Glenbrook’s Bryan Derman, Chris Uriarte, Cici Northup, and Joanna Wisniecka are back from Money20/20 and return to Payments on Fire to debrief with Yvette Bohanan in this Fanning the Flames episode.

If you listened to Episode 180, you know what hot topics the team was anticipating at the conference. Was it everything they expected? Tune in to hear the highlights and observations. 

Yvette Bohanan:

Welcome to Payments On Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution. I’m Yvette Bohanan, a partner at Glenbrook and co-host of Payments on Fire along with George Peabody. But today, I have the opportunity to corral the Glenbrook team members who have just returned from Money 20/20 2022. So without further ado, Bryan, Cici, Chris, Joanna, welcome home and welcome back to Payments on Fire. From what I understand, there’s a lot to debrief on here, it’s a big event. So, Chris, let me know your top three takeaways related to fintech. You are going to talk about fintech and talk with Fintechs. So what’s going on in the fintech scene?

Chris Uriarte:

Yeah. So Yvette, I think I’ll just start with a very general takeaway to get us kicked off, and that is by far the first big impression everybody got from attending the conference this year was that this is a very crowded space. And I meet that literally and figuratively. The stats from the conference say that there were over 11,000 attendees, 3,000 companies represented this year.

But perhaps what’s most interesting is they say that it represents a 55% increase in attendees since the last pre-pandemic conference back in 2019. So that’s a staggering growth number and I think it clearly tracks with what we’re seeing in the industry or about the industry in general, which is fintech really isn’t slowing down any time soon.

So keeping with that theme, we’re really seeing an increased number of new entrants into many verticals and solution areas. And what really came across strongly is that starting to become more and more difficult for buyers of payments and fintech services to differentiate between this vast number of providers that are out there. So I really, really pity the poor payments and fraud and product managers who work for buyers of these services and are really just trying and keep their head above water when it comes to understanding fintech solutions in 2022.

Yvette Bohanan:

Wow. Yeah, we do hear that a lot with clients there. It is a confusing… No matter what angle you’re looking at it in or what lens you’re looking at it, a lot of people are saying a lot of the same things. What buzzwords were there? Like orchestration comes to mind or AI/ML?

Chris Uriarte:

Yeah, absolutely. And I think those buzzwords that you just note are very relevant to my second point. And I’d certainly be remiss if I didn’t mention crypto. So to nobody’s surprise, anything crypto really continues to dominate much of the mind share at the conference. And while Money 20/20 surely isn’t as crypto focuses, say the Bitcoin conference, there is still a definite sort of all crypto all the time vibe as we speak with people and we walk around the showroom floor. And that of course impacts not just the core crypto companies, but also the very many service providers on the periphery of that industry who are really just trying to grab a little piece of this continuingly, aggressively growing sector.

Yvette Bohanan:

And when you say crypto, there’s crypto and there’s stable coins. Are you lumping them all together as just digital currency writ large kind of thing?

Chris Uriarte:

Yeah, I’ll say crypto and crypto adjacent maybe is the term, because everybody seems to want to have dip their toe a little bit into the pool of crypto. Even if crypto really doesn’t have much to do with their business, they want to certainly take advantage of that growth. So tons of folks that are squarely under that crypto umbrella and a little bit that are just sort of standing with a part of their arm and leg underneath it.

Yvette Bohanan:

Okay, okay. And your third observation would be what?

Chris Uriarte:

Yeah. So lastly, I think I want to mention one takeaway that was pretty surprising to me. And that’s chatter about the BNPL or the buy now, pay later space was relatively quiet and subdued at the conference. And if we hit the rewind button back and go to our conversation on this very podcast here a few weeks ago, I think I even called the BNPL space, the darling of the payments industry back in 2021. Probably going into early this year 2022 as well.

But there weren’t many big announcements in this space this week, which leads you to wonder whether things are slowing down on the new entrant front and if the industry is really just sitting on their edge of their seats waiting for the regulatory landscape to clarify before anybody makes any big next move. So that was a little bit surprising. But still a hot topic of a conversation for sure.

