Roy Luo says AI will not crush incumbents like Canva, whose distribution and customer advocacy position it to win as barriers to entry fall.
Luo's biggest five-year bet is identity and anti-fraud, which he expects AI to transform.
ICONIQ Growth invests from Series A/B through IPO and looks for about $1m ARR as a soft proxy for product-market fit.
Fintech's next five years run through identity and anti-fraud
Financial products barely change. Deposits and credit are the same instruments they were decades ago, and what AI changes is how they are delivered and recommended. ICONIQ Growth invests across that lifecycle, from Series A to the public market, and the companies Luo expects to endure are incumbents with distribution and customer advocacy rather than the newest point solutions. His newest money is going to identity and anti-fraud.
Takeaways
AI widens fintech's surface rather than replacing incumbents. Luo argues incumbents with distribution and customer advocacy, Canva among them, are well placed to win as lower barriers bring more point solutions. Lobo counters that data network effects on high-velocity workflows are the real moat.
ICONIQ invests from Series A through IPO. The firm backs companies from Series A and B to pre-IPO and IPO rounds and buys in the open market. It treats roughly $1m of ARR as a soft proxy for product-market fit, though it has done pre-revenue deals.
Only the delivery of financial products has changed. The instruments themselves, from deposits to credit, are the same as they were decades ago, and what AI changes is how they are delivered and recommended. Embedded finance remains real, but payment and card issuing in a box never found the traction its backers expected.
Underwriting models need multiple cycles to prove. Luo says proving a lending model takes multiple cycles across low and high interest rates and recessions. Nubank's transformation of banking in Latin America shows what a model that has survived those cycles can do.
Identity and anti-fraud is Luo's biggest next bet. Asked where he would place his biggest bet over the next five years, Luo names identity and anti-fraud, and expects AI to transform how both work.
Founders must align with what customers value. ICONIQ's rubric compares the firm's view, the founders' vision and what customers say. When founders believe they are winning for reasons customers do not value, that gap has to be parsed apart.
Partnership with founders matters most in a crisis. During the Silicon Valley Bank crisis and the start of COVID, Luo spent ten, fifteen, thirty minutes or an hour with each portfolio business. Trust, communication, mutual respect and alignment are the pillars of the relationship.
Where AI is already landing in fintech
Ramp uses AI to automate expense management and spending, and Luo says that is where much of its value comes from.
FloQast does the same work for accounting.
Payment routing. Primer gives merchants infrastructure to manage several payment service providers, and Luo says merchants who see the vision of intelligent payment management say they would buy it from whoever delivers it first.
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On this episode 2
Show 1
Customer service in wealth and banking. Lobo recalls queueing at Bank of America to send wires when Boast.ai was small, and argues agents could bring that level of attention to everyone.