Hi fintech friends,

Five years ago, I wrote a guest piece for TechCrunch arguing that fintech’s next decade will look radically different.

Halfway into the next decade, let's see how those predictions are holding up – and make some new ones.

But before I get into them – I'd like to hear your predictions for the year. Come join online community TWIF Premium members and give us your wildest take for the next decade:

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This Week in FintechSabrina Baxter

Here's what I wrote in 2019:

Early signs are beginning to emerge from overlooked areas which suggest that financial services in the next decade will:

Be portable and interoperable: Like mobile phones, customers will be able to easily transition between ‘carriers’.

Become more ubiquitous and accessible: Basic financial products will become a commodity and bring unbanked participants ‘online’.

Move to the background: The users of financial tools won’t have to develop 1:1 relationships with the providers of those tools.

Centralize into a few places and steer on ‘autopilot’.

Prediction #1: Portable and interoperable

Grade: A / A+

This was a fairly easy prediction to make, but the basic premise was that open banking would become more ubiquitous in the US. Rules like PSD2 and GDPR in Europe would catch on in the US as well, and consumers would be able to leverage their financial data to access better products – even from other providers. A couple years later, we got the CCPA in California and CFPB rulemaking on financial data rights (Dodd Frank 1033).

So does that mean the open banking story is done? I don't think so – we're now entering the "Open Market" phase discussed by Commerce Ventures, where every product should get better, but every customer should get less sticky.

Prediction #2: The open protocol layer

Grade: B+

The original prediction I made in 2019 was that, "Basic financial services will become simple open-source protocols, lowering the barrier for any company to offer financial products to its customers," which is as close as you can get to saying 'crypto' without saying 'crypto.'

It is true, the fintech infrastructure map has grown significantly since 2019. It's not a stretch to say that more companies today are focused on enabling back-end financial services use cases than are actually in the business of offering financial services to end users. Just look at this Fintech Infrastructure Map:

And yet, it's not like fintech has become a basic built-in component of most online platforms, where your financial data, payment authorization, bank balance, and other info is easily portable across multiple services.

And I think that's unlikely to shift until web3 tools get much wider adoption (if they ever do).

Prediction #3: Embedded fintech

Grade: B+

My third prediction was that financial services, rather than being offered as a standalone product, would become part of the native user interface of other products. I wouldn't say that this has happened for so many products that it's an obvious trend; other than a checkout flow, most consumer products don't interact with your financials.

However, more and more platforms have found financial services to be a bigger component of their product offering. Toast's finserv revenue eclipsed software sales in 2022:

And TikTok has become a monster in e-commerce by introducing in-app shopping and its own wallet and hosted checkout last year, earning $205 million more than Facebook, Twitter, Snap and Instagram combined in 2023.

Even trade management software ServiceTitan, which went public last month, looks a bit like an embedded fintech company when you look under the hood, "the company generated $685 million in revenue, of which $156 million (23%) came from "usage revenue", primarily consisting of payment and lending fees."

Prediction #4: Bringing it all together

Grade: C-

My worst prediction was that a central 'hub' would develop for people to easily manage everything in one place – mortgage, payments, wallet, savings account, investments, loans, drivers' license, etc. To be fair, there are maybe 1,000+ companies competing to offer this. Everyone from Apple Cash to Chime to Revolut to SoFi wants to become the single user financial hub. But if everyone is doing it, no one is really doing it, and I have yet to see the "Final card" dream accomplished for fintech.

For me, the biggest surprise in this category was that a couple companies came along and built a better Mint.com. When Intuit purchased Credit Karma and sunset Mint in 2023, apps like Monarch Money*, Origin, and Copilot quickly rose to the occasion and actually built more intuitive, better-synced PFM experiences with higher usability. But these apps still have a long way to go before any one of them claims the title of "central user financial hub."

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Fintech's Next Half-Decade

We've been through a roller-coaster five years for fintech. Companies raised record levels of funding in 2021, which led to many high-profile shut-downs and collapses from 2022 through 2024, including companies like Bolt (once valued at $11 billion), BlockFi ($3 billion), Fast (which tried to raise at a $1 billion valuation), Synapse, FTX, etc.

Emerging from two slow years of growth and rebuilding, the consensus at Money2020 USA this year was that fintech is back. Put differently, reports of fintech's death have been greatly exaggerated:

vs.

But it is way, way too soon for victory cigars. There are many landmines to avoid. The market is full of richly-valued fintechs that haven't raised money since 2021, and it is unclear whether they'll be able to raise again or exit on the same terms. Some of these companies sit on large warchests, but haven't been able to reduce their burn rates. Others reduced burn only to find they don't have product-market fit. And others appear to be long-running scams that are running out of steam.

So, adjusting predictions halfway into the decade: What will the next five years hold?

1. More zombie deaths

There are many fintech zombies still out there. These companies can look very different from each other: some are unprofitable burning through cash. Others are actually profitable but their products aren't attractive enough to continue growing, and so the likelihood of an exit is low. Others are continuing to fight to pivot and find product-market fit. And yet others have great PMF, but are building in spaces with 5+ competitors all eating away each others' margin.

I know we've just been through two years of high-profile fintech deaths, but strap yourself in because there will certainly be a few more. As push comes to shove and companies that raised at 2020 premiums look to exit, there will be a few who don't clear their pref stack – and some that don't manage to exit at all.

But it's not all doom and gloom, because the zombies will be overshadowed by an:

2. Exit bonanza!

Consumer optimism is up. Markets rallied immensely in 2024. Interest rates are slowly coming down (IMO: not slowly enough). And there looks to be a changing of the guard at the notoriously anti-tech merger FTC.