Yvette Bohanan:

Okay. So what I’m hearing is it’s a crowded space, people are still very much active in this space in spite of all the macroeconomic stuff and headwinds and everything else that’s going on that we had been seen as of late. You have buzzword bingo in the industry and that’s making it hard for differentiation of all of these new products coming to the four in all shapes and sizes. Crypto, crypto, digital currencies, that’s kind of the new darling perhaps. And the other darling buy now, pay later is wait now, move later. Okay, okay. Got it.

Chris Uriarte:

I like that. Yeah.

Yvette Bohanan:

Joanna, tell me, from building on Chris’s observations, what did you see in here at Money 20/20?

Joanna Wisniecka:

Thanks, Yvette. And really great observations from Chris. I admit my head was spinning a bit from all the shiny objects at Money 20/20 and trying to distinguish between the different solutions represented and with so many of them having payments at their core. As I mentioned in our pre-Money 20/20 chat, I wanted to pay particular attention to what’s happening in the fraud space. And so I focused on that while at the conference, really looking at front monitoring mitigation with a particular lens on fast payments or account to account payments. And while the solutions I saw and panels I heard didn’t specifically target payment systems themselves or fast payments, I did note a couple of interesting takeaways.

First one for me was data, data, and more data. Data is the foundation of this topic, of this space. The solutions being built to monitor fraud, whether it’s to prevent it or to look back and analyze the frauds to more monitoring, they are so deeply reliant on transaction data and data on confirmed frauds, data on bad actors. And much of that data is somewhat difficult to come by. And the complexity of the data that’s needed for strong, solid solutions increasing is increasing.

So it’s no longer enough to have transaction data for one end user, for a financial service provider or even for one payment system. So the complexity there is increasing. And there are a lot of implications of this, but one thing that’s kind of on my mind is that I think ecosystem stakeholders in this space will need to collaborate more and more to find a way to share that data with the goal of fraud reduction for the broader ecosystem.

My other observation kind of builds on Chris’ point about the sheer volume of fintech and organizations there. And wow, identity verification is one where there’s a lot of activity. This space has a lot of innovation, sometimes perhaps somewhat challenging to distinguish the different value props, but there’s a lot of thinking and there’s a lot of stuff coming out in this space. So I’ll be watching it closely and see what wins out and see which solutions are particularly relevant or are best suited for fast payment systems.

Yvette Bohanan:

That makes a lot of sense. Data’s feeding all of this machine learning, all this AI. Gives us pause all the time to try to figure out with all of this going on, and yet we’re still seeing a rise and an increase in different fraud patterns and fraud schemes. Where is this all really leading to, right? And trying to disambiguate this space is really tough.

Joanna Wisniecka:

Yeah, absolutely.

Yvette Bohanan:

So besides that, what other things did you pick up on while you were out there?

Joanna Wisniecka:

Yeah, so it’s a couple maybe less expected topics, couple highlights that jumped out to me. And these didn’t dominate the conference, but I think it’s just worth noting that they got attention. And one was African fintech, this came up in a few instances. What is happening on the African continent? What are the innovations taking place there?

One of the highlights for me in the conference, I got to admit I was somewhat starstruck, was Serena Williams did led a conversation or participated in a conversation, the full house about her investment philosophy. And she actually mentioned in her portfolio that she focuses or has not an insignificant portion of her portfolio focused on African fintech startups.

And then there were some other panels on the topic. There was an announcement of a product in Uganda. For us, like Glenbrook, certainly on the global payment side, we’re watching the continent very closely from primarily fast payment systems perspective, but other innovations as well. So that was interesting to see.

And finally, cannabis banking. For sure, from what I follow, this is the first time that I’ve seen as many sessions as this Money 20/20 dedicated to the topic. We know most payments in this industry, in this space are done in cash. And digitizing these payments is a complex challenge, to say the least, within the current legal landscape. So worth paying attention to, how the landscape evolves in particular regulations and laws and what will that mean for payments innovations. But that was a couple of maybe other highlights to note here. There’s a lot more. We could talk more, but I’ll stop here.

