In 2020, I wrote “All Roads Lead to Rome,” where I explored the state of consumer fintech and predicted where things might go. Since then, it feels like everything has changed. We’ve seen regulatory shifts, new and fading players, macroeconomic changes, emergent platforms and technology arise, and ecosystems such as crypto ballooning and condensing, leaving behind valuable pockets like stablecoins. In this essay, I want to explore the state of building in today’s climate given all of these changes.
We’re in a unique time for builders, especially those in fintechs, but I believe there are a few key attributes of those that find themselves with momentum and effectiveness, and some key tools they’ll be using.
Scaling a financial services business—fintech or traditional—takes time. Revenue models based on interest, fees, or investment income need massive growth before they approach anything close to venture scale. Infrastructure has grown to support this, but between regulatory obstacles and the scale required for valuations of $10B+, today’s market sets a steep, but not impossible, climb.
But building a company and raising venture capital comes with an implicit deal:
Scale quickly to justify ongoing rounds, racing toward IPO or acquisition. That said, while doing things the right way, fintech scales best at a more deliberate pace. Building a big fintech company may mean being the tortoise with a robust compliance team, not the hare with a BaaS platform and a 10x engineer. The founders who master and get an edge on the “boring” parts will be the ones to push tech boundaries meaningfully, but is that aligned with how the technology and venture ecosystems operate?
Historically, differences in operating models between banks and software companies could point to a resounding no.
Banks rely on stable, predictable income streams from interest, fees, and deposits that grow steadily, emphasizing risk management. Software companies, however, thrive on high-margin, rapid scalability, and “moving quickly and breaking things”. But scaling in a regulated space means slower build times, higher upfront costs, and a need for strategic risk management. Banks have scaled across decades, growing generationally and sustainably by balancing these risk and growth vectors. This patience stands apart from fintech’s past decade’s blitz of raising capital, scaling fast, and repeating, often without a sustainable long-term plan.
Then there’s the regulatory elephant in the room. The BaaS industry has been rocked, the market adjusted, and regulators’ tone has been firm. And this isn’t due to new cracks suddenly appearing; the camel’s back was simply loaded too heavily. Building something sustainable means scaling at a healthy pace, moving as quickly as possible, but as slow as necessary—there’s no other way to bite into the broader market sustainably.
A former colleague of mine liked to say that companies and ideas are subject to a Darwinian test—any one of them that exists today has already battled and won. So, there’s something to learn from legacy financial institutions. Even though, red tape and communication costs can bog them down, their ability to survive through careful balance of scale and risk is an impressive feat in itself.
With hundreds of billions in recent investments and a wave of new companies, fintech might seem enormous at first glance—but it’s still early days, given how small it is relative to the $19 trillion financial services ecosystem. It begs the question—what’s fintech’s endgame? Disruption of legacy financial institutions? Taking over incumbents’ market share? Possibly. But all innovation stands on giants’ shoulders. You can’t tear down a skyscraper and build anew without respecting the foundation. There’s still vast potential—not just to penetrate the financial services ecosystem but to harness emerging tech to actually change it.
So, how do we build in fintech? The opportunity to leverage tech to create a quicker, more accessible, and efficient financial system is huge. But moving slowly enough to do things right is just the beginning.
Today, everyone has access to the same fintech infrastructure. So, distribution is key—if two chefs have the same ingredients, it’s how they cook them and get customers in the door that matters.
In the past, companies got away with low-margin, high-scale models, as VC money subsidized them. But now, margin expansion is essential for sustainable growth. Two important tools I see for this in the next cycle are:
Asymmetric Distribution Advantages
Fintech product attachment into existing products, leading to substantially lower costs while cross-selling, compared to net-new user acquisition
Acquiring nascent customer bases and scaling alongside them
Build Where Possible, Buy Where Necessary
Fintech is in a beautiful cycle with abundant infrastructure to leverage, but reliance on third-party middleware can add costs and risk. Building critical pieces, though slower, prevents system fragility and optimizes long-term margins.
In 2024, building in fintech may take more patience than grit, and precision may beat speed. But building something that lasts requires navigating the complexity of regulation, focusing on sustainable growth, and mastering distribution.
The opportunity to reshape financial services is massive—but only for those willing to play the long game and get the fundamentals right. Fintech isn’t a sprint; it’s a marathon, and only the disciplined will endure.
