🧠 Tokens are the future of finance, the economy and everything

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Hey Fintech Nerds 👋

The 7th largest bank in the UK is Monzo;

Revolut is a Telco now

And a new dating app that only matches people with good or great credit scores.

I guess everything really is Fintech.

Is Fintech back or is it changing shape?

I’m obsessed by the idea that actually, all Fintech and finance is being tokenized.

Whether that’s identity, payments or any other kind of asset. Whoever you are, whatever you do, you’re probably not thinking about tokens enough.

Here's this week's Brainfood in summary

📣 Rant: Tokentech: The future of commerce

💸 4 Fintech Companies:

1. Idemn - Conversational Insurance Agent

2. Route Finance - The Finance Strategy to Ops Platform

3. Prosper - Vanguard for Gen Y (UK)

4. Whitebox - Digital first wealth management (DE)

👀 Things to Know:

1. Revolut launching eSIM plans 

2. Score is a dating app for people with good credit scores.

3. Monzo passes 9m customers, 7th largest UK bank by customers.

📚 Good Read:

1. Can anyone win BaaS?

If your email client clips some of this newsletter, you can check out the whole post including Things to Know and Good Reads on Substack

Weekly Rant 📣

Welcome to Tokentech: The future of Finance, Identity, and Commerce.

This is the most important topic in the tech industry, hiding in plain sight.

Tokenization will reshape identity, commerce, and finance. Every online interaction will be disrupted by it over the next decade.

The term is confusing. Depending on your background, you might think about data privacy, cybersecurity, digital assets, credit card tokenization, or even open banking.

But the subject is so much broader.

Every commerce transaction will use a token.

Passkeys will become the replacement for passwords.

Identity will be tokenized on your device.

And every Wall St CEO is trying to figure out how Real World Asset tokenization is an opportunity for them.

The more I think about it, the more I see tokens everywhere.

Everything is tokens.

Tokens are everything.

It's not Fintech anymore; it's Tokentech.

1. Defining tokens

2. Payments method tokens

   1. Card tokenization is already an all-out war

   2. Pay by Bank tokenization is the next wave of payments

   3. Tokenization will unlock new payment flows in B2B and IOT

   4. Wallet infrastructure isn't ready for the combination of these methods (yet)

3. Identity and data tokens

   1. Government identities in Apple and Google Wallet

   2. Passkeys and FIDO

   3. Personal data (PII), privacy GDPR and data vaults

   4. Loyalty, attribution and advertising

4. Asset and cash tokens

   1. Cash is tokenized as Stablecoins or CBDCs

   2. Securities are tokenized as "Real World Assets"

   3. Alternatives are being securitized

   4. Digital native IP will exist as tokens

5. The combination of these tokens

6. Creates the strategic battleground of the next decade

7. Welcome to Tokentech

1. Token Definitions

The word token is infuriating.

It is a stand-in word that can mean literally anything. In the English language, computer science and finance, we use the word to mean many different things. 

Here are just some examples from the English language.

• Noun: A "token" of appreciation, a gesture like flowers

• Noun: An object that unlocks some capability like a laundry token

• Noun: A voucher that can be exchanged for money off or a free item

• Noun: An individual included in a group to give the appearance of diversity where little exists

• Noun: A small linguistic unit (e.g., a word) as understood by humans or large language models

• Noun: An object (hardware or software) that confirms a right to perform an operation on a computer

It's that fifth computer science definition where things get tricky. Simply put, data goes in, tokenization magic happens, and tokens come out.

Tokens can be used for a myriad of use cases, like:

• Data security: substituting data with a "token" so a service doesn't have to handle personal data (PII)

• Session tokens: A unique identifier for a client-server interaction (e.g., tracking that you're actively logged in and not timed out)

• Security tokens: In software, things like OAuth and soon passkeys prevent us from entering passwords. In Hardware, NFC chips and biometrics help us securely authenticate a transaction.

• Access tokens: As the name suggests, a token that confers the ability to access secure parts of a system

In financial services, "tokenization" is usually shorthand for one of two things.

