The Premier Fintech Conference: Money 20/20 USA
Two weeks to recover from the most anticipated industry event of the year — Money 20/20 USA. The who’s who of financial services, banking, and fintech in Las Vegas for 4 days. The sheer volume of participants, size of the exhibition floor, number of panels & networking events — a solid leap from 2021.
Overall, the sentiment seemed a bit uneven as many felt the weight of the last 12 months when it comes to the economy and inflation, lackluster funding for startups, war in Ukraine, and job stability in tech. Last year, there was more of an optimistic outlook as the lingering effect from COVID slowly faded and business levels across multiple sectors (crypto, credit, cross-border payments) started to pick up.
Here’s a recap of key themes from 2022’s Money 20/20:
LACK OF CRYPTO DISCUSSIONS
Key players (from cryptocurrency exchanges, market makers, and vendors) were present at the event — such as Ripple, TaxBit. However, non-crypto companies (even those directly offering financial services) lacked buzz in discussing digital assets, higher yields, or even stablecoins offerings. For many, this ‘nice-to-have’ became cumbersome in terms of navigating the regulatory and economic environment in 2022. Celsius ran into liquidity issues months ago (with other firms likely facing similar trouble) and regulators are increasingly vocal about findings (such as BlockFi offering yields on non-stablecoins).
The other glaring component: cryptocurrency market valuation. Bitcoin (BTC) was near record-highs of $60K this time last year. The industry had taken notice and the majority of companies were exploring how users can purchase, exchange, and hold crypto — especially merchants and payment gateways. DeFi (Decentralized Finance) platforms competed against one another in maximizing yield on digital assets (offering above 10%), and clients swapped cash sitting in bank accounts for stablecoins (most commonly USDC). This level of interest was gone.
Even if BTC, ETH, and overall valuations somewhat recover in the next few months, lack of clear guidance from regulators in the US can still slow expansion of the sector in early 2023.
COMPLIANCE AND FRAUD MANAGEMENT IN THE SPOTLIGHT
In a year that regulators also stepped up guidance in monitoring banking partnerships, it makes sense that compliance is now a prominent topic across the industry. We discussed the Blue Ridge Bank event last month — poor oversight of 3rd party fintech partnerships led to strict enforcement protocols from the OCC (for the 4th Qtr).
From ID Verification, Know Your Customer (KYC), user onboarding, and fraud prevention, fintech firms and banks have multiple options. These compliance vendors were active — talking to banks, Banking-as-a-Service (BaaS) platforms, and fintechs. The majority of direct-to-bank partnerships lack embedded KYC or risk controls — companies must pick from an approved list of vendors. For BaaS platforms that do provide a compliance layer, fraud management is still a recommended area that needs to be added through a 3rd party.
Other areas within compliance and risk management that are experiencing a surge?
PCI compliance;
Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) policies and controls;
Fulfilling reporting and audit requirements to bank partners;
International document and address verification (for fintechs onboarding international individuals or businesses);
Top brands like Alloy, Onfido, Trulioo, Incode, Sumsub, and Unit21 all come to mind — but each has certain specializations and strengths in terms of features and program coverage.
EXPANSION OF PAYMENTS
The industry has grown beyond local, legacy payment rails towards instant, cross-border, and even crypto pathways.
Zelle has quickly grown in the US as a speedy way to transfer from account-to-account in the US. Real-Time Payments (RTP) and FedNow are expected to offer similar processing and secure transfers next year, as more banks adopt and integrate these new channels. ACH may no longer be the dominant payment rail in the US.
Cross-border payments that are faster and cheaper than SWIFT wire transfers continue to be in high-demand. Well-known providers like CurrencyCloud and TransferWise (now Wise) still provide these services, but emerging payment focused firms (like Nuvei) are also starting to stand out. As mid-size and enterprise fintechs start to branch out internationally, international payment processing will gain increased attention.
Crypto payouts and transfers (much like the overall market) have experienced volatile demand. Earlier in the year, companies were interested in holding cryptocurrency (especially stablecoins) as an alternative to fiat. Crypto is also seen as a way to make international transfers instant and low-cost (compared to SWIFT wires). With markets becoming unhinged and conservative when it comes to crypto, interest has dissipated. Expect this to turn around once valuations pick back up.
NEXT LEVEL BANKING-AS-A-SERVICE (BAAS)
BaaS is here to stay. The value proposition is still the same: a faster and lower cost path to launching banking services (compared to working directly with a bank, or applying for appropriate licenses). The majority of BaaS vendors and providers are able to provide a user account and payment access via API (application programming interface). This basic offering is quickly being commoditized and discounted (especially by new providers).
HOW and WHAT else is being provided is gaining more attention than ever. In networking discussions, the common question is: how is X vendor different than Y provider?
The response comes down to:
Program management: certain BaaS players only provide a ‘thin slice’ of what’s needed; multiple vendors must be added on top to make a complete solution;
Experience: not only in years, but also when it comes to existing platform customers and various use cases (consumer vs. business neobank, investments, prize-linked savings, crypto wallet, credit builder cards, US accounts for non-US users, etc.);
Product & feature availability: product roadmaps typically extend past deposit solutions — if a BaaS player has minimal features, other vendors must be added in the future OR a program migration to a new provider needs to take place;
Since the needs of companies interested in banking services changes often, it’s difficult to pinpoint a BaaS platform that’s a clear leader for early-stage startups, mid-size fintechs, and enterprises.
Differentiation was the clear theme at the event, and the industry is now better informed of where synergies exist (between use case, scale, and BaaS providers). Next level Banking-as-a-Service is all about delivering standard offerings in a more stable ecosystem and upselling new programs seamlessly (in line with user demand).
THE EXCITEMENT FOR 2023
Money 20/20 USA is the ‘Superbowl’ of Fintech conferences. With something for every community in financial services, it is indeed a highly, valuable event for professionals and companies of all sizes. In hyper-competitive sectors (payments, compliance, BaaS, data aggregation), attendance is a must and having a booth is heavily encouraged. As the event continues to grow, it’s no longer a 3-day conference (Mon - Wed) but 4 days (Sun - Wed).
Looking ahead to next October, emerging themes of risk managements, credit programs, and international expansion should take center stage. The wild card will be the potential resurgence of the crypto sector, based on the market performance and regulatory moves. No matter what, the plan is to be there again with 15K+ in attendance.
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