00:08:10 · Wesley Aster, Yoonkee Sull
[00:08:10] S1: And looking back at your journey from starting as an associate to your current role as a partner, what do you think are some of the biggest lessons you've learned about spotting high potential FinTech companies? [00:08:25] S2: I think I think the biggest maybe learning is we might start to explore a certain thesis or a certain trend because we have a viewpoint on it, but we... We've learned time and time again that we really need to maintain a pretty flexible mindset. What works for a particular region or a particular end market or a particular customer can vary greatly. All entrepreneurial journeys are incredibly unique, and while we might bring learnings we have at a global level and try to apply that where relevant, ultimately, we're partnering with founders who have a unique point of view on how to build the how to build the best business and the best products for the customers that they wanna serve and for their mission and vision. And so I think for us, it's just been, you know, keeping an open mind, keeping a learning mindset. If I reflect on all the investments that we've made across the FinTech portfolio, no story is the same. No entrepreneur is the same. You know, we talked a lot about pattern recognition, but, you know, I think the pattern recognition is to just, you know, work with incredible entrepreneurs who have a unique insight into the markets that they're building with just an obsession with the product that they build and the customer that they serve and really kind of follow that.
00:09:43 · Sabrina Fathi, Yoonkee Sull
[00:09:43] S0: Awesome. And shifting a bit more to the fintechs that you're investing in. So we had mentioned earlier you've invested in some of the the best fintechs out there like Chime and Wealthsimple, and these companies have successfully taken market share from traditional banks. What do you think are the biggest weaknesses of legacy financial institutions that startups can capitalize on? [00:10:03] S2: Yeah. You know, I think it's a combination of things. I think the first kind of words that come to mind are speed, transparency, low cost, convenience, simplicity, better UI. And over time, I think if you continue to deliver across all or some combination of these dimensions consistently to your customers with delightful products, you build really, really deep trust and ultimately a brand around that, and I think that sort of... That serves as the ultimate ultimate moat. And there are, of course, you know, economic advantages as well. Right? So, you know, the lack of overhead that technology businesses have more agile in using technology to drive operational efficiency, also better understanding the customer. It also feeds into an ability to drive accelerated product velocity and innovation. And oftentimes, you know, these companies are also bringing disruptive business models to the to the industry. And so I think I think it's a I think it's a think it's a combination of these things, and I don't think that's gonna change anytime soon.
00:10:03 · Yoonkee Sull, Sabrina Fathi
[00:10:03] S2: Yeah. You know, I think it's a combination of things. I think the first kind of words that come to mind are speed, transparency, low cost, convenience, simplicity, better UI. And over time, I think if you continue to deliver across all or some combination of these dimensions consistently to your customers with delightful products, you build really, really deep trust and ultimately a brand around that, and I think that sort of... That serves as the ultimate ultimate moat. And there are, of course, you know, economic advantages as well. Right? So, you know, the lack of overhead that technology businesses have more agile in using technology to drive operational efficiency, also better understanding the customer. It also feeds into an ability to drive accelerated product velocity and innovation. And oftentimes, you know, these companies are also bringing disruptive business models to the to the industry. And so I think I think it's a I think it's a think it's a combination of these things, and I don't think that's gonna change anytime soon. [00:11:20] S0: 100%. As these FinTech startups are evolving and thinking about differentiation, especially, we've seen the FinTech sector kind of mature over the last couple years as well. How can some of these new FinTechs compete with wealth funded incumbents and FinTechs that have already established themselves, and how can they think about differentiation as they're growing as well?
00:11:42 · Yoonkee Sull
[00:11:42] S2: Yeah. I think... I don't think it's... I don't think the basic principles are are really any different, you know, and and I don't think it's inconsistent with how we would think about any other sector, but I I think using speed and technology as core advantages as we talked about to ship amazing products that, you know, add a ton of value to the customer, I mean, that's that's really what this is about. And, of course, like, the advantage that incumbents or maybe other established players might have is distribution, certainly. Right? Some of these brands have been around for decades, if not longer. Also, huge balance sheets to get aggressive on and, you know, do creative things with if they if they so desire. And so what that what that comes... What that boils down to at the end of the day is, you know, you then need to compete with a better product or perhaps through creative distribution strategies. And so I think that's I think that's a really big part of it. I think a good example of this, you know, which has been a growing trend, I think we'll talk about this later in this, interview as well, is the growth of embedded financial services, for example, in terms of vertical software businesses or marketplaces increasingly becoming the point of distribution for financial services products. I think I think there's an interesting balance between, you know, melding both a creative distribution strategy and a better product. And so an example, you know, a a a good framework for this would be, you know, it it is likely that a traditional bank, for example, won't partner with a next generation vertical software business to distribute their, you know, lending lending products through. But a new emerging FinTech company that can provide really modern infrastructure to enable this kind of functionality, but also use that as a leverage point for, you know, accelerated distribution and very efficient distribution, I think those those those are some of the some of some of the ways where I think, you know, net new startups can really effectively compete with both both on the product side and and and the distribution side. And I think there are multiple examples of this. That's just one example. But in the end, I think those are some of the, you know, some of the characteristics I, you know, I think about a lot.
00:13:59 · Sabrina Fathi
[00:13:59] S0: And as you mentioned, embedded FinTech is becoming quite popular as well. And with embedded FinTech, a lot of these companies are actually partnering up with banks. And we're seeing a lot more partnerships between FinTechs and traditional banks. Do you see this as the future of FinTech, or do you think challengers will continue to disrupt the industry on their own, like perhaps some previous neo banks have?
00:14:20 · Yoonkee Sull
[00:14:20] S2: Yeah. I think I do think partnerships are here to stay. In the end, the financial services ecosystem, more broadly speaking, there are a lot of counterparties here. A lot of people do a lot of business with each other. It's very intertwined. And so and, you know, I think there are things that the traditional banks are really good at, and I think there are other things that startups are really good at, and there are other things that the card networks are really good at. You know, there's a lot of different core advantages, different players in the ecosystem might have to bring to add to the increasing value of the general... The the overall FinTech ecosystem. And so I do think things will... You know, everyone will, you know, co... Coexist for for a long period of time. Now I don't think it's mutually exclusive, meaning, you know, you, of course, are seeing more digital banks, for example, becoming their own banks, beginning... Getting their own bank licenses versus partnering with a bank on the back end, and, you know, them seeing that as a strategic advantage as it relates to cost of capital or other product related, you know, related reasons. And so, of course, over a very long period of time, you know, I do think there will probably be more convergence and more competition, but at the same time, like, you know, it's such a big market and there are such big, you know, pockets of opportunity that I think I think you're gonna see, you know, a mix of different approaches over time. And, you know, I think I think there are many, many different avenues to create a lot of value for for everybody.