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The Winners And Losers In Fintech In 2019

Forbes | Ron Shevlin | Dec 16, 2019

AI power - The Winners And Losers In Fintech In 2019As we approach the end of the 2019, it’s a good time to look back and see who won and lost—or more appropriately, who’s winning and losing—in the fintech world.


Winner:  Goldman Sachs

The Vampire Squid took a few lumps this year with reports of $1.3 billion in loan losses (over a roughly three-year period) in its Marcus unit and accusations of bias in setting credit limits on the new Apple Card, but those were minor speed bumps on Goldman Sachs’ path to fintech success in 2019.

While many mid-size banks struggle to gather (and retain) deposits, Marcus ended 2018 with roughly $35 billion in deposits and by October had grown that to about $50 billion.

How do you follow that success? By partnering with Apple to launch the Apple Card. By the end of Q3, Goldman Sachs had extended about $10 billion in credit lines to Apple customers and new credit card customers had $736 million in loan balances.

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Outlook: Marcus will continue its march towards becoming a consumer finance powerhouse. Goldman spent $80 million advertising Marcus in 2017 and double that in 2018. In 2019, it will spend $270 million on its retail businesses. That’s about as much as BBVA, Santander, and USAA will spend on marketing in the US—combined.

Winner:  Zelle

Take a floundering consortium of large banks, re-form it within an established enterprise, give it a new name, re-count all the existing transaction volume as the volume of the new fintech....and voila! have Zelle.

In short order (or years depending on when you think the service started), Zelle has become the leader in P2P payments in the US according to a study from Cornerstone Advisors.

An analysis by S&P Global of the 27 largest banks in the US found that 21 of them offer Zelle as their P2P service, with two more soon the launch the service. Among mid-size institutions, Zelle is offered by banks like Umpqua, First Bank, and First Horizon.

In Q3 2019, $49 billion was sent through the Zelle on 196 million transactions, representing a 58% increase in dollar value and 73% increase in transaction volume over Q3 2018.

Outlook: Zelle has plenty of runway left to continue its torrid growth pace. But it’s not a winner-take-all battle in the P2P world, so don’t count Venmo, Square, and Apple out.

Winner:  Chime

Chime’s account growth is nothing short of astronomical account growth. A December 5 CNBC article put the current total at 6.5 million, up from 5 million at the beginning of September, and up from 4 million in June 2019. The startup’s valuation is astronomical as well, with a recent $500 million raise valuing the fintech at nearly $6 billion (on expected 2019 revenue of $300 million).

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Outlook: Chime has had strong tailwinds, but there are storm clouds ahead. As I wrote in The Warning Signs Ahead For Chime, the startup’s customer base is heavily skewed towards low- to middle-income consumers. Nothing wrong with in and of itself, but it doesn’t bode well for an entry into lending. And a revenue strategy based on interchange fees is risky with the political and market forces putting downward pressure on interchange rates.

Honorable mentions: Stripe, TransferWise, Brex


Loser:  Robinhood

With 10 million accounts (200,000 of whom signed up for fractional share trading on the first day it was announced) and a $7.6 billion valuation, Robinhood must be on the winners list, right? Wrong.

The company had a couple of missteps this year:

  1. A botched attempt at launching a checking account (which, granted was actually late 2018). After announcing a checking account with market-leading interest rates and no fees, it turned out that the account wasn't insured by the SIPC. After being mocked by the fintecherati for being nothing more than a money market account, plans for the checking account were shelved.
  2. The”infinite money” glitch. A glitch in its system allowed users to trade stocks with excess borrowed funds, giving them access to what amounted to free money.

Paradoxically however, another reason why Robinhood is the big loser this year is due to its success.

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In 2019, Robinhood successfully disrupted the economics of the industry with free trades—what Efi Pylarinou calls the “Robinhood Effect.” This effect now puts the startup at a potential disadvantage relative to the brokerage behemoths with their deep pockets.

Outlook: With a strong fan base among its customer base, Robinhood isn’t going away, but, ironically, may now struggle to find a profitable business model.

Loser:  Facebook

Nobody contributes to Big Tech’s bad reputation as much as Facebook does, with its tin ear towards data privacy issues and controversial ad policies. The company makes this list, however, because of its plan to launch its own cryptocurrency, Libra. Within weeks of Libra’s announcement, high profile partners like MasterCard, Visa, PayPal, eBay, and Stripe all pulled out of consortium.

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