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CREDIT + CRYPTOCURRENCY TAKE CENTER STAGE AT MONEY 20/20

Credit + Cryptocurrency Take Center Stage at Money 20/20

Recap

November 11, 2021

Three big themes emerged from our Galileo client conversations, prospect meetups and the Money 20/20 sessions: credit, crypto and collaboration.
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Money 20/20 USA delivered the largest in-person gathering of fintech innovators since the pandemic began—approximately 8,000 people flocked to Vegas to celebrate a dynamic industry, explore new trends and reconnect with colleagues and business associates.

Three big themes emerged from our Galileo client conversations, prospect meetups and the Money 20/20 sessions: credit, crypto and collaboration.

As digital banking has gained momentum in the market—44% of U.S. consumers use a digital-only bank as a primary or secondary provider—fintechs are looking to expand the services they provide to consumers (or businesses) to increase customer value, loyalty and revenue. For many fintechs, that means expanding into credit.

Rethinking credit

“We are seeing a lot of interest in credit right now, especially alternative ways to increase access to credit for low- to moderate-income consumers,” said Nikkee Rhody, EVP of strategy at Central Payments and managing director of the Falls Fintech accelerator program.

Through Falls Fintech, which Galileo sponsors, Rhody works directly to select and nurture 10 early stage fintechs a year, companies that are finding creative ways to solve familiar problems. That includes opening up the financial services ecosystem to more and more people and improving their overall financial health in the process. She said there’s a lot of focus on reaching underserved demographics in urban areas as well as graduates just leaving school who are looking to start their financial lives but don’t always know where to start.

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For many of the established neobanks and challenger banks in the market, credit is the next step in building out their suite of products and services for their customers. Depending on their target demographic, beginning with a secured credit product is often the best option. Others like TomoCredit and Tala, already are using alternative data sources to underwrite customers who otherwise would be shut out of credit and lending products.

“We’re thinking about credit as a continuum,” said Galileo’s Chief Product Officer Archie Puri. “There is a need to support consumers at every stage of their journey. Therefore, we’re building our product roadmap to support clients that aspire to offer products across the spectrum—from secured to buy-now-pay-later to eventually offering unsecured credit and lending. There’s so much momentum in the market right now to service all your customers’ needs, and Galileo is committed to making that happen.”

Crypto has its moment

The next major theme at the conference was all things crypto. In a session on the rise of digital payments, Marie-Claude Nadeau, who co-leads McKinsey’s North American payments practice, noted that 20% of consumers hold digital assets in 2021, compared with about 6% in both 2019 and 2020.

“We think that’s driven by accessibility, and obviously a lot of publicity around it. But it’s huge. One in 5 consumers are involved in this market,” Nadeau said, according to a BizTech Magazine report.

Mastercard also announced a major crypto partnership with Baakt, which the companies said will make it easier for merchants, banks and fintechs in the U.S. to offer a broad set of cryptocurrency solutions and services, including the ability for consumers to buy, sell and hold digital assets through custodial wallets.

Meanwhile, crypto and the blockchain infrastructure that underpins it continues to come up in conversations around financial inclusion.

“We see DeFi as an ecosystem that will increase financial access and enable those overlooked by traditional banking services to be able to participate,” Tala’s SVP of Global Business Anay Shah told Galileo. “We’ve already started to see this happen, but there are still many opportunities for the ecosystem and services available on the blockchain to be more accessible and user-friendly to a wider population.”

For Tala, which plans to use funds from their recent $145 million series E funding to fuel the effort, Shah said the blockchain will help the company accelerate its product roadmap and offer more financial services at a lower cost and greater convenience than the traditional financial services infrastructure allows.

“The promise of DeFi, blockchain and crypto to transform the lives of the emerging middle class is yet to be unlocked and Tala aims to be on the precipice of that,” Shah said.

No fintech is an island: Collaboration required

Looking to the future and the blistering pace of change in the market and the more than $91 billion in capital that’s flowed into fintech so far in 2021, Galileo CEO Derek White hosted a packed session to talk about keys to fintech survival.

The human capital is just as important as and arguably more important than the financial capital that can be raised. The team and how they’re going to translate their vision into a product and technology are absolutely critical to success.
Derek White,
Galileo CEO

Keri Gohman, operating partner at Bain Capital Ventures, agreed. “Great teams and great businesses will always get funding because your environment is going to change. We think about what happened during COVID; the best businesses figured out how to pivot, how to adjust, how to change. And that's always going to be true,” she said.

For Laura Spiekerman, co-founder and COO of Alloy (a newly minted unicorn), success comes down to a great idea, a great team, a bit of luck and focusing on what you can control.

"I can remember those early years when investors weren't as enthusiastic about fintech as they are now,” she said. “But we set up the company to survive by making sure we didn't run out of money and making sure that the few customers we did have loved our product and were ready to act as references for the next few."

The speakers agreed that fintechs and traditional financial services providers alike will be stronger working together.

"In previous roles as an executive in banking and at the beginning of the cloud evolution—emerging fintechs told us they were going to ‘eat our lunch,’ and we tried to build our own tech. In the end, neither really worked very well. We needed their help to build beautiful digital experiences, and they needed ours to reach critical scale and customers efficiently,” she recalled. “It took a bit of the market showing us that we needed to work together.”

The principle still applies today.

“The essence of any strategy is to understand what you’re good at and what you’re not good at,” added White. “Understand what your magic is, then find great partners to complement what you do best.”

For Galileo, that means helping traditional and nontraditional players take advantage of innovations “below the glass”—its modern platform and robust APIs—so they can deliver the financial experiences of the future “above the glass.”

“There are more than 150 neobanks, creators, builders and disruptors that are building new businesses off of our platform,” White continued. “We connect those creators and entrepreneurs to the financial services ecosystem so they can create the future of financial services.”

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