Monica Desai Weiss is an investor at Silicon Valley venture capital firm Kleiner Perkins, where she focuses on fintech and blockchain. Previously, she led operations and strategy at digital wallet startup Blockchain and was a bond trader at JPMorgan. Forbes spoke with her about the past year in fintech and her top predictions for 2020. The conversation has been edited for brevity and clarity.
Forbes: For fintech in 2019, what events or milestones stand out as the most important?
Desai Weiss: There were a few big themes. Financial services incumbents took notice of fintech startups, and some parts of the fintech industry matured. There were several mergers and acquisitions around payment processors [like Fiserv acquiring First Data]—these companies are coming to terms with Stripe and Square’s success in payments. There was also a great reckoning around trading fees. Schwab, TD Ameritrade and Etrade all dropped their trading fees to $0, matching Robinhood and Square. This all counters the notion some held that fintech has a ceiling.
Second, everyone is becoming a bank. Big tech made its presence known, with every tech company trying to be a bank and every bank trying to get into tech. Apple, Google and Facebook all entered financial services, or at least announced their entry. Fintech startups Acorns, Betterment and Dave launched checking accounts. Uber and Lyft are adding banking features. There’s huge saturation in banking services.
Third, blockchain made inroads within large enterprises. Fidelity launched a crypto custody service. For Facebook’s new digital currency libra, many big companies came to the table, regardless of where they ended the year. JPMorgan created a digital coin [to speed up payments]. Bison Trails, a startup we recently invested in, is helping companies build blockchains. Think about what Amazon Web Services did for cloud computing years ago. Bison Trails is trying to do that for blockchain, so that any app developer or enterprise that wants to create access to a blockchain can do this easily without needing to hire a blockchain team.
Forbes: Regarding the adoption of blockchain technology over the past couple of years, how has that played out compared with your expectations?
Desai Weiss: You always think these things are going to happen faster than they do. I thought things were going to move more quickly. But I’ve realized that they have to move slow and then fast. You need a certain level of regulatory clarity. There needs to be technological stability on the underlying blockchain. We’re starting to see that come into place. On regulation, there’s still a lot more to be done, but with projects like libra, sovereign digital coins [like China’s] and other things, it’s going to push the conversation forward such that we’ll get more clarity in the next year or two.
Forbes: How would you summarize what happened with blockchain technology in 2019, and what will 2020 be like?
Desai Weiss: 2019 has been a year of building and consolidation. Funding has been harder in the industry, so you’ve seen a bunch of companies like Coinbase starting to make acquisitions. That’s probably a good thing—if there’s still a lot of investment needed before we get to mass adoption, it’s probably better to be with a well-capitalized player. I think that trend will continue.
My theory is that in the background there has been a lot of building. People are starting to embrace the need for a better user experience for end users. People are starting to build apps that are easier to understand.
Forbes: What predictions do you have for fintech in 2020?
Desai Weiss: First, there has been this great unbundling around everyone offering a bunch of different product lines, and around narrow wedges like payday loans and payment financing. I think we’re reaching a point where it will become overwhelming for people. Consumers can’t keep up with 10 different applications to manage their money. I think there will be re-bundling. It could be like a “super app,” akin to what you see with Grab or Alipay in Asia, [where the app handles payments and many other functions, like serving as a digital wallet and hailing a taxi]. It could be the return of personal finance management apps. Or it could happen through automation. Some apps can remove some of the headache of financial services, like Tally, which consolidates credit card debt, or Pillar, which focuses on student loans.
Second, in an election year, the student debt crisis will move front and center. There’s still a ton of confusion around the best path forward for people who have debt. What is the best way to repay? What if you have multiple loans outstanding? Are you eligible for refinancing?
We invested in Pillar based on the thesis that student loans are becoming an epidemic of this generation. Hopefully we’ll see some evolution in government rules and regulations and in alternatives like income-sharing agreements (ISAs). With ISAs, you don’t pay upfront—after you graduate and get a job, you pay a set percentage of your income toward the loan. Student loan debt is becoming a bigger issue across voting constituencies, and it will become a bigger part of the conversation. We’ve already seen more startups popping up since investing in Pillar.
Third, fintech is becoming saturated. Acquiring customers is getting more expensive, and mindshare is getting harder to come by. We’ll see brands that already have mindshare in other ways move into fintech. People you go to for other products and services will use fintech to make their product or service easier. Some people call this embedded finance. You’re seeing that with Uber and SmileDirectClub doing it for their teeth aligners. The natural way to do this is with features like flexible payments and insurance. Over time, I think it will go broader than that and will come from brands that you love. Brands like Glossier, Fortnite or Nike that have real loyalty with consumers will start to become bigger players because they have this natural entry point. A challenger bank or a new fintech must build that from scratch in an incredibly difficult world of customer acquisition.
If more brands start adding fintech as a feature, all these companies will need infrastructure. I expect more investing dollars will go toward these companies that will help them manage compliance, fraud and other building blocks.
Forbes: What other predictions do you have?
Desai Weiss: I think companies will continue to move away from FICO and traditional credit scoring for lending to consumers. More and more data sources come online every day, and FICO scoring has become slightly outdated. Today there’s more real-time, rich data available on consumers that is probably more correlated with your likelihood to repay but that you couldn’t access before. With that you can underwrite better and thus create new companies, but also increase who can access these products, because you can start to underwrite people earlier in their lifecycle of being spenders or of being in the country.
Lastly, one area we’re spending time on is tools for baby boomers. Ten thousand people will hit retirement age every day for the next decade. It’s a very overlooked population, but they are tech savvy. They are young in many ways, and they’re going to need many more tools around retirement, estate planning and family planning. As more of the “HENRY” [high earning, not rich yet] Millennial population gets saturated, entrepreneurs will start to see this as a huge opportunity and move there.