2020 Is the Year Fintech Cemented Its Role in Society

Eventually there will be fewer Zoom conference calls. Or, at the very least, fewer elementary school classes, yoga studios and happy hours online. Sooner or later, theaters, ball games, and indoor dining will come back.

There’s no telling what the “new normal” will look like, but it’s safe to bet that fintech apps have successfully scaled their way into everyday consumer behavior beyond stationary bikes or home-baked bread. How do we know?

A Harris poll of Americans this year found that nearly 60% increasingly relied on fintech in 2020, largely driven by the pandemic.  And, in developing economies, early studies have identified widespread adoption of fintech this year.

The acceleration of digital payments and other consumer finance apps got a lift because people need to maintain social distance, and because it isn’t optimal to handle cash right now. What’s the impact for fintech? Square shares have nearly tripled in value this year, and PayPal stock is up nearly 100% over the same timeframe.

Wall Street firms and big banks should be worried, and not just about near-term stock performance (big banks haven’t exactly kept pace). Apps’ stickiness with consumers is going to lock in long-term relationships, and, increasingly, permanent capital. 

Take Robinhood — even with a spate of outages, the startup saw users flock to the platform and nibble away at Wall Street’s holy grail: AUM. Along the way, Robinhood grew its valuation to nearly $12 billion. Perhaps that’s why Morgan Stanley snapped up E*Trade for $13 billion earlier this year — and the New York bank is far from the only legacy player in the finance space to buy out an upstart competitor in what’s been a busy year on the M&A front. The debut of Ant Financial is just one more reminder of the market’s continuing appetite for fintech. 

No different from the brokers that are being disrupted, the same is happening to big banks’ credit card divisions. Points accumulated for travel have been marginalized as consumers stayed in, and companies like Plaid — which agreed to be bought for $5 billion by Visa on the precipice of the pandemic, in a deal that faces continuing regulatory scrutiny — get a boost with increasingly budget-conscious shoppers. Affirm is offering consumers the opportunity to finance purchases, and next it’s offering investors a chance to buy into its IPO, too, at the low, low valuation of $10 billion.

The integration of cryptocurrency into consumer habits is still scaling, as is evidenced by startups like BlockFi, which is not just seeing its investor base for bitcoin grow — it is also expanding its consumer finance platform, as well.

As apps step in to create convenience and even critical replacements for relationships that were once invaluable to users across spending demographics, they are earning more trust from consumers. More people are comfortable making bigger purchases, from six-figure stock trades to a new car, without a client rep or a dealership.

The pandemic upended norms and created imbalance that will at least temporarily govern consumer and client relationships. But people who have become accustomed to their new, tech-enhanced norms may now prefer doing business this way especially when there are services like Chime, the checking app advertising that it helps users get paid two days earlier and without overdraft fees. Ask your current brick-and-mortar bank to front you for a couple of days at the end of the month, and see how it goes.

For their third quarter earnings, some of Wall Street’s consumer banking stalwarts fell short of analysts’ expectations,  and they could find themselves missing out on the next generation of relationships that shifted to smartphones thanks to the pandemic. After all, studies estimate that nearly one in four Americans are ‘unbanked,’ or without an existing relationship to an established financial services provider. For disruptors, on the other hand, the once-in-a-generation opportunity to take on mega-banks is still expanding, as app stores keep upending storefronts.

by Jon Marino, Director


(646) 808-3600


(949) 269-2535