1. That's how Apple Pay, Visa, and Mastercard all work.

2. Real World Assets (RWAs) like stocks, bonds, and commodities represented on a Blockchain network

But to understand the nuance here, I want you to pay attention to this broader category set. 

In financial services, we're heading towards an explosion of tokens, and they'll become the battleground in technology, payment rails, and network effects for the next decade (they are already for cards).

1. Payment method tokens. Take a payment instrument like a credit card and turn it into a token to "live" inside a phone (or Vision Pro, perhaps). Conceals the underlying account or card number with a secure "token."

2. Identity or data tokens. Converting personal data (like a date of birth) and tokenizing it so it can be moved securely. Placing a driver's license in an Apple Wallet and passkeys replacing passwords are also in this category.

3. Asset tokens. Recording cash, stocks, or intellectual property as a token instead (or in addition to) recording it on a traditional accounting ledger. This makes the asset move like physical cash (i.e., when I give you $10, you now have that, and I no longer do. It has instant settlement).

In finance, we're always looking at a slice of the issue. But the key insight from this Rant is that the combination of them will define the next decade.

Therefore, You are not paying enough attention to tokens.

At all.

2. Payment and wallet tokens

These tokens are all abstractions that point to an underlying account and payments rail. For example, a card token is a secure way of storing a card number and expiry. A Pay by Bank token is a secure way of collecting an account and routing number. 

a) Card tokenization is already an all-out war. You use a "token" version of an underlying credit or debit card whenever you use Apple Pay. This token is exchanged when you tap to pay instead of sending the card number and expiry. These tokens are stored on the device in the secure chip and act and tell the card network (Visa, Mastercard, AMEX) to begin a transaction.

There are two important nuances.

• In cards alone, there are actually multiple sub-types of tokens. Every network, processor, and device manufacturer has their own flavor (see this great explainer from Chuck for more). 

• The payment type is more secure but still vulnerable to new fraud attacks. Tokens are harder to steal than a card number or expiry, but Zahid did a great explainer of the risks for Apple Pay here, plus how it works technically.

It's already a critical battleground in payments.

Card networks like Visa incentivize merchants to use tokens because they're more secure. However, those tokens are in a proprietary format, and the DoJ is now investigating based on these tokens being anti-competitive (vs secondary networks like STAR that could be cheaper)

b) Pay by Bank tokenization is the next wave of payments. Pay by Bank is a token that represents underlying ACH or domestic payment rails (like an account and routing number). Just as the card token replaced the card number and expiry, the same works via open banking. These rails naturally suit higher payment amounts and volumes.

This payment type is still emerging; per my deep dive last week, it still has a very domestic focus and carries a huge fraud risk if we're unable to build the right controls from the ground up.

Pay by Bank in Europe could get even more interesting with Variable Recurring Payments. This example from Yapily shows storing your account details with a merchant (imagine Doordash) and then using biometrics to "auth" each transaction. Pay by Bank is a much slicker experience once users get it.

c) Tokenization will unlock new payment flows in B2B and IOT. Card penetration of B2B is still tiny compared to ACH, SWIFT, or wire transfers. SWIFT and Wire are incredibly expensive and slow. ACH is much cheaper but lacks the infrastructure for ultra-low-cost or secure payments that tokens enable. This will lead to three things.

• The use of Pay by Bank as a B2B payments rail. The rise of spend and treasury management has done wonders for card penetration and managing the complexity of ACH and Wire in business. Pay by Bank levels that up and gives it an "auth layer." High-impact fraud attacks on businesses are one of the fastest-growing risks. One company lost $25m to a deep fake of their CFO. Adding this "auth layer" to B2B payments will be critical.

• Experimentation connecting advertising to loyalty to payment transactions. Card not Present (CNP) fraud is a massive issue in advertising since stolen details are readily available on the dark web. For ad networks and merchants, following a user from ad to payment is incredibly hard, especially since Apple and Google killed cookies. Payment tokens could be a compelling fraud prevention and attribution solution. (Everything on the internet is ad tech)

d) Wallet infrastructure isn't ready for all of these tokens yet. Today, there isn't one wallet that supports every token and payment rail. Apple is the closest (it now supports Open Banking in the UK), as well as cards. But it will take some time for most wallets to support most tokens.

