Fintech 🧠 Food - The Next Big Thing in Fintech?

Plus: Revolut withdraws UK banking licence application & losing your identity as a founder

Hey everyone 👋, thanks for coming back to Brainfood, where I take the week's biggest events and try to get under the skin of what's happening in Fintech. If you're reading this and haven't signed up, join the 30,849 others by clicking below, and to the regular readers, thank you. 🙏

Hey Fintech Nerds 👋

Never a dull week in Fintech. Revolut might not get a license; the US Treasury is suggesting more banking M&A is coming, and the UK Treasury Select Committee suggests Crypto may be more like gambling than investing.

Safety and growth seem like opposite ends of the spectrum. Governments and regulators are forced to slow things down for safety, and entrepreneurs push back to build a better future by moving fast and breaking things. These ideas seem opposed, like adversaries. 

But they don't have to be.

We need the market to have safe and sound big rocks and big products. 

We need entrepreneurs moving fast and breaking things.

And more than anything, there needs to be a better prize for the private sector to solve structural social problems. 

As software eats the world, it moves more into the physical realm and away from digital devices. We're moving away from software that exists on a screen and into a world where software is in everything.

Heavy industry, transport, and, yes, Government.

If Government is "too slow" to approve new innovation, that's a structural challenge for us to go and solve. Entrepreneurs thrive on constraints. Getting licenses may be hard. Making Crypto safer and delivering on its promise is challenging. Building smaller tech-first banks may be riskier than just doing M&A.

But we have to.

And we have to build the solution for and with Governments. Their procurement processes and tools suck. 

Let's build a better future.

You think Fintech is over?

It's just getting started. 

And that's this week's 📣 Rant. $1.5 trillion reasons to love Fintech. Where I look at where growth could be coming from next. Also, check out this week's 💸 4 Fintech companies; Parthean is doing consumer GenAI in such an interesting way.

PS. This is your 0 to 1 in Fintech. Alex Johnson, possibly the clearest thinker in Fintech, listed the top Fintech resources. You should send this to everyone new to the industry.

PPS. Who's coming to Money 2020 Europe? Hit reply if you wanna say hello.

Here's this week's Brainfood in summary

📣 Rant: 1.5 trillion reasons to love Fintech

💸 4 Fintech Companies:

  1. Parthean - If ChatGPT and a Wealth Manager had a baby

  2. Charlie - The Neobank for Retirees

  3. Fundly - Supply chain financing for Pharma (India)

  4. Spendkey - Enterprise cost optimization platform

👀 Things to Know:

📚 Good Read:

Weekly Rant 📣

1.5 trillion reasons to love Fintech

It feels like the Fintech world is lost.

Embedded finance will be big, real-time fraud and compliance are mission critical, and everyone is scrambling for better Fintech and Bank partnerships. 

But that's not the question.

The question is, "What's the next category?"

What's the next thing

Firstly. I think we're discounting the current thing too much.

This report from BCG and QED Investors says that 

  1. Financial services remains the most profitable industry segment

  2. Growth in global Fintech revenues will be 6x from today to 2030

  3. Fintech will move from 4% to 13% penetration of banking revenues

  4. Revenue from deposits will 10x, lending 6.5x, and infrastructure 8x

  5. B2B will grow revenues by 11x, B2B2x will 7.5x

  6. Large banks will bring tech spend much higher (following JPMC's lead) creating a huge opportunity for providers

If all of that happens, the current thing has a lot of room to run.

But if we really want to find the next thing.

The irony is we have to focus on what will not change.

Jeff Bezos is famous for saying he believes "that in 20 years, customers will still want low prices and fast delivery." The tech will change, but that provides a north star.

So when you zoom out on the industry, what patterns might not change?

I have several concepts I come back to.

