Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling

crunchbase news |  Christine Hall | Oct 21, 2020

fint - Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling 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.

See: How to Value a Fintech Startup

Five years ago, that deal might not have happened. Early leading fintech brands like Lending ClubSoFi 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.

In the 1990s and early 2000s, banks were emerging as one-stop shops, essentially building a “supermarket of financial services”. 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,” Ben Savage, partner at Clocktower Technology Ventures, told Crunchbase News.

Today, there are 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.

See: Where are the Biggest Fintech Startup Hotspots Around the World?

M1 Finance is another example of a fintech trending toward rebundling. M1 Finance is bundling investment, borrowing and banking products into what co-founder and CEO Brian Barnes coins a “finance super app.”

When fintech companies began unbundling, the tools got better but consumers ended up with 15 personal finance apps on their phones. Now, a lot of new fintechs are looking at their offerings and figuring out how to manage all of a person’s personal finances so that other products can be enhanced, said Barnes.

Rebundling will become a core part of workflow and a way for fintechs to leverage those relationships to then be able to refer them to other products.

 

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Fintech startup SoFi gets preliminary approval for U.S. bank charter

Financial Post | Anna Irrera | Oct 28, 2020

fintecch - Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling

Financial technology company Social Finance Inc has received preliminary, conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) over its application for a national bank charter, the company said on Wednesday.

The application for “SoFi Bank, National Association,” which was filed in July, still needs to be reviewed by the Federal Deposit Insurance Corporation and the Federal Reserve.

A banking license would enable SoFi to hold customer deposits and make loans, without having to rely on a bank partner as it currently does.

See: How banks can help companies restructure for growth

“SoFi is on a mission to help consumers get their money right all in one app,” chief executive Anthony Noto said in a statement.

“This preliminary conditional approval from the OCC is a testament to the mission-driven company we have built, the employees who help it grow, and the over 1.5 million members we currently serve.”

SoFi, one of the most well-funded financial technology companies in the United States, rose to prominence after the Great Recession by refinancing at cheaper rates student loans for promising graduates.

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