts:


In the world of payments, all eyes are on the part of the ecosystem that helps retailers process card transactions. Incumbents like First Data Corp., Vantiv Inc. and JPMorgan Chase & Co.’s merchant services unit have long focused on winning business from large brick-and-mortar retailers, neglecting to spend a lot of time on the growing e-commerce sector. That’s made room for startups like Stripe Inc. and Adyen BV, which have garnered high valuations for doing just that. Now the questions are: What will be the next way that consumers make purchases and what will the incumbents do to catch up?

Matt Harris, Bain Capital Ventures: “SoftBank buys 20 percent of Stripe for $3 billion. PayPal continues to push itself down the path of being the leading financial services company for millennials and the mass market.”

Dion Lisle, Capgemini SA: “‘Alexa, buy this’ or ‘Siri, I need an Uber, pay for it with my AmEx.’ Payments are going to be activated by that voice because that’s a great security method.”


For investors in online lending, 2017 was the year of the shakeout. The companies that didn’t pay enough attention to underwriting were burned by losses, while longtime leaders like LendingClub Corp. and CAN Capital Inc. struggled with operational troubles and securing sufficient capital. Next year might not be any easier, according to experts. Banks have finally gotten their act together, and that means online lenders will increasingly have to compete against these large financial institutions.

Dan Ciporin, Canann Partners: “Scale is increasingly a competitive moat, with established players like LendingClub and SoFi now competing much more with bank offerings like Marcus from Goldman Sachs.”

Spencer Lazar, General Catalyst Partners: “Potential changes to the Consumer Financial Protection Bureau (CFPB) under the Trump Administration will likely turn back the clock on Obama-era regulations on non-bank lenders. This will be a boon to startup lenders, making it far easier to dole out capital. The fear is that rates could potentially become predatory.”

Amazon vs. JPMorgan

Retailers like Wal-Mart Stores Inc. have long wanted in on banking, and regulators might finally be on their side. That could open the door to a Bank of Amazon or a Facebook Financial. If these technology giants did decide to move into finance, they would have a few major advantages over the banks: better data, a superior user experience and immense customer loyalty.

Andy Weissman, Union Square Ventures: “Some combination of Amazon, Google, Facebook, Apple, etc. will move deeper into online financing of small businesses.”

Jeff Richards, GGV Capital: “Facebook has rolled out payments via Messenger to compete with Square Cash and Venmo, but hasn’t been super aggressive on this front. A ramped up effort in e-commerce could tie into an increased focus on payments.”
Jeremy Philips, Spark Capital: “The tech behemoths have been slow-ish but that’s changing quickly driven largely by Chinese chat/payments envy. Facebook and Apple and others will double down on trying to replicate this in the US.”


While some areas of fintech have seen consolidation, there’s still room for more. The maturing sector could see some combinations in areas such as lending, payments, personal financial managers and more.

Tyler Sosin, Menlo Ventures: “Stripe and Adyen will merge, forming a $20 billion plus enterprise-value business and API-driven merchant processor.”

Sean Park, Anthemis Group: “We think 2018-2019 might be the sweet spot for this since it’s part of a maturing ecosystem. In consumer finance, personal financial management and consumer lending, both could see a lot of combinations.”

Brendan Wallace, Fifth Wall Ventures: “Many generic online lending startups will fail or be acquired by large financial institutions at discount valuations.’’

Asset Management

The past 12 months have seen new hybrid versions of investing, pairing humans with the technology backing robo-advisers. Large banks are making moves, with Morgan Stanley and JPMorgan each announcing robo-adviser versions as a way to attract younger generations and create better user experiences.

While these moves add legitimacy to the startups, Wall Street could also simply turn around and duplicate them. Or, the banks could decide to partner with them as a way to beat the tech giants?

Kyle Lui, DCM Ventures: “Digital advice assets under management is estimated to hit $1 trillion by 2020. Traditional banks are waking up to this trend and viewing digital and robo-advisory products as a core part of their consumer growth strategy within asset management.”

Alois Pirker, Aite Group: “For startups in wealth management, it’s getting tough to differentiate yourself. I think you increasingly get beat with your own weapons since big firms can do this in greater varieties and have clients on board already.”

Venture capital-backed fintech companies raised $4 billion in the third quarter of 2017 alone, according to CB Insights. If the year’s current run rate holds steady in the last quarter, global fintech investment dollars and deal activity could hit records. And if that pans out, which areas should be seeing the most funding?

Alex Rampell, Andreessen Horowitz: “The first phase of fintech was ‘unbundling’ banks -- taking one of the features of a mega-bank, and doing it better. The next phase is rebundling -- adding other services, and cross-selling products (like SoFi starting in lending and later adding wealth and insurance). Venture capital will flow to successful startups moving into their second act of rebundling.”

Charles Birnbaum, Bessemer Venture Partners: “Valuations in the alternative-lending space were overly optimistic in our opinion over the prior five years, but we do feel that the pendulum has likely swung back too far in the other direction following the recent pullback” leaving the sector ripe for potential funding or M&A.


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