3. Identity and data tokens

Fixing identity has been the ultimate tar pit idea in financial services for decades. There were two paths to success. 1) Digitize the existing paper process (digital onboarding and KYC). 2) Government-developed or supported services like Aaadhaar in India or BankID in the Netherlands.

Paper documents were already subject to high fraud and money laundering risks, but the risk is exploding with the rise of digital onboarding and deep fakes. It is now comically simple to create deep fakes of identities online.

In the West, we'll transition away from paper with the help of private sector initiatives like: 

a) Government identities in Apple and Google Wallet. There are now 4 US States that support adding a driver's license to the Apple Wallet. I've come across various articles suggesting this will come to the UK. Apple already supports proof of age, but in typical Apple fashion, it's very closed and state-by-state. This could take a while to roll out, and the lack of progress here presents a huge opportunity for whichever wallet can gain traction. 

Once identity becomes a digital token, with biometric proof, the mobile device becomes a valid driver's license and form of identity and a way to store personal data like DoB and SSN. Wallets and devices will become critical for anything identity-related, which, spoiler alert, is everything in financial services.

b) Passkeys and FIDO. Passwords are easily stolen, and a horrible UX. At least 1.6 billion personal records are available for purchase on the regular internet, not even the dark web, including passwords and email addresses. FIDO is a standards body that created the FID2 standard, commonly known as passkeys. This token allows users to sign into services without a password or one-time passcode (OTP)

Login and authentication will have a new standard for all apps and services. It's supported by the largest names in technology and the device ecosystem. Laptops, mobiles, and even IoT devices will support passkeys. While the initial use case is "login without a password," you could do much more from there. Initially, passkeys will replace the 3D Secure pop-up for e-commerce transactions. We'll do much more from this base in time.

c) GDPR and personal data (PII) storage. Since the high-profile breaches like Target, Equifax, and Sony, personal data has shifted from being an asset to a liability. Ideally, you want to hold as little in plain text as possible.

Today's Fintech companies store personally identifiable information in a secure vault (e.g., Basis Theory, Skyflow, VGS). These data vaults could have much, much broader applications across commerce. Data can be accessed and permissioned using the passkey, and even made portable.

Combining a wallet, passkey, and secure PII vault can unlock powerful new use cases. Imagine giving permission to share data stored in one place, to instantly sign up somewhere else, without the data ever being revealed in plain text. That starts to head towards true account portability of everything.

d) Ad-Tech: Loyalty, attribution, and advertising. The original sin of e-commerce is that all the merchant and customer data about a user gets dropped when a transaction happens. Cookies fixed this and allowed us to follow people across the internet at the expense of personal privacy.

The death of 3rd party tracking cookies and the rise of passkeys means the customer acquisition channels of the 2010s are dying. You see this most clearly in mobile video games, which cannot acquire users at the rate they once did. Consider that Google and Meta are two of the biggest contributors to the FIDO (passkey) standard, and their revenue is 90% plus based on advertising.

Digital wallets are already the home for loyalty cards. Where does Google Adsense end and Google Wallet begin? And where do tokens play into all of this?

4. Asset tokens

Ledgers matter.

Today, all assets are typically recorded in a ledger. The largest innovation in financial services over the past 50 years has been to gradually take those ledgers and make them digital. They replicate what the paper did, just way faster. When you pay or buy a stock, that transaction completes when all relevant ledger entries are updated.

The tokenization of assets is an abstraction from those underlying ledgers or a replacement entirely. 

a) Cash can be tokenized. Stablecoins, deposit tokens, or central bank digital currencies (CBDCs) are all flavors of digital cash. Unlike the payment tokens (in cards), they're not pointing to an account or routing number. Only one wallet holds that token at any time, just as one human holds an individual banknote.

There's no right answer for which token is most valid. 

• Stablecoins are already demonstrating transactions as a store of value and cross-border payment rail for markets with high inflation. Argentina, Brazil, and Nigeria see some of the most consistent Stablecoin usage. They're becoming a "US dollar for everyone else."