  1. Some things never change

    1. As long as there are governments, there will be regulations. 

    2. Network effects matter

    3. Balance sheet power matters

    4. Risk management matters

  2. Fintech moves in generations

    1. Toddlers are 2 to 5-year-old companies, somewhere in their growth cycle with traction

    2. Teenagers are 10 to 15-year-old companies aiming for profitability

    3. Titans are 20+-year-old companies with strong EBITDA profitability but low growth

  3. And it's different everywhere

    1. Europe isn't one place; it's many, but it is a regulatory superpower

    2. The USA can't pass laws but has the world's most dynamic private sector

    3. India has the most Fintech opportunity but the most unique challenges

    4. The West pays too little attention to seemingly small Singapore, Hong Kong, or the Middle East

  4. Fintech is going deeper into the financial value chain

    1. Customer segments like global transaction banking and cash management are still in the early stages

    2. The consumer problem is 1% solved

    3. The B2B problem is 1% solved

    4. GenAI flips Fintech Infrastructure upside down from API first to flat files

  5. Finance customer value is moving up into the problem space

    1. Finance isn't a destination; it's fuel for the journey

    2. Instead of being Fintech for Vertical SaaS, it's Fintech for Vertical-everything.

  6. Narratives to find opportunity

    1. Embedded Finance follows tech into non-digital industries

    2. Generative AI becomes a default interface for finance and software

    3. People discount the compounding of gradual change

    4. People discount much of B2B because it has weird niches and requires expertise

    5. People discount the capital markets opportunity

    6. Crypto is a parallel global financial infrastructure

Lets dive in 🏊‍♀️

1. What doesn't change

a) As long as there are governments, there will be regulation. There's no getting around regulation. There are ways to automate, streamline, or push the complexity away (by doing less and relying on 3rd parties). Major regulation changes create opportunities for market shifts, but if the entire value proposition of a business or technology is to completely get around regulation, it is effectively illegal.

Now. Let's be clear. A lot of regulation is not ideal. And if you could wipe the slate clean and start again, we might do a lot of it differently. But consider that nearly all of the money in all of the world lives inside the formal financial services system, and you can see the network effects issue avoiding regulation has.

As long as there are humans, we'll want something that performs the regulation function. "Make people whole if something bad happens" is a fundemental value storage and transfer requirement.

We need counterbalances. We need things like Crypto building alternative approaches. But we also must remember the principle that if any software or company is handling money or value on behalf of someone else. That software or company has a huge responsibility. How they manage that responsibility might not have to look like today's regulation. 

This week, Europe passed the MiCA regulation requiring KYC on most Crypto transactions. The result? VC investment has swung to Europe. 

💡 Regulation can be good. Regulation needs to be better. Today it is too analog, and supervisors need better tools. This is a gap entrepreneurs have struggled to penetrate. Where a16z is going with "American Dynamism" is the right idea to try and infuse infrastructure and Government with entrepreneurial zeal. But in finance, we need to be backwardly compatible with the existing.

b) Network effects matter. Card issuing and acquiring will always be subject to the card network rules. Changes in those rules or technologies can create new market conditions. For example, the introduction of "tokenization" created mobile payments. Apple has been a notable beneficiary here, and now both Apple and Square allow their merchants to accept payments with just a phone and no separate device.

There are now more rails than ever, with closed-loop wallets, TCH, FedNow, ACH, and Open Banking. Globally there's a move towards push payments with UPI and Pix. There has never been a time when the card schemes are under more pressure. One of the big business cases for RTP rails is "low fees for merchants." But there are two problems. 

  1. Consumers aren't yet ready to use RTP in most commerce (especially e-commerce). RTP competes with checks and cash. Behavior change at checkout is hard and will take time and investment (or a cheat code like BNPL). This will come and has started, but it moves in 7-year increments (Except in Brazil or India, which mandated change also, a cheat code)

  2. Remember, the value card schemes create is not running a network. It's managing the network rules and what happens if something goes wrong. Zelle, Venmo, and faster payment scams are so effective because push payments don't have a "what happens if something goes wrong" network. 

