David here.

After months of rumors, Google finally announced that they’ll be partnering with banks to offer consumers bank accounts in 2021.

Google will provide the front-end UX, deliver top-notch consumer experience, and provide data to the banks they’re partnered with. The accounts will be offered via Google Pay, which is their existing platform for tap-to-pay purchases.

When a goliath like Google makes a bold move like this one, it begs the question: what’s the underlying paradigm shift to watch? And how should companies and investors play it?

To better understand the future of Fintech, we must first understand exactly where this industry came from.

A Brief History of Fintech

It all started in 1866, when the first Transatlantic cable was established connecting London and New York City. The ability to send telegraphs across the pond provided the necessary infrastructure for the intense half-century of financial globalization that followed.

Fast forward to 1918, when the Fedwire was created to connect all 12 federal banks. This allowed for the first electronic transfers of funds (via telegraph).

The credit card was born in the 1950s with the Diners Club Credit Card. The first ATM appeared in 1967. The electronic Stock Exchange came about in the 70s; then came data services for banking; then e-commerce, PayPal, and so on.

Fintech Today

Today, the pioneers of Fintech are startups like Robinhood (brokerage), Better.com (mortgage), Kabbage (lending), and Venmo (payments).

Financial institutions have invested more than $27 billion in digital innovation and fintech since 2015, a recent KPMG report indicates.

But now, Big Tech is moving in. They’ve been preparing for this for years already. In fact, Facebook, Apple, Amazon, and Google have all played roles in more than 10 huge Fintech acquisitions so far. They’ve also taken on projects like:

  • Facebook‘s recent launch of a new product group to promote “payments and commerce opportunities,” headed up by David Marcus, the co-creator of Facebook’s failed cryptocurrency Libra
  • Apple launching Apple Pay and the Apple Card
  • Amazon‘s Web Services division supporting fintech services in India; plus offering the Amazon Pay credit card with ICICI Bank
  • Google‘s launch of Google Pay, and now, Google Bank Accounts

The Future of Fintech

The Big Four (Facebook, Apple, Amazon, and Google) are all in a major competition: to become the biggest Fintech firm in the world. The winner will lead the pack for at least the next few years, if not decades.

You can expect any frontrunning tech company to funnel time and money into acquiring the hottest financial startups. The end goal, of course, is to become a consumer’s one-stop shop for everything they need in life.

And while right now we see companies like Robinhood entering late-stage funding or filing to go public, I expect the Big Four to overtake them for the top spots on the Fintech list within the next decade.

Still, some setbacks do exist, including legal issues that can make it difficult for tech companies to expand into this highly regulated space. To quote a recent BIS press release:

“Big tech’s entry into finance introduces additional elements into the risk-benefit equation. Some are old issues of financial stability and consumer protection in new settings, but a new element is big tech’s access to data from their existing platforms. This could spark rapid change in the financial system through the emergence of dominant players that could ultimately reduce competition.”

The jury is out as to who will win the high-stakes Fintech market. Will it be the FAANG’s? Will it be the large investment banks (Goldman Sachs, JP Morgan, etc.)? Or will it be new startups we haven’t even heard of yet?

My money is on new startups, where companies like Better.com, Carta, Robinhood, Plaid, and others will continue to drive new product and financial innovation.

Over at the Angels & Entrepreneurs Network, we’ve been laser-focused on Fintech startups for the past few months. We’re currently featuring companies like…

  • A software platform that connects private lenders with investors
  • An online loan marketplace that helps everyday people find better rates
  • A profit-sharing token that allows investors to share in a leading company’s success
And those are just a few. You can check them all out on your Deal Flow Tracker, and if you’re not yet a member, just click here to learn more.

I’ll be back soon.

Very best,

David Weisburd

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