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Get Think Tanked Distilled with Julie Chariell

Posted by Michael Venuto on Feb 8, 2022 10:15:00 AM
Michael Venuto
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The tech sector continues to control the market narrative, both on the way up and on the way down. It’s in an especially interesting spot today given some of the volatility we have seen heading into a Fed tightening cycle. Julie Chariell, the senior fintech analyst at Bloomberg Intelligence, stopped by the ETF Think Tank to offer her thoughts on some of the sector’s biggest players and some of the trends she sees playing out in the near future.

The theme of digital payments and consumer financial solutions came up frequently in the conversation. The “buy now, pay later” option on many platforms may be a developing trend, but Chariell says it’s here to stay. She notes that installment payments are already commonplace in Latin American countries, even though it’s a newer thing in the United States. Over the next 12-24 months, most merchants are going to need it to offer it as a payment option. The banks and credit cards will soon offer it regularly and it will just become another payment option along with cash, check and card. Many financial institutions will use it as a bridge between debit and credit.

In terms of innovation, the growth of the “super app”, which adds more functionality, product, and service offerings to an existing app, will continue to emerge. Companies won’t use it necessarily to attract new customers, but to increase engagement and stickiness, which would, in turn, drive greater monetization. As an example, companies will begin rolling investing options into their existing financial apps. PayPal is offering payroll direct deposit into their accounts, so it can potentially be disruptive to those looking to avoid banking altogether. The migration of more products & services into fewer destinations is both interesting and a little scary.

Another big opportunity in fintech, Chariell says, is simply getting businesses set up on an electronics payment platform. Many contractors, for example, still like to work with cash and roughly half of payments are still done via check, so the opportunity to move businesses away from paper and towards digital automation adds efficiency. The remote work trend could force some of this change along since offices and their staffs are becoming more disconnected physically. This is an especially big opportunity for the likes of Visa and Mastercard.

How do companies, such as Robinhood and Coinbase fit into this? Both started out targeting mostly retail traders by offering stocks, options and crypto all in one place. Both are competing more towards acquiring more affluent and experienced traders, but Coinbase has been having more success on this front. Around ⅔ of Coinbase’s trading volume is now institutional, not retail. There’s the expectation that banks will eventually arrive, but will they be too antiquated and are they going to go after market share?

Other key takeaways:

  • Mastercard is a little ahead of Visa in terms of its technology mindset but expect both to begin making strides in blockchain and crypto. They’re just beginning to allow individuals to use their cards to buy crypto and it’ll next be about accepting crypto payments. Visa has already partnered with Coinbase.
  • Micro-lenders, which may offer something like a mini-10-day loan as a way to build up credit, is pushing companies past the boundaries of simple, targeted businesses. Products are getting more creative, and banks are slowly beginning to catch up. Many are considering giving up fees to become bigger players. The big banks could replicate these products relatively quickly, but do they want to since they tend to cater to higher net worth individuals.
  • Some companies, such as PayPal, have struggled because they overestimated user growth and the degree to which consumers would make the switch to digital and online sales permanent. They thought pandemic-era growth in online shopping would continue post-pandemic, but many are showing that they want to go back to stores.
  • The acceptance and use of products like ApplePay and GooglePay haven’t caught on as much as expected. It was initially gaining traction on the peer-to-peer side, but that has since slowed. Even the companies themselves are beginning to focus less on these. GooglePay was ahead of ApplePay in terms of services offered, but they’ve abandoned some recent growth efforts. Apple could try to grow the Apple Card instead.

 

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