• CDBCs are a valid, private cash replacement. There's a world of people who are still cash-first. As cash inevitably disappears, driven by cards and wallets, we need a solution for the unbanked that is universally accepted.

• CBDCs suit transactions between large banks and asset managers at scale. Large institutions settle overnight with their Central Bank, but doing this across borders is slow and gives a huge efficiency and cost of capital hit.

• Deposit tokens are an interesting middle-ground that gives the benefit of Stablecoins (programmable, instant settlement) with the stability of a bank balance sheet backing the token.

b) Securities are being tokenized. This is coming from two directions, top-down and bottom-up. Large banks and asset managers are jockeying for position and profit. The Blackrock CEO, bank analysts, and even central bankers have called tokenization the future of markets. More interestingly, US Treasuries and emerging market debt now appear as "Real World Assets" or RWAs in decentralized protocols like MakerDAO.

These markets are natively global, 24/7, and programmable. It sort of doesn't matter which network wins. They're heading toward each other. Top-down and bottom-up. 

c) Alternatives are being tokenized. While fixed income dominates (because treasuries offer high and stable yields), real estate, climate, and even trade finance are gaining traction on decentralized marketplaces. If interest rates drop, real estate could make a meaningful part of the mix of asset classes that now trade on a global 24/7 market. 

d) Natively digital assets are the future of IP. Digital collectibles don't require a Blockchain network but are the future of fan and artist engagement. Brands like Starbucks are building superfan experiences, while services like Reddit make digital avatars that are low-cost and transferable. It sort of doesn't matter what the underlying tech is; the takeaway is that IP that you can "own" is already happening. The trade-off is between IP in a closed network (like Fortnite) or open. 

5. The combination of tokens unlocks new use cases

Some tokens are much closer to mass adoption than others. Card tokenization is at scale, open banking tokenization is just starting, and passkeys will have their moment over the next 2 to 3 years. 

The most compelling question is how do these overlap?

What happens when your identity, data, assets, and payment methods can all be managed from a wallet? We're on an inevitable path toward this future.

I've give examples in the above sections of

• New payment flows. 

• Secure transaction signing. 

• Secure data portability.

• Secure asset portability.

• New asset classes.

• Contract signatures.

Now, remix those ideas together. Imagine a user passing KYC for a loan in part with their digital identity, then securely creating an account and authorizing a loan agreement with a passkey. In the same transaction, they could permit the lender to pull funds via ACH from their bank account to repay the loan on a monthly billing cycle.

This is a hypothetical, fraught with real-world challenges.

But it demonstrates my core point.

You're probably not thinking about tokens in a broad enough context.

We will unlock new use cases and consumer, business, and economic value as tokens become the dominant way to pay, authenticate, and manage data and assets. 

The new cases will unlock value-capture opportunities for the winners.

6. Tokens are the strategic battleground

For users and merchants, the obvious benefit is more security; the less obvious benefit is enabling new use cases that weren't possible before. This can be as simple as paying with your phone in-store or enabling pay by Bank with one click. 

The more complex use cases are still emerging, and there's a race to grab market share with those tokens and payment flows.

This race will create winners and losers.

Tokens create network effects for the groups controlling the dominant standard and capturing the economic value. This is why the DoJ has investigated the Visa and Mastercard token pricing closely. 

The winner would

• Dominate existing payment flows

• Win new payment flow volume (e.g. pay by bank and machine to machine)

• Own digital identity to unlock new secure transactions

• Unlock new experience with passkeys

• Unlock new experiences with asset ownership and transfer

Incumbents have never had a bigger opportunity and threat to their market position. Banks, card networks, big tech companies, payments companies, and open banking providers are all in the mix.

Banks benefit from card interchange but see RTP and open banking eroding their market position. Card networks see new payment flows but are held back by anti-trust and market readiness. Big tech companies struggle with regulation but don't sleep on passkeys. 

The token battleground (Icons from Flaticon)

7. Welcome to Tokentech

I was talking to Zach Andersen Pettet (of Money 2020 fame), who mentioned Zach Perret (Plaid CEO) said:

My immediate reaction was to be offended because I was in Fintech before it was cool and I'm here after it's peak of 2021. I love this industry because of the sheer impact we can have on the world if we do our jobs well.

