00:00 Speaker A
I saw a stat recently indicating that young people inheriting wealth almost the, the overwhelming majority expect to move out of the traditional bank and move their family wealth into a fintech firm. What does that signal to you about the appetite specifically amongst younger people for where they want to put their money?
00:18 Nigel Morris
The you, you mentioned Capital One and I must say that you know um, it’s been 30 years since Rich Fairbank and I took Capital One public. And what a journey that has been. And for Capital One, which I think was the first real fintech.
00:44 Speaker A
Right.
00:45 Nigel Morris
And now, yeah, indeed, I mean culturally, philosophically, it came out of nowhere. And we built this juggernaut. Now Capital One with the acquisition of Discover that just got a green light is now the biggest credit card company on the planet. It’s a very, it’s very special to have been part of that with my, my friend Rich Fairbank. Um so what I think what we see is a generation now of consumers who are digitally native, who don’t feel the loyalty that may have existed to the incumbent brands. Certainly not the incumbent bank distribution channel, which is branches. And I candidly, I think so many banks confuse inertia with loyalty.
01:45 Speaker A
Explain that.
01:47 Nigel Morris
In that it’s it’s not easy to move your your checking account, your current account from bank A to bank B to bank C. In a world where we are going to see these AI agents and in a world where open banking gets more traction in the US, it’s going to be easier and easier for people to be able to shop across financial service providers. Now I philosophically believe that unless there’s a good reason in consumers will fragment or modularize their banking and financial service relationships. They’ll have a brokerage account, they’ll have a checking account, they’ll have a CD here, have a credit card here, they’ll have a mortgage here, rather than bundling it together. And I think that we’re going to see the fintechs cherry picking best customers and best product away from the incumbents.
03:01 Speaker A
Right, you may have your high yield savings account where you can get the best yield, but then keep your checking elsewhere and kind of shop around for those services.
03:11 Nigel Morris
Particularly if the product is largely a commodity and has not been tailored to you. Right? I mean, I think the incumbent population isn’t the banks and insurance companies are not really good at figuring out what unique product will sing and work for a unique individual or small business.
03:47 Speaker A
What do you think is the best product for a Fintech to offer right now?
04:00 Nigel Morris
Well, I think that you’d want to go to where you think the economic rents are really good, where the unit economics are terrific, where consumers are willing to buy the product online and to do it digitally. For instance, annuities and mortgages are much harder, because they’re much more complicated and require you know, have much bigger stakes for the for the for the individual. So look, I am I grew up in an in and around lending. Many of Q, we’ve made 200 investments, invest in nearly 30 unicorns over the last 20 years as Fintech specialists. I constantly zero back into lending, and into consumer lending. And I’ll give you one stat that just because I was in Mumbai just a couple of weeks ago. There are 80,000 Indians, 80 million Indians now that make more than $10,000 a year. And on a PPP basis purchasing power parity basis, it’s three and a half times that. 3% credit card penetration in India.
05:38 Speaker A
Wow. So there’s an opportunity.
05:40 Nigel Morris
So, I think consumer lending if done well, is fabulous. Capital One built a juggernaut on that, and I think that’s a place that I often go to.
05:54 Speaker A
I want to end with something you mentioned at the beginning, buy now pay later, which is something that obviously Fintechs have the capabilities to do, but I have heard some people say that the existence of BNPL is part of what makes them skeptical about switching to a Fintech. They like the idea of the more traditional banking model that doesn’t play with anything that may be perceived as risky through BNPL. What do you make of that?
06:21 Nigel Morris
Buy now pay later is in itself is not a massive innovation. What it is, is pay for a product digitally online that you were going to go to buy over two or three installments. That’s what it is. Now what we what we’ve found is that there a massive ascension of Klarna, which is a QED investment, we see um, here in the in the US, Affirm, and we don’t see the banks really playing in the space. It meets the need of of short.
07:03 Speaker A
Is that not because the banks think that they shouldn’t be playing in that space? It’s too risky?
07:08 Nigel Morris
It’s a really good question. I think that it depends on which bank you talk to. Some banks would say, this is not something we want to do. It feels kind of tawdry, and it’s focusing on a population that we don’t really look. If you have a FICO score under 650, and by the way, Credit Karma was a QED portfolio company and they now have 120 million customers, and they democratized access to credit bureau data, if you have a FICO score under 650, you’re not very interesting to the Main Street Bank. We don’t really want to lend money to you, and it’s 40% of America. We don’t want to lend money to you. Probably don’t have a lot of money, so your deposits aren’t worth very much. And the chances of you wanting access to a mortgage anytime soon is low. So there’s a question mark about whether or not the incumbents really missed buy now pay later, and now you have Klarna and Affirm who’ve got incredible moats, or whether or not they steered away from it. Probably a bit of both and depends on the bank. But I think it speaks to something much deeper, and that is culturally, banks are designed to defend themselves, to stay around, to make sure they don’t make mistakes. And Fintechs are the innovation platforms. It’s no surprise that earned wage access, buy now pay later, money movement across border, Etoro and Circle in money management, these are this is where the innovation is occurring. And I think banks have to say, look, we’ve got these marvelous experiments going on in real time. How do we partner? How do we buy? How do we learn from this incredibly innovative ecosystem that exists around us?
发表回复