💡 The card schemes aren't going away and will always be a part of the landscape. We sorely lack a "Visa for RTP and all other rails." Something that creates a rule set over various networks would solve the problem but potentially create new costs. You can see Visa attempted to become this with the Plaid acquisition and Mastercard buying RTP provider Vocalink (who runs Faster Payments in the UK).

c) Balance sheet power matters. The balance sheet is the center of gravity in the financial universe. The largest banks, asset managers, and custodians manage $trillions in real assets on behalf of their clients. The more diversified their sources of capital, the more balance sheet power they have over time. Whether it's Blackrock, JP Morgan, or, lately, custodians like BNY and State Street, the value proposition of "deposits or assets are safe here" cannot be underestimated.  

A giant balance sheet is like an oil tanker. It becomes so big that market waves are unlikely to knock it over. That's not to say it couldn't have a 2008-style event and have entire market contagion, but in many (not all) cases, bigger is safer and more profitable. 

Whether you're trading in Crypto or capital markets, if you have more capital, you get lower fees, better margins, and benefit more from market moves. A larger balance sheet can also absorb losses and shocks and stay in the game longer. 

💡 The long-term trend to M&A is driven by the value of compounding (the more capital you have, the more it compounds) and the 80/20 rule that "bigger is usually better." 

d) Risk management matters. You might have heard the saying, "Everyone is a genius in a bull market." In 2021 there were plenty of geniuses in Crypto and the stock market, but how many of them feel great about their investments today?

If the banking crisis shows us anything, there's a fine line between profiting from market change and exposing yourself to long-term risk. The Warren Buffet "get rich slowly" approach might seem dull, but its also statistically the most probable way to succeed. 

This is where some smaller and niche banks, with super well-run balance sheets, have made a real difference in the US. There was no prize for being a lean, well-run bank for a long time. That is changing, 

In 2021 bank stocks got crushed because they were boring. They sat there, being profitable but not growing. But do we want to balance profit and revenue growth?

💡 Risk management is back in fashion. We want safety and soundness, but these lessons might quickly get lost in the next bull market. The reality is someone has to do this. And there has to be a prize for doing it well.

2. Fintech moves in generations.

Fintech has Toddlers, Teenagers, and Titans. 

If you think about payments, lending, deposit taking, or investing, every generation brings a new crop of companies, and you can loosely group them together in their evolution.

With card issuing

  • Toddlers: Lithic and Highnote

  • Teenagers: Galileo and Marqeta

  • Titans: FIS and Fiserv

With investing apps

  • Toddlers: 401 Financial, Titan Invest

  • Teenagers: Robinhood

  • Titans: Schwaab (or Hargreaves Lansdown in the UK)

You get the idea. It's far from a perfect framework, but this pattern repeats the financial services infrastructure landscape. What's more interesting is to evaluate each product line by what can't change and what can with new technology, regulation, or economic conditions.

a) Toddlers are 2 to 5-year-old companies, somewhere in their growth cycle with traction. Their shared challenge is sustaining revenue growth and putting in place the structures to manage it. They're the industry's darlings, but they'll likely fall over and face regulations, and their future success is almost impossible to predict. When they're growing, everyone loves them. They learn and grow faster than teenagers or titans and will surprise you with their creativity. That child-like creativity will find something genuinely novel and exciting on very rare occasions.

b) Teenagers are 10 to 15-year-old companies aiming for profitability. Their shared challenge is being resilient enough for their big clients, and they're torn between fighting for business from the Titans and defending market share against the toddlers. They're the industry's flashy names but may have fallen on harder times. They're in the weeds of regulation, operational resilience, and trying to maintain growth. They can take meaningful market share from Titans and start using M&A to become a titan. 

c) Titans are 20+-year-old companies with strong EBITDA profitability but low growth. Their shared challenge is finding growth opportunities and defending market share against Teens. The Titans have incredible clients, assets, and unbelievable market opportunities. They have grown through M&A in recent decades and may lack a cohesive tech stack or go-to-market. They can be game-changing by leveraging their incredible client base and market position. But like a sports star approaching retirement, picking the right spot and knowing how to use the experience rather than trying to be a teenager is the advantage.

💡 This pattern will repeat. Every time we think a new titan is born and a category is dead, there's an opportunity to disrupt that exact category again. When a company goes public, it enters its teenage phase and has a different problem set. 

