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FINTECH-Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling-B-AIM PICK SEL


As fintech companies mature, many no longer aspire to be the best at one thing. That could mean not only new revenue sources for fintech companies, but also additional venture capital to startups and even a surge in M&A activity.

One example of a hot startup that has drawn attention from a big financial services company is San Francisco-based Plaid, an early fintech startup that manages the connections between apps and banks. Earlier this year, Visa agreed to acquire Plaid for $5.3 billion.

Five years ago, that deal might not have happened. Early leading fintech brands like Lending Club, SoFi or Robinhood started out as “best-of-breeds,” essentially unbundling one aspect of financial services. Today, venture investors and leaders in the fintech space can visualize a future where such startups will move toward again rebundling services.

Unbundling was driven by a sensible bit of conventional wisdom, Ben Savage, partner at Clocktower Technology Ventures, told Crunchbase News. In the 1990s and early 2000s, banks were emerging as one-stop shops, essentially building a “supermarket of financial services,” he said.

However, many of those offerings represented a small amount of the bank’s overall business. The early wave of fintech startups settled on taking one of those bank functions and executing better.

“You can really only do one thing at a time as a startup, but if you do that really well and find product market fit, you win the opportunity to expand the features,” Savage said.

In addition, the barriers to entry were difficult: Any infrastructure or function required to execute had to be built internally. Fast-forward to today, and “the price of admission has come way, way down,” Savage said.

Indeed, there are now infrastructure businesses that help fintechs build in less time and with less cost, enabling them to expand their product footprint more easily. However, as it turns out, consumers eventually liked seeing all of their information in one place again and pushed fintechs to reintegrate.

“Profitability nudges you to open more product lines,” Savage said. “You see this in companies like Credit Karma, which used to do only credit checks, but now offers their own products. It is much easier to do it now, consumers expect it and it is a better economic model to offer more products.”

Credit Karma is also another example of a startup being acquired by a larger financial services company. The San Francisco-based personal finance platform is being acquired by Intuit, the financial software provider behind TurboTax and QuickBooks, for $7.1 billion, pending regulatory review.

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