Yvette Bohanan:

Those are wonderful observations. And kind of this whole cannabis thing kind of underscores Chris’s point that buy now, pay later was being amplified, now it’s more subdued. Cannabis was really amplified several years ago, now it’s been kind of subdued. Now it’s kind of coming back to the forefront. So these topics and these ideas go in cycles. So it’s always interesting to study the cycles to understand where we are. And obviously, regulatory landscapes changing, macroeconomic, global economic landscapes changing, and you see things like Africa coming on the radar in a big way. So yeah, very interesting. All right. Cici, you are up next. Remind us of what you were focused on and what key takeaways are in those topics.

Cici Northup:

Yeah, thanks Yvette. So if our listeners recall, which I barely do after the crazy week at Money 20/20, I was aiming to pay particular attention to Web3 updates. And I’m using that term really broadly in the same way Chris used that crypto, so sort of digital currency Web3 activity. So let me share a few observations. The first two are just about the industry in general. And then the last is specific to payments.

So to start, there’re a ton of companies working to help build out and proliferate Web3 infrastructure seemingly more and more every day. It’s hard to sort of map who’s doing what in the space. And the progress though incomplete is palpable. I see a lot of success with companies integrating or connecting Web2 traditional systems. I also see aspects of Web3 architecture like decentralization, like cryptography-based security, being built into existing traditional solutions. So we’re seeing this space start to manifest. So I said progress is incomplete.

My second observation is that collaboration is not here yet. I was really hoping to see or hear about alignment starting to take shape around standards. Unfortunately, this was not the case. When I inquired, a lot of folks said the standards critical to drive the value what they were doing, but most agreed this is not yet taking place to the extent it needs to.

My last observation is specific to payments. So to me there is a strong crossover between the attributes of Web3 payments as they’re typically described. Think push payments, real time irrevocable, 24/7, ideally low cost, and the requirements are attribute of a faster payments. And faster payments are already achieving many of these business attributes across multiple use cases, including that last one. A very important one, which is low cost.

For example, last I checked Pix, the faster payment system in Brazil, is costing financial institutions 1 cent per 10 transactions and is free for consumers or at least for certain use cases like p2p. So in many ways, the acclaimed value and goals of Web3 payments are already here in many ways vis-a-vis faster payment systems. So given this, where does Web3 fit in among existing payment rails? And aside from cross-border, what payments use cases are optimally suited?

So I’m not sure I’ve seen these questions answered. And I realize I sound bearish on Web3 and crypto. Yeah, I’m really not. I shared these observations to reinforce that we have a lot more work to do to figure out how this revolution best comes to life.

Yvette Bohanan:

Yeah. Yes. More work to do, more conferences in the future, I am sure, to source-

Cici Northup:

Yeah, it will be all for some time.

Yvette Bohanan:

Yeah, yeah. Thanks, Cici. So last but certainly not least, I’m going to ask Bryan to give us the redux and the big picture here. It’s a whirlwind series of meetings, speaking on main stage speakers, meeting people in the hallway, grabbing coffees, going to a foreigner concert perhaps, I don’t know. But all of this, if you pull it all together, Bryan, what were your key takeaways here that we should all be thinking about as we kind of get into the next year or two?

Bryan Derman:

I think if each of us comes home with their own version of reality based on which session you went to and who you bumped into in the hallway. But one thing I was looking at with a lot of focus as I work a lot with our investment clients and when you read the Wall Street research, there seems to be a probability of recession next year that is running at about 125% likelihood.

So I was interested to see the way people were thinking about that. And you do see with the private equity investors a little bit of caution about what sort of companies they invest in and tighter management of their past investments, recognizing that exits from those investments are not going to be as easy as they were, particularly in 2021.

All that said, this is not an industry that in any way is battening down the hatches. Chris’s number about huge increases, 11,000 attendees. People were there to get stuff done. Obviously there’s some pent up demand after several years of not really having events like this. But people are still looking to do stuff. The number of people who reached out from meetings with us or stopped us in the hallway to say they were working on something that might need our help was really encouraging. So there’s a little bit of caution, but still a lot of creativity in the market to my mind.

All that said, there probably are some spaces where a little bit of shakeout is inevitable. Chris talked about the number of identity validation companies out there. They will not all survive. But on the other hand, it’s great to see so many people focusing on what I think everyone acknowledges is the important problem from the standpoint of fraud and payment system integrity. Obviously they can’t all survive.