The IPO market fell off a cliff, but it is slowly reopening:

And in 2025, the market expects that trickle to become a deluge. Klarna has filed for IPO, Chime filed for an IPO, Webull filed for IPO, Circle is prepping for an IPO, Klar is prepping for an IPO... I wouldn't be surprised to see one of Stripe, Revolut, or Monzo announce a 2025 IPO.

All this rides on whether the "IPO window" is considered to be open, ie: are public markets interested in marking up tech companies that were richly-valued by private markets? If last month's ServiceTitan public offering is any indicator, it will once again be safe for late-stage tech companies to exit in 2025.

Part of this is a downstream impact of market enthusiasm, but another part of it is a feature of...

3. Deregulation

This is more US-centric, but: with a new presidential administration come new policy preferences, and if there is one word to describe the incoming adminsitration, it is mercantilist – "an economic policy that aims to increase a country's wealth." This doesn't just refer to boosting exports, but to a general inclination towards doing business (many incoming policy advisors come from tech and venture).

Which means that regulators are very likely to get de-fanged for the next four years. The merger-averse FTC, the crypto enforcement action-happy SEC, the CFPB, even possibly the FDIC (?) are in the crosshairs of the new administration.

Now, part of this is the natural ebb and flow of regulatory and market cycles. Corporate success and tech innovations create enthusiasm, which sparks market euphoria, which leads to asset bubbles, which lead to looser risk restrictions, which allow scams to proliferate, which eventually collapse and the cycle begins anew. When it comes to tech – fintech in particular – we are now exiting a period of (relatively) tight regulatory oversight. It is likely that the baby was thrown out with the bathwater a few times over the past few years, so regulatory loosening could be a big net-positive for fintech.

This means: more innovation, more competition, more new products, and a better environment for fintechs to fundraise and exit. (And, yes, it probably also means that more companies which flout regulations will go unnoticed or unpunished.)

4. Neobanks become two-trick ponies

We are in the middle of a remarkable about-face in neobanking. For a long time, neobanks were the dogs of fintech. Affinity group-focused neobanks failed to find PMF and shut down (it turns out people care more about bank features than a bank's 'identity.') Mass-consumer neobanks were extremely capital-intensive, difficult to scale, and spent more money than they made on the marginal user.

Founders learned these lessons and adjusted.

Nubank is a public company worth more than Itau, Brazil's largest bank. Revolut, Chime, and Monzo are now three of the most highly-valued private companies in the world. KakaoBank in South Korea is close to being a decacorn. Competitors like Starling, Even, Atom, and Zopa have all hit profitability. Mercury passed 200,000 customers. TBC, run by the ex-Tinkoff team, is rapidly scaling across Central Asia. And a constellation of other neobanks are scaling quickly in different countries.

What changed?

Interest rates went up, banks started earning more on deposits, and they were able to reinvest into geographic expansion and new products.

But some neobanks are sitting too comfortably on their interest margin – which savvy investors discount down to zero. For newer neobanks to succeed, and not go the way of the affinity neobank graveyard, they need to become multi-product, and quickly. They need to be able to support payments, credit, investing, and other user financial needs, or they risk negative ARPU and high user churn.

Because when interest rates come down, it will wipe out the revenues of neobanks that didn't go multi-product. It's not enough to be a NIM engine; neobanks have to be two-trick ponies.

5. Stablecoins

I am sure that anyone who reads TWIF is sick of me writing about stablecoins at this point, so I want to tell a short story, about one of our portfolio companies LB Finanzas* in Argentina:

LB originally built a crypto exchange (the largest in Argentina at the time) and realized that most of their users were buying and holding USDC, without trading it, using their crypto wallets as a substitute savings account. So LB stopped focusing on the exchange and started building stablecoin-denominated banking, which gave their users a safe haven from the volatility of the Argentine peso. Today, the company offers personal and business accounts, wallets, payments, a crypto-backed, card, and US dollar accounts.

The stablecoin story is more intuitive in emerging markets and outside of the US because it's such an obvious substitute for a fragmented or anemic financial services ecosystem.

Currency stability, lower transaction costs, higher transaction settlement speeds, programmable payment logic, cross-border settlement... There are many advantages that stablecoin payments have (today) which are difficult to build on top of conventional financial rails without a lot of workarounds.

Now:

Some of these benefits are due to stablecoins existing in a regulatory grey area.

And yes, some of the volume in stables is driven by looser KYC / AML.

And yes, if you layer in features like fraud protection, auth, disputes management, returns, etc. that cards have, the 1:1 costs of fiat and stable transactions may approximate each other more closely.

But stablecoin usage is still growing rapidly across many use cases.

A research survey of 2500 crypto users in emerging markets indicates that stablecoins are being used for several non-crypto use cases:

And while we don't know how much stablecoin usage corresponds to each use case, we know that they are quickly finding product-market fit for a varity of different applications.

And yet, many product questions remain, and challenges still exist.

I predict that the next five years will see a wave of experimentation and innovation in the use of stablecoins, will see a stablecoin company IPO, will see at least one company reach $100B in annualized stablecoin payment volume, and will probably see some kind of rulemaking or regulatory regime developed for the use of stable currencies.

Only time will tell – until we find out, let's keep building together!

Software pricing models are moving from seats to usage with the proliferation of AI – don't get left behind. Metronome is a usage-based billing platform built to help companies launch and iterate pricing faster, give customers better control over spending, and drive strategic decisions with real-time insights. Learn about OpenAI's pricing playbook, or watch our on-demand webinar to see our product action.