3. Fintech is different by GEO

X for Africa, or X for India, has been a trend in Fintech for some time. Take a successful model in one country and try to place it somewhere else.

Each market is on its own timeline, shaped by policy, culture, and the economy. Market entry is rarely copy+paste, and understanding local dynamics is the key to winning. 

The master of this is the global consumer brands like Coca-Cola or Mcdonald's. While the brand is ubiquitous, its ability to understand local supply chains, cultural norms, and requirements makes it truly global. Mcdonald's has Halal options, serves rice in Asian markets and uses local suppliers but unites it all under the same logo.

This happens in tech; if you're Netflix or Spotify, the local payment providers and data protection rules will vary dramatically. Stripe + AWS as a default, doesn't work as well when trying to penetrate the Middle East or some parts of Africa. 

Here's my cheat sheet of things likely to be true in the ~20-year future because they're driven more by culture

a) Europe isn't one place; it's many, but it is a regulatory superpower. PSD2, GPDR, and now MiCA have shaped and will shape the future of finance and the internet. The UK denied Microsoft in its takeover bid of Activision, but Europe said it was OK. Europe often has first mover advantage in regulation and shapes the narrative.

Even if you don't live in Europe, the internet is filled with cookie consent forms. Many jurisdictions followed PSD2 to create open banking rules in their markets (like Singapore, Australia, Middle East). I'd even argue "open banking" as a term emanated in Europe, even though the US private sector made a much bigger commercial success from it. 

But this creates misconceptions. The "SEPA" payments rail (Single European Payments Area) often is assumed to be ubiquitous. The reality is it's another payment type in Europe alongside all the domestic ones. "Open Banking" in Europe is really open checking and looks very different in Southern Europe, the DACH region, and Scandinavia. 

💡 If you want to see the future of regulation, look at Europe. While you don't have to go state by state to get an MTL license (a single e-money license is often OK). But you have to go market by market for providers, language, marketing, and there's a whole raft of other compliance things to consider. 

b) North America can't pass laws but has the world's most dynamic private sector. "Open Banking" is regulated in many markets, but nowhere is it more used or commercially successful than in the US. The compounding effect of this is a market dynamic that turns into friction. 

In Open Finance, many banks push back and "break" connectivity due to "security concerns" (AKA, not getting paid or not wanting to be disintermediated). This connectivity issue is slowly worsening and hurting onboarding conversion, forcing many to partner with multiple open banking partners and cores. 

So while in Europe, one partner can do all the banks (but just for checking), in the US, one partner can do the checking, credit cards, and investment accounts, but not with every bank. Another example is Crypto. Europe has passed MiCA. The US has conspired to pass zero legislation on the topic, forcing the regulators to try and fill the gaps. 

But of course, some entrepreneurs will see this as an opportunity. They'll build something amazing. And the US private sector will brute force attack the inability to legislate with innovation and dynamism. This cycle creates a market structure that's ever more complex and costly. 

💡 Ideas don't copy+paste they rhyme. What worked in the US might not work elsewhere. What works elsewhere likely has 5x companies that do precisely that thing already in the US. But there are zero downsides to trying something new. In fact, if we get better consumer and market outcomes in the US, we need entrepreneurs to do it.

c) India has the most Fintech opportunity but the most unique challenges. In "India as the bull case for Fintech" (and humanity), I wrote: 

India has 600m people under the age of 28, universities producing top tech talent, the world's second-largest internet user base, and a growing middle class. In the 20th century, the Western powers created bridges, ports, and roads to help them grow. India is speedrunning its growth by creating digital infrastructure. Its identity and payments infrastructure are the envy of the world and create unique opportunities and challenges. Payments are almost zero-profit; the market is lending starved and struggles with cross-border trade. India might just be the world's brightest Fintech opportunity.

Western and Chinese big tech firms have struggled for over a decade to gain a foothold in India. They have finally gained a foothold but must use India's national infrastructure like UPI and Aadhaar. India needs innovation in credit, cross-border settlement, and insurance. It has a burgeoning BaaS sector, and banks are willing (but not always) able to partner.