Sort of same in the banking as a service or BaaS space. There’s a lot of players there and I think a little bit of shakeout there is probably going to be inevitable. Maybe some rollups and combinations are the things that are for there. To build on what Cici said, I think Web3 is becoming real at a certain pace and it will probably not be a linear transformation. The people talking about it are not just the pioneers anymore. There are big companies starting to put real resource behind applications.

I think the subtlety might be all those applications may not be payment. But if we think more broadly about the custody of digital assets, how is the securities market of the future going to work in terms of understanding who owns what asset in a moment in time. So payments might stay for a while on traditional rails, but the assets that are being bought and sold might find their way to the blockchain.

Yvette Bohanan:

Right. Yeah. There’s a lot of refinement in the language that we’re hearing come out of companies and financial institutions like Citi when they talk about currencies versus assets. And I think that your point is bringing that to life a little bit, how this might unfold in different ways.

Bryan Derman:

Yeah. So people who are custodians or transfer agents for assets that are inherently digital, like securities, loan documents, or whatever it might be, I think are going to have to come to terms with Web3 and blockchain.

Yvette Bohanan:

Yeah.

Bryan Derman:

The last quick observation I’d make is that there is a ton of fintech going on that that’s great, but regulation is going to have an impact there. Rohit Chopra from the CFPB made his way from Washington, DC, all the way to Las Vegas to deliver some messages about the way he expected to see fintechs overseen. And you got the sense it’s not just going to be left up to a few sponsored banks to police the behavior of hundreds or thousands of fintechs. There’s going to be government oversight on some of that. We’ll see what form it takes and how enforcement works and all of that. But people who are hoping to build a fintech business out of lightweight regulation are probably making a dicey bet at this point I would say.

Yvette Bohanan:

Yeah, I think we’re starting to see regulators. I mean, they’ve been positively prolific in the last couple of months around digital currencies, around banking and compliance, even open banking APIs. I think that was the last more recent announcement, one of the more recent ones. And we have fed now imminently approaching its launch date in 2023 and they’re updating things like Reg J. So there’s a lot going on from the regulatory perspective. If they were behind in any way, so to speak, I think they’re quickly catching up on all fronts. So a lot of momentum for sure. Wow. Okay, so before we close and call this a wrap on Money 20/20 2022, any final thoughts from anyone or are you all-

Joanna Wisniecka:

Wondering what the concert will be next year. Foreigner this year. Who’s next? I vote for Lady Gaga.

Yvette Bohanan:

Oh. See, I was thinking bands that play Vegas like Santana or ELO. They would be pretty awesome to see too. I’m a fan of Gaga. Chris?

Chris Uriarte:

I think it’ll be interesting to see the attendance next year. I’m wondering if everyone just sort of missed being in-person here since the pandemic and that drove up some of the numbers because it was a massive amount of people there. Not a lot of space to sit down and meet, not a lot of spaces to go get a drink, and the Starbucks lines were about a hundred people deep.

Yvette Bohanan:

Oh man.

Bryan Derman:

I have to admit, it was fun to learn how tall some of my Zoom friends were.

Chris Uriarte:

For sure.

Bryan Derman:

They were easy to recognize, but some of them surprised me with their height.

Yvette Bohanan:

We will have come full circle when we can be in the metaverse and send our avatars to Money 20/20 and stay home with our own coffee.

Joanna Wisniecka:

Can my avatar be taller than I am?

Yvette Bohanan:

Absolutely.

Joanna Wisniecka:

Nice.

Cici Northup:

And mine be shorter maybe?

Yvette Bohanan:

I think anything’s kind of fair game in that department. All right. Well, thank you all for first of all braving the crowds, standing in line for coffees, but mostly connecting with people. I’m sure you met up with people who listen to this podcast, people who are clients, people who have attended our workshops. It’s great to get out there and see everyone. So thank you for doing that. And we hope that you who are listening, if you made it to Money 20/20, we hope you’re all back home safe and sound and back to work. And if you didn’t, we hope that this gives you some additional insights as to what was going on for those days in Vegas. And until next time in our next podcast, take care, be safe, and do good work.