Money20/20 US Highlights The Rise Of Embedded Finance And “Everything” As-A-Service

Money20/20 provides one of the year’s best pulse checks on the fintech ecosystem. It offers a view into the fintech “hive mind” while giving a glimpse of where the industry is headed. This year Money20/20 US was back in full force, and in practically every regard, it felt like a pre-pandemic event. Masks were off, parties were plentiful, and the conference halls were alive with activity. Below, are several key observations made during three days of meetings, sessions and hallway conversations.

Embedded finance and “everything” as a service takes over

Embedded finance was the unmistakable focal point of this year’s Money20/20. From payment processing and card issuance to banking and lending, fintech infrastructure and a one-to-many distribution model is clearly in vogue. While the conference began in 2012 with a primary focus on business-to-business and business-to-consumer fintech models, increasingly the emphasis is on B2B2B and B2B2C.

We met with not only numerous well-established players that have moved in this direction, including Stripe and Green Dot
GDOT
, but also a variety of newer entrants such as Maast, the new BaaS subsidiary of Synovus
SNV
Bank. An array of embedded finance providers were four- and five-star sponsors, including yen NV, Stripe, Marqeta Inc., YouLend and Deserve. Announcements pertaining to embedded finance flowed consistently throughout the event. On the opening night of the show, yen announced that its two newest embedded finance products — Capital and Accounts — are now available to platforms and marketplaces in the U.S. and Europe. The next day, Marqeta signaled its intension to become more of a full suite BaaS supplier with the announcement of new APIs that will allow its customers to offer various banking capabilities, such as demand deposit accounts that support direct deposits and early pay. Embedded finance announcements came from all directions, including cryptocurrency as a service (such as those from Metallicus and Bitstamp) and fraud prevention as a service (Signifyd’s Fearless Payments launch).

Fintech faces a reality check

At every Money20/20 up until recently, there was unfettered — and dare we say brazen — enthusiasm for the fintech sector. Free-flowing venture capital, low interest rates and a “growth above all else” mindset fueled an impression that nothing could throttle the sector. This year, the rose-tinted glasses have come off. Rising interest rates, inflation, conservative investors and widespread layoffs are all weighing heavily on the space.

These factors failed to put a damper on the show (or the large sponsored parties and happy hours), but similar to Money20/20 Europe in June, the tone was decidedly different than in years past. For example, while previous years would see fintech companies flashing headcount growth numbers in our meetings, many of the fintechs we met with had recently announced sizeable reductions in force. We heard more talk about returning to business fundamentals, focusing on sustainable growth, and operating with greater pragmaticism. It is clear that a reality check is setting in, and the mantra for the next few years will be doing more with less.

The rise of the orchestration layer

The new fintech buzzword is orchestration. Nearly every vendor we spoke with used this term to describe their business or a specific product they offer. We see it in payments with companies that help enterprises orchestrate PSPs (e.g., Spreedly, Primer) and those that orchestrate alternative payment methods (e.g., Kushki, PPRO). We see it in banking with BaaS platforms that orchestrate multiple fintech partner banks on the back end (e.g., Primer, Unit). We even see it in buy now, pay later with providers that can orchestrate multiple lenders (e.g., Sezzle Inc., Divido) and with digital identity specialists that orchestrate multiple identity elements (e.g., Socure, Callsign). At the end of the day, an orchestration layer is an elegant term for middleware. But as is always the case in financial services, there is value — and revenue — found in abstracting complexity and enhancing operational efficiencies.

Web3 becomes the shiny new object in payments and banking

Every three years or so, there is a new topic that captivates Money20/20. For the first several years of the conference (dating back to 2012), digital wallets were the shiny objects. Vendors were either talking about launching a wallet, supporting a wallet or creating a platform for developing wallets. For the next few years, it was IoT. Injecting payments functionality into every connected device was the hot topic, and connected cars, robots and smart home devices adorned booths across the show floor. It now appears that we are firmly in the metaverse and Web3 era of Money20/20. We counted more than a dozen sessions that mentioned the terms Web3 or metaverse in the title. The first day of the event featured a keynote by Meta’s Head of Commerce & Fintech, who talked about, among other things, the opportunity for banks to open branches in the metaverse.

mittedly, the cryptocurrency hype was less notable than at 2021’s show. Still, blockchain, digital asset and crypo infrastructure providers had large presences. We counted more than 30 of them as sponsors, and vendors such as Copper, NYDIG, Fireblocks, Paxos, Prime Trust and Ripple had particularly visible presences.

Most payment service providers (PSPs) we spoke with are taking a pragmatic approach to crypto for now. Few see a near-term opportunity to support cryptocurrency payments at checkout, largely due to low merchant demand. Stablecoin settlement, however, is top of mind. After announcing a stablecoin settlement partnership with Checkout.com at Money20/20 Europe in June, Fireblocks announced a similar deal with Worldpay
WP
from FIS
FIS
at the conference.

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