But holy wow, is it a market with unlimited talent and potential. 

d) The West pays too little attention to seemingly small Singapore, Hong Kong, or the Middle East. Most of the regulatory innovation in the world comes from these markets. What happens in Singapore often gets copied elsewhere. The Singapore Fintech Festival is as big if not bigger than Money 2020 Vegas, with 62,000 participants. It's the only place you see a16z, Ant Financial, and the CEO of both Binance and Coinbase.

4. Fintech is still going deeper into the finance value chain

Fintech investment is running up the difficulty curve. Building a consumer debit card was always possible; differentiating on experience or a wedge feature will gain traction.

a) Customer segments like global transaction banking and cash management are still in the early stages. If you plot the difficulty curve on a graph, it will look something like this:

The further you get into capital markets, the less relatable the problems are and the bigger every single customer becomes. Classic Silicon Valley investment was traditionally better at disruptive innovation. Serving the underserved segments.

Chime and CashApp start by serving low credit-score consumers or Micro merchants. Stripe starts by serving micro e-commerce stores. As you get into hedge funds and pension funds, the customer isn't underserved in the traditional sense. They don't lack people trying to sell to them; they lack people who can execute, given their long contracts and high transaction costs. The founder-market fit here is critical. While a founder could build a consumer or B2B Fintech company having never worked in the industry, that is substantially harder further up the difficulty curve.

b) The consumer problem is 1% solved. Consumers still live paycheck-to-paycheck; most have no savings and are in a cost-of-living crisis. Consumer Neobanks have scratched the surface of the opportunity available to them, and most "PFM" apps end up as scaled niches. 

What excited me about one of this week's 💸 4 Fintech Companies Parthean is it is pushing the boundaries of personal finance with human language. We never had a family office in our pocket because computers weren't very good at empathy. The UX of finance got great at engagement through dopamine but was poor at helping us make long-term choices. 

c) The B2B problem is 1% solved. BCG says the B2B segment will 11x by 2030. A tiny fraction of global B2B payment volumes use cards or any modern rail or Fintech company. Deposits are starting to spread away from traditional banks, but they're still the vast majority, and lending is still dominated by traditional providers.

Not everything starts at spend management or payment orchestration, but those two starting points did make a great wedge. Who's the next Netsuite or Quickbooks, and what's the right angle of attack there?

The whole "BNPL for B2B" space is the new hype. Whether it's trade finance or SaaS, the sales pitch is similar to B2C, where retailers see more sales or higher value and more repeat purchases. If, as a B2B company, you can generate $Xm in new pipeline by offering "credit at checkout," that seems like a great deal. Especially in a tight market, more companies are looking for upfront commitment or multi-year deals. The customer protects their cash flow, and the vendor gets upfront payment. 

Growth companies are often a driver of the new normal, and with longer sales cycles, higher CAC, and shrinking runway, getting clever about how to pay for growth is a no-brainer. 

d) GenAI flips Fintech Infrastructure upside down from API first to flat files. Finance is built on flat files, emails, PDFs, and spreadsheets. Despite a decade of great SaaS and APIs, the infrastructure is stubbornly old school. Scratch under the hood of the biggest financial services companies in the world, and you'll find files that look like .txt files are the key messaging format. At best, they're XML (like ISO20022).

But it's always text data.

And you know what's good with text? Large Language Models like ChatGPT.

Using an LLM is a skill. Today it's fantastic if you're a tinkerer who already used Zapier and occasionally played with a Raspberry Pi. But for everyone else, the best results elude them because it's so hard to chain prompts and help the model figure out your context.

Understanding the customer context. Understanding their problem and helping them get to where they're trying to go. That is the very nature of entrepreneurial opportunity. Founders who get finance will do amazing things to flat file structures with LLMs.

5. Customer value comes from moving up into the problem space

Finance has an engagement problem. It is not engaging. It's dull. It is admin.

Finance used to be a destination. You walked into a branch, called the insurance company, or used the shiny Neobank app. Then it started showing up at checkout or in your SaaS project management software.

The closer the finance got to the problem a user was trying to solve, the more it enabled them.