And yet, I'm reminded of the age-old saying, "Do you want to be correct, or do you want to be successful?"

For better or worse, Fintech has a negative brand image. The mood of music changed, and the industry's core topic is how awful BaaS is. 

If Apple can rebrand "The Metaverse" and turn it into "Spatial computing," perhaps Fintech needs the same thing. The Metaverse was pure hype and a weird-looking Mark Zuckerberg. Spatial computing is our inevitable future of multiple screens and true 3D experiences.

Perhaps Fintech was 1,000 Neobanks and APIs with compliance issues.

Tokenization is the secure, fraud-resistant, and private future of finance.

Welcome to Tokentech.

The revolution will be tokenized.

See you at Tokentech2030?

ST.

4 Fintech Companies 💸

1. Idemn - Conversational Insurance Agent

Idemn enables insurance companies to offer a conversational insurance quote and buying experience. The service is led by an AI co-pilot and can pull in humans when required. The platform can help quote, underwrite, and bind coverage; it can also be customized by the insurance carrier.

🧠 It's hard not to see this as Intercom with better marketing. Every digital company has had a homepage chatbot or conversational UI for a while. GenAI has proven exceptionally capable of driving legacy internal systems and processes in other areas, and perhaps that "UI Path but for your complex use case" model works well here.

2. Route Finance - The Finance Strategy to Ops Platform

Route Finance aims to create a single source of truth across finance and operational systems. Over this, they have model templates and corporate finance-trained AI agents to help make sense of strategy questions. They aim to make finance teams more efficient in identifying revenue, working capital, cash, and treasury opportunities.

🧠 Putting the services back into financial services? The service element of financial services for corporates was always around strategy questions like hedging currency risk or managing supply chain disruption. This service is still early (and has some weird ship imagery as a home page), but I'm curious to see how much traction this type of service gets because LLMs exist or if it's a tar pit idea.

3. Prosper - Vanguard for Gen Y (UK)

Prosper is a modern fund investment platform offering ETFs, mutual funds, and bonds for 0.25% of AUM for assets bought on the platform (plus a 0.04% transaction fee). The service offers tax-efficient accounts like a self-directed pension (SIPP), stocks and shares ISA (tax-free up to £20k), a general investment account, and a cash savings rate of 5.46% in money market funds. Early access users will also get lifetime zero-fee investments up to £20m ($25.2m).

🧠 As GenY turns 40, they’re suddenly paying attention to their investments' fees. The tradeoff historically was low fees but horrible UX (like Vanguard or iii) or higher fees with a Roboadvisor with way better UX. Prosper is aiming to be the best of both. Using modern tech, they believe they can be an order of magnitude cheaper than competitors and pass that on to customers. Can they scale enough to make that margin work?

4. Whitebox - Digital first wealth management (DE)

Whitebox offers pensions, stocks, child accounts, wealth management, and portfolio management for German high-net-worth and affluent customers. They’ll actively rebalance portfolios and provide phone or personal support upon request.

🧠 This is true Roboadvisory. Historically, many “Roboadvisors” were just fund-buying platforms like Vanguard with better UX. Whitebox is different; it actively manages the portfolio digitally.

Things to know 👀

1. Revolut launching eSIM plans

👉 New mobile offering for Revolut customers will allow them access to roaming without extra charges. Subscribers to Revolut's Ultra ($69 per month) plan will receive up to 3GB of data, which resets monthly. Regular users can buy the eSIM directly from the Revolut app. An eSIM can be stored virtually instead of requiring a hardware change.

👉 Revolut also announced a scam-intervention feature that is something every bank and Fintech should be doing. If they detect a high scam probability based on the device or user behavior, they’ll layer on ever more friction in front of a push payment. Kudos.

🧠 This plays in the sweet spot of the Revolut Ideal Client Profile. Revolut made its name as the travel card, and it is core to its value proposition. Roaming fees for the UK to and from Europe have increased dramatically since Brexit, and this is a huge pain point.

