In today’s Exponential Investor:

  • Banking supremos, entrepreneurs, celebrities, Sam and Elliott all in one place
  • Much razzmatazz combined with a huge amount of insight
  • A big conversation points to the dialogues – and opportunities – of the future

If Exponential Investor were dedicated to showbusiness, you can be sure that we would work very hard to attend the Golden Globes in the United States, the Cannes Film Festival in France and the BAFTA awards here in the UK. 

The awarding of prizes to very talented people is a key theme that links these events. However, much more happens than the presentation of trophies. Deals can be done, or at least be set in train. The industry talks to itself. There are many parties. People find out (or teach) about the best and the newest ideas and trends.

Exponential Investor is dedicated to the best and newest investment ideas and trends in today’s world. With that in mind, Sam Volkering and I spent three days (7-9 June) at the Money20/20 Europe conference in Amsterdam.

Money20/20 Europe may not be a household name, but it is a big deal. The theme of the conference was “Fintech’s greatest conversation”. In the words of Ana Patricia Botín, the executive chairman of the Santander Group (the global banking giant with branches in many of the UK’s high streets and much else besides), Money 20/20 Europe “gives you the unique opportunity to connect with companies and people that you usually would not see, all in one place”.

What is fintech?

The conference brought together more than 5,000 people, with over 300 speakers. The speeches and presentations were organised around five major trends.

A conference of this scale inevitably has an element of razzmatazz. Aside from very senior banking executives, entrepreneurs with brilliant ideas, representation of Exponential Investor in the form of Sam and myself, the people present included genuine rock stars, a famous astronaut and a celebrated female Formula One racing car driver.

Fintech is a portmanteau word that describes that place in the global economy where financial services meets information technology (IT). It’s a fairly broad concept.

It involves young and rapidly growing companies taking advantage of technology to deliver products and services that would normally have come from traditional financial (TradFi) institutions, like banks. A good example would be the digital-only banks that have appeared over the last decade, such as Starling Bank.

Fintech also involves companies that provide technology to help financial institutions to carry on their business. An example is Stripe, which was also at the conference. Think of e-commerce – the trading of goods and services via the internet (whether through computers or mobile apps) – as a country: Stripe provides much of the roads, rail and other infrastructure to make the country work. According to the company, “millions of businesses of all sizes—from startups to large enterprises—use Stripe’s software and APIs to accept payments, send payouts, and manage their businesses online”.

Fintech also involves decentralised finance (DeFi). This means the provision of financial services in a way that there is no governing institution. One example is peer-to-peer (P2P) lending. Another example of DeFi is the entire crypto world – where systems and communities are run through networks based on blockchain technology. Nothing happens unless a transaction is approved by all members of the network.

What conversations were we hearing?

Given Sam’s and my interest in the crypto world through our work with Frontier Tech Investor and Revolutionary Trend Investor, crypto was a topic to which we devoted much of our attention. Constraints of time and space are such that it’s not possible to summarise all the presentations that we attended.

However, some key insights follow:

  • In theory, bitcoin provides a versatile medium of exchange for people in very unstable countries, such as Venezuela, as well as El Salvador and the Central African Republic. It is legal tender in the latter two. In practice, the extent to which bitcoin is used for domestic or cross-border payments in such countries remains to be seen. We will be watching for hard numbers that confirm what is – or is not – happening.
  • The border between the TradFi world (based on traditional or fiat currencies) and the DeFi world (based mainly on blockchain and crypto) is becoming ever more blurred. This is a topic that we have been covering for some time in Frontier Tech Investor and Revolutionary Trend Investor. For example, Stripe co-founder John Collison explained how that company became involved with crypto in April this year.
  • Stablecoins – cryptocurrencies that are backed by reserves in fiat or traditional currencies – are providing an increasingly important bridge between the crypto and the fiat currency worlds. The recent collapse in the value of Terra UST has probably been helpful for true stablecoins. Terra UST’s value had been maintained by complex trading involving a sister crypto called Luna. Terra UST was perceived as being a stablecoin, but wasn’t one. True stablecoins held their values throughout the episode.
  • Regulation is still something of a grey area for the crypto world. As yet there is no agreement over the right level of regulation. Too much regulation could stifle innovation. Too little could turn the crypto world into a lair of rogues – and especially those who are looking to circumvent Know Your Client (KYC) rules in the TradFi world.
  • Without care, the crypto world could turn into a den of thieves. For instance, Anne Boden, CEO of Starling Bank, referred to crypto fraudsters as being a hindrance to her company adopting crypto.

There are other big trends which are sweeping through the TradFi world which could provide opportunities for investors. One is open banking, where merchants can securely access information about bank customers on an anonymous basis and use the information in order to improve their service and offerings. The other is embedded finance. This is a fancy way of describing how a non-bank company that is involved with e-commerce can work with a fintech to incorporate lending or payments processing into its own infrastructure.

What comes next?

Both the TradFi and the DeFi worlds are undergoing massive shifts which will provide better outcomes for customers and major opportunities for investors.

In relation to TradFi, expect to hear more about how TradFi and DeFi organisations can collaborate more. This this cooperation may well involve stablecoins.

In the TradFi World, there will be more – rather than less – said about open banking and embedded finance.

In the DeFi world, regulation and security will continue to be major issues, or – as Sam and I see it – opportunities for solutions.

There probably will be a surge in usage of bitcoin as a medium of exchange (or a way to remit money cheaply and secretly across borders). Exactly where that surge takes place is as yet unclear. However, this is a positive wildcard.

You can be sure that we will be writing more about all these topics in forthcoming editions of Exponential Investor – and, of course, in Frontier Tech Investor and Revolutionary Trend Investor as well.

Further insights from Money20/20 Europe will appear in Wednesday’s edition of Exponential Investor.

Until next time,

Elliott Playle
Contributing Editor, Exponential Investor