Embedded finance flips finance from trying to engage users to enable them. This trend is just getting started as we broaden the problem space.

a) Finance isn't a destination; it's fuel for the journey. Financial products usually enable some task or economic activity. But we're often expected to do finance rather than finance to be part of the experience. Fintech in vertical SaaS is just the beginning of embedded finance. Brett King has been calling it "invisible" finance for half a decade, and it's a better label for where we could go. 

b) Instead of being Fintech for Vertical SaaS, it's Fintech for Vertical-everything. The problem space is changing. We're moving into atoms. As growth companies move into the "real world," transport, energy, and defense are starting to resemble software as software eats the world. 

The difference between that and traditional car leasing, or industrial financing, is who's doing it, and the software that provides it materially alters the unit economics. If you look into the profitable underbelly of the giant banks, they're financing infrastructure and heavy industry. If software is going to eat those industries, Fintech will too.

6. What could change?

In short everything.

Politically we're entering a more unstable world. Economically, we're in high inflation. Socially, we're more divided, and with technology, AI is a genuine paradigm shift. This follows a pandemic, and most of the world is still trying to find its new normal. 

So here are a few narratives to noodle on.

a) People are "bored" of embedded finance, but we're less than 1% done. If software eats atoms, Fintech follows everywhere software leads. 

b) People discount the compounding of gradual change. Apple is moving in decade-long increments to become a dominant financial services company and identity provider. Technologies like CLEAR could move into financial services and reshape onboarding or cross-sell. UPI, Pix, and international linkages of RTP create new payment corridors. 

c) People discount B2B because it has weird niches. B2B Fintech isn't off the ground yet and has 1000x more flavors than consumer because it's so vertical-specific. 

d) Generative AI is a new paradigm. What you thought might not happen for decades is happening every other day. This will become a default interface for how humans understand finance and how it eventually becomes invisible (and how software becomes invisible too). 

e) People discount capital markets. Trying to sell here is hard because they're hard to penetrate, and there are few buyers. Still, tokenizing everything over the next decade dramatically shifts the battlefield.

e) Crypto is a parallel global financial infrastructure. Telco's didn't vanish when the internet appeared; they became an access point. It took another two decades for video calling to become a thing. Crypto will get industrialized and regulated; when it does, it will be a game changer.

As we search for "the next thing." There are so many things it could be.

We live in a universe of possibility.

Damn, this was fun to write.

What are your thoughts? 

Hit reply.

Til next time.

ST.

4 Fintech Companies 💸

1. Parthean - If ChatGPT and a Wealth Manager had a baby

Parthean helps users ask questions about their money and build personalized plans to achieve goals like paying off student debt, getting married, or buying a house. Parthean connects securely to underlying bank data sources and can answer questions tailored to users, like "What have you noticed about my finances that need improving." It is intended as an educational platform like Nerdwallet or Investopedia, but with chat as the default UI.

🤔 This is the most exciting thing I remember seeing since I discovered Stripe in 2010. I wrote last week, "We've been struggling for decades to help consumers improve their financial health. Agents that combine AutoGPT and behavioral psychology can nudge us to better outcomes. " Parthean could be that thing. PFM was a niche. We don't need more pie charts. Humans need a human language response, reassurance, and problem solvers that understand our context. That's what wealth managers always did, but they were way too expensive for most people. I love that they've focussed on the explainability of responses out of the gate and keep humans in the loop. Real financial experts constantly evaluate the responses. 

🤔 I wonder if the right long-term business model is cross-selling like NerdWallet? Or something else? Long-term, they'll also be as hamstrung as everyone else by the limitations of open banking. If open finance platforms can't see your data, neither can Parthean. 

2. Charlie - The Neobank for Retirees

Charlie provides those over 62's with a debit card and checking account experience. Its wedge feature is getting social security up to 4x weeks early, including no fees or minimums, and US-based phone support. 

🤔 I love this. Why shouldn't the over-60s have a Neobank that is for them? The design aesthetic is spot on, and getting the social security check early is a great hook. What worked for Chime 2 days early should work for Charlie 4 weeks early. Moreover, the credit risk of not getting paid by the US Government is pretty low. BTV-backed, serial founders expect this to do well. Expect copycats too. Who said consumer Fintech is dead? If Charlie gets the direct deposit, can they do more too? 

