This past week’s Finovate Fall NYC is in the books, and for a slew of deficiencies in organizational prowess (quirky networking app, sub-optimal dining timing, and miniature product demo stations), to this banker’s mind, the conference pulled back the curtain on the future of finance, payments, and banking, and revealed a handful of truths, and some counterintuitive trends for hard core fintech news consumers, investors and analysts.
Ever present and compelling were the innovations and innovators leveraging the slow-rolling (semi-forced) relinquishment of consumer and business financial data from financial institutions, an “open banking” movement part and parcel to a larger Web3 revolution which seeks to decentralize the internet and defang the market power of BIG tech and legacy financial institutions who have captured, custodied, controlled access to, and profited from (without explicit consent) our personal and business financial information for roughly two decades. The new products, services, distribution models and value propositions in this area are staggering to contemplate, and if I’m making bets, my chips are on this segment of fintech and banking related services for the next decade.
Diametrically opposed to the forward momentum and myriad of open banking-related companies was the non-existence of crypto-forward payments companies and founders. So much so that it vibed like a “waving of the white flag” in regards to the belief that cryptographic, token-based payments are going to play a meaningful role in the future of commerce. However, that comes with notable exceptions. First, the use of stablecoins and utility tokens (like XRP) as better currencies for cross-border transactions is an objectively better technology (being blockchain based) than the existing correspondent banking / SWIFT infrastructure. Second, the use of more speculative tokens (like Bitcoin) as an efficient mechanism for transmitting value in countries where financial infrastructure is non-existent and/or the political infrastructure is incompetent and/or corrupt, and throughput isn’t an issue. But generally speaking, not a lot of noise about crypto as a payment mechanism for goods and services at this event, which to me signals a major confirmation bias has been permeating the sector. It should also be noted that blockchain-based applications are certainly finding their footing in the financial services sector, including capital markets technology, intra and inter-bank capital movement, and the tokenization of real world assets.Lastly, and perhaps most interesting to me, was a perceived change in sentiment toward Generative AI. A part of what seemed to be every company’s marketing and advertising campaign as recently as this past spring, Generative AI has suddenly taken on a negative lean in the form of a divergence between real and productive use cases and full on bull***t. Companies deploying GenAI for automation use cases are pulling back from the technology as a focal point of their product/services offering, understanding that markets and investors are beginning to scrutinize its usage and validity as a value add much more diligently. This is in stark contrast to companies who have built proprietary models for targeted use cases of the non-generative ilk like optimization engines, inferential, and deep learning systems; expert machines and chatbots sitting on top of OpenAI’s ChatGPT aren’t moving the needle any more. Further, more sophisticated operators have abandoned using the terminology altogether, understanding that they can’t get away with marketing themselves as a GenAI company when in fact what they have built, and built well, are very sophisticated algorithmic rules engines serving very sophisticated, targeted financial, payments and banking applications.