🧠 Every Bank and Neobank is trying to figure out how to diversify revenue, while Revolut is showing the way. Banks know high rates won't last forever and must find new "fee income." Neobanks can't rely on debit cards to grow. The answer is new products. This is a fantastic case study. This is a partnership under the hood (with 1 Global), so replicating it is possible. Expect copycats. 

2. Score is a dating app for people with good credit scores.

👉 The new app by Neon Money Club requires at least a 675 credit score to use. As the founder of Neon said to TC, “Before you educate people you need to get their attention.” The premise is based on the question “what is the minimum credit score someone should have before you date.”

🧠 Genius marketing right before Valentine Day. There’s an important message underneath that couples need to talk about finances more.

🧠 Customers don’t want education. They want better outcomes. Neon Money Club knows this and has found a hook to get people talking.

🧠 Yet there’s something weirdly dystopian about measuring someone’s worth based on a financial score. I’m fairly sure I wouldn’t be married if my wife knew ahead of time what a mess I was.

🧠 Marginalized communities lose the most in a battle of credit scores. It’s compelling then that Neon Money Club is a black-owned business focussing on this issue. The shock factor is intentional, and it has gotten people talking.

🧠 There’s a generation of people for whom talking about money and being money smart is not only cool, it's necessary. CashApp has blended money and culture like few others. I hope more can break this taboo and make being good with money at least socially acceptable.

3. Monzo passes 9m customers, 7th largest UK bank by customers.

👉 Monzo has announced it passed the milestone of 9m consumers and 380,000 business accounts, making it #7 by retail customer base. The vast majority of growth came from word-of-mouth marketing. This compares to Revolut with 6.8m UK users (of 35m total) and Starling with 3.6m.

🧠 This is impressive growth, and they’ve barely done product extension. Monzo is super deep in experience (to my taste, still the world’s best). However, it does not offer a traditional credit card or mortgage and has barely scratched the surface of its SMB offering. There’s plenty of headroom to sell more profitable products.

🧠 Can they keep up this growth for much longer? The UK adult working population is 34m. Their core demographic is under 35. Have they saturated that? No.

🧠 But user retention is substantial. If they keep their existing cohort, win more young customers, and do product line extensions, they’ll soon be one of the big 5 UK banks without breaking a sweat or entering a price war.

🧠 User growth is way ahead of deposit growth. In their last report they noted £6bn of total deposits a (I’d estimate an average deposit of £804.) 51% of users are under 35 and the higher deposit holding over 65s are just 4%.

🧠 Monzo’s profit will rise with the age of its first cohorts of customers. The most profitable customer is an elderly customer. The large banks have a cohort of profitable elderly customers, but they’re not winning the younger cohorts. They will continue to erode market share.

🧠 The big 5 UK banks have nothing in their locker to combat the Monzo threat other than pricing. The big banks are dull. Natwest shows some signs of life, but the rest are just reading water in their consumer offering. Monzo's biggest risk is its direct competitors (Starling) and Chase UK, who are doing an incredible job.

🥊 Update: Last week, I shared an article from the FT alleging a sanctions breach at two UK banks. In my summary, it implied a sanctions breach had happened, which misses the point. It’s clear the banks did their job per the law and applicable regulations.

If you read this statement, a bigger systemic problem (and the one I intended to highlight) stands out. Trust companies and identifying true account ownership is incredibly hard for the whole industry. That will take government, regulator, and industry support to fix. File under: Glaring issues that need fixing in financial services.

Good Reads 📚

1. Can anyone win BaaS?

Alex covers the wave of enforcement actions bank partners are experiencing but notes it's still the best way for community banks to grow. Ideally, we'd have a 2x2 matrix where winners have the best technology and compliance. That has historically been a trade-off but is starting to change with newer providers and the rise of Headless Banking. Headless banks are compliance-first and developer-first. They hold the charter but run a modern tech stack. Policy and tech are perfectly intertwined.

That's all, folks. 👋

Remember, if you're enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

(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 *. None of the above constitutes investment advice, and you should seek independent advice before making any investment decisions.

(3) Any companies mentioned are top of mind and used for illustrative purposes only. 

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held 

(5) Citations may be missing, and I've done my best to cite, but I will always aim to update and correct the live version where possible. If I cited you and got the referencing wrong, please reach out