3. Fundly - Supply chain financing for Pharma (India)

Fundly provides retailers, distributors, and pharmacies with invoice financing. Users apply online, sign an agreement and pay interest via UPI or net banking. They have more than 2000 retailers and 30 distributors so far. 

🤔 Everything in Fintech is invoice or trade finance lately. I like how Fundly is bringing this to an important sector (healthcare) and doing so for businesses that hadn't been served in the past. This market segment is traditionally dominated by banks and often relied on by small businesses. The segment needs disruption, but it's also a bit like the overdraft segment for consumers; it can be a beneficial or predatory product. Also, anything lending is a lending business more than tech. The Fundly team is leaning into that, but not all founders I meet fully understand that consequence.

4. Spendkey - Enterprise cost optimization platform

Spendkey helps businesses understand their spending data to identify cost savings and optimization opportunities. It identifies possible rebates and discounts and helps get accounts audit-ready. They solve a data quality problem for large enterprises from multiple ERPs and geographies. 

🤔 The focus on cost management is a unique angle here. The team has experience doing this work manually for large enterprises and has spun that out into an AI Product. This differs from using features offered in spend management companies (like Ramp, Airbase, etc.) because Spendkey is a pure analytics play. It works best where there's already complexity. Their target is CFOs at multinationals. I guess "dashboard-as-a-service" is a better business model than doing it as consulting, if nothing else.

Things to know 👀

1. The UK's bad week of Tech headlines - Revolut and Crypto

According to some reports, Revolut will not get a banking license in the UK and will withdraw its application. Revolut's CEO has claimed regulators have been spooked by the banking crisis in the wake of SVB and Credit Suisse. Earlier this month, the Revolut CFO quit citing "personal reasons." 

This follows the UK saying no to Microsoft's acquisition of Activision and the UK Government's."silicon chip" strategy announcement, disappointing many in the tech industry, and the Treasury Select Committee appearing to suggest Crypto is more like gambling than investing. Is the UK a bad place to do business if you're in tech?

🤔 The Revolut story plays very differently on both sides of the Atlantic. In the US, Revolut is seen as a success story with millions of accounts, blitzscaling, and a dominant player. In the UK, to many in Fintech, Revolut is the away team, not the home team. Despite its impressive scaling, it disagreed publicly with its accounting firm and has a history of compliance irregularities and senior staff churn (especially in compliance). These are typically (but not always) warning signs that something fishy is up. 

🤔 Accounting issues and banking license applications don't mix. Auditor BDO could not account for £477m ($593m) of revenue due to the "configuration of Revolut's IT systems." When your CFO quits, you have high churn of senior staff, and your auditor is making these public statements, it's not a good look. The banking crisis is undoubtedly a piece of this puzzle but not the only one.

🤔 Revolut's blitzscaling approach is something the market needs, but also not conducive to safety and operational resilience. Revolut was the first Neobank in Europe to offer Crypto, they've gone deep into B2B, and their feature velocity is astonishing. But zoom out. Your job as a regulator and central banker is to not introduce dynamite to the banking sector, and this excitable fast-growing thing is exactly that.

What about the other decisions?

🤔 The "Crypto is like Gambling" comment isn't UK policy, nor is it intended to be. You have to see the Treasury Select Committee like the Senate Banking Committee. The chair says something has influence but doesn't shape legislation or regulation. I get why the optics look bad; Crypto is thirsty for legitimacy as a real financial service. In my opinion, it can be that, and the UK has a shot at being a global center for it, but the Crypto industry also needs to not react like a moody teenager every time someone says something that sounds mean. 

🤔 The Microsoft/Activision thing was done by the competition markets authority (CMA), which, for better or worse, has a great deal of independence from politics. The UK has the leading regulated open banking market in Europe, which can be traced back to the CMA making it happen. 

🤔 The UK isn't a chip manufacturing powerhouse but a chip design world leader. The Government is also trying to restrict spending. That looks rational, but it looks bad when the US is spending $50bn, the EU $43bn, and the UK $ 1$bn it looks bad.

🤔 Optics matter. These things are separate. Each decision looks rational from the decision maker's perspective, but combined, they look like a political headache. The UK Government, from 2010 through ~2016, did a great job of attracting Tech talent and investment and, since then, has lost focus. But let's look for action, not headlines. The UK Financial Services and Markets Bill is in the final stages of approval. This bill puts competition and growth back at the heart of financial services and has a real shot at making the UK the best place on earth for Fintech.

The European law "Markets in Crypto Assets" has been approved. The law is aimed at harmonizing Crypto rules across all 27 member states. The law requires identification for all Crypto transactions happening within the EU. 

🤔 If you want to see Crypto's future, you have to look outside the US. Regulatory clarity is already bringing benefits, with the vast majority of VC investment in Crypto swinging to Europe demonstrating. 

🤔 Regulation solves the biggest problem in the industry, getting bank accounts now Silvergate and Signature have gone. The lack of access to bank accounts means hedge funds, exchanges, and traders couldn't move regular fiat into Crypto and settle trades. If banks can operate with legitimacy in Crypto, this problem solves itself. 

🤔 The real story isn't Europe; it's Hong Kong. Coinbase has recently set up entities with licenses, and I hear many others following Hong Kong, in particular, has long been a world leader in how to address Crypto regulation. It is also the offshore finance center for China and can handle Euros, Sterling, RMB (Chinese currency), and the HK dollar and decided Crypto is property. If a future financial services hub involves blockchain tech right now, there's a very good chance it is in Asia. (I've seen this first hand with the work in Global Digital Finance* where we work to build a default global digital asset market). 

🤔 The big thing in Hong Kong is that banks can interact with Crypto Virtual Asset Service providers (like Coinbase). If the issue in the US is finding bank accounts, and the issue hedge funds have is clearing US dollar trades. Might the answer come from Hong Kong?

Good Reads 📚

This incredible piece by Kristen Anderson, the founder of Catch, hit different. The raw honesty here is brutal, refreshing, and utterly compelling "Catch failed because we couldn't make enough money. We couldn't make enough money because I made a lot of bad choices.

🤔 There are hard jobs, and then there's being the founder and CEO. Having even 10s of employees means having 100s of people and families you impact if something goes wrong. And. With one or two exceptions, most CEOs are not sociopaths. They feel this stuff. My respect for Kristen is off the charts. In a world where most people try to stage-manage their public image or "follow the process," Kristen has never once hidden. That's a kind of bravery that doesn't get enough applause. 

🤔 Success is a poor teacher. "Failure" is the fastest way to learn. You ever meet someone early in their career who's had no failures yet? Everything they touch turns to gold, and they have unlimited talent. They're invincible until they're not. America loves a comeback story, and the world loves a storyteller. Kristen is compelling, can recruit, and just learned more than 1000x MBA courses could ever dream of teaching.

🤔 There are lessons here for any founders. You can have the right market problem and incredible execution but never quite get the flywheel going. Product-market fit is so essential because revenue is oxygen. The world wants us to look at other metrics, but revenue and unit economics is the reality we should have always been held to. The whole industry lost sight of that in the wild-eyed funding through the Fintech bull market. You better believe nobody is more aware of that than Kristen. But is the next Kristen? If they read this, they might be. I hope this leads to many more people trying. Showing it can be done. And trying again.

🤔 Identity crisis is a real thing. Ask anyone who just became a parent; having a sudden change in your "label" and how the world sees you is unsettling. Now do that after leading people you hired towards an outcome where they can't feed their family. Now get back on your feet and get ready to go again.  

That's all, folks. 👋

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Disclosures: (1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees. (2) All companies or assets mentioned by the author in which the author has a personal and/or financial interest are denoted with a (3) Any companies mentioned in Rants are top of mind and used for illustrative purposes only. (4) I'm not an expert at everything you read here. Some of it is me thinking out loud and learning as I go; please don't take it as gospel—strong opinions, weakly held.