Make Cents: A Fintech Market Map
An Overview of the Sector by Use Case
In recent posts I’ve talked about how we at Redpoint define fintech, why the ecosystem is important, as well as defined the universe of fintech infrastructure. In this post, I’m diving into a topic that I’ve been wanting to explore for a long time — a deeper look at the components of the fintech ecosystem and its subsectors (plus a market map, of course!).
As a reminder, we define fintech as any technology or business model innovation that enhances the delivery of financial services.
Given this broad definition, I debated a dozen different ways to segment the market before landing on the simplest and most intuitive one. I see the landscape as 3 broad categories: consumer, B2B, and infrastructure.
There are many ways to segment the market further. I chose to do so by use case, because that is how the end users view the market: by need. My hope is that this helps operators and consumers navigate the landscape of companies they can leverage for any specific need. Whether you want to learn who the players are, or see where there’s white space, this market map can help you wrap your head around the many areas of fintech, how they fit together, and where opportunities exist.
Consumer fintechs offer products and services to consumers. As a result, their GTM and user experience is oriented to individuals vs to businesses or developers. Within the consumer segment, there are 6 categories of companies.
Banking and Saving
This category includes consumer neobanks and savings products. The thesis here is that segments of consumers have been completely ignored or underserved by traditional institutions, so providing products more tailored to their needs will engender loyalty and unlock cross-sell opportunities, and therefore meaningful revenue per customer. Chime, for example, famously eliminated overdraft and account fees for its users, which can make up to 4% of profits at traditional banks. These fees, while lucrative, were most punitive to lower income consumers, which is the segment Chime initially focused on serving.
58% of Americans — roughly 150 million adults — live paycheck to paycheck, according to a recent LendingClub report. By helping consumers make ends meet and eventually save, companies can build strong relationships with these users and monetize this emerging wealth over time all while helping improve the lives of millions.
Credit & Lending
Americans love lines of credit. 77% of Americans have some form of debt. Companies in this category offer consumers a specific form of debt — mortgage, credit card, student loan, cashflow, etc. Similar to the category above, the thesis is often to focus on a specific segment and expand products and segments from there. SoFi, for example, started by offering lower cost student loan refinancing options for students from top universities and has expanded to mortgage, banking and other products over time.
Trading & Wealth Planning
This category includes many products I consider under the umbrella of “financial management.” I believe that there is a significant trend towards consumers wanting a more active role in their finances. The rise of Robinhood, M1, crypto etc. illustrate this interest towards platforms and tools that enable users to have more fine grain control over where and how their money is being invested vs more traditional wealth advisors. In conversation after conversation with millennials and Gen Z they express skepticism of the value add from organizations that charge 1% on AUM and a distaste for models that require regular face to face interaction.
Companies in this category empower and enable consumers to more actively manage their finances whether equities, tax, alternatives etc. Some companies are working to put more targeted investment strategies on autopilot for lower cost (e.g. Wealthfront, Titan, Betterment), others are providing access to asset classes that retail investors previously did not have access to (e.g. Rally, Yieldstreet), and still others are trying to optimize taxes (e.g. Agent).
Like the unbundling of the bank account, insurtech in recent years has seen new entrants providing an enhanced digital delivery of insurance products, marked by better UX, UI, and transparency. Many of these companies are offering more straightforward access to insurance products like life, auto, and homeowners/renters. Many are now also innovating on the distribution model and some on the underwriting as well.
This segment of companies enables the transfer of money between consumers. The use case and experience varies but the structure is similar — a consumer most often transfers money from one digital wallet to another. Venmo, Cash App and Zelle are among the most well known examples.
This is a broad one. Businesses in this category are innovating on the experience of owning a home - whether it is the buying, selling, or ownership aspect. For example, Opendoor has made selling a home more turnkey and arguably guaranteed while Divvy is enabling consumers to work towards the ability to buy a home through their rent to own financing structure.
Companies in this sector are building products and services for businesses. Unlike fintech infrastructure, these are applications that are most likely usable as standalone products vs. as building blocks for other ones. These products are used directly by the buyer for their own workflows, vs to build a new product or service for their end customers. Within B2B, there are 6 categories of companies.
Business to business payments continues to be an area of high friction and opportunity. It is very challenging and costly for businesses to accept, send and manage payments today. Given the meatiness and complexity of payments, companies in this space are starting with a specific wedge, working to simplify and streamline a specific aspect of this process. Ramp and Brex, for example, started by making it easier for start-ups to get their first credit card to pay more quickly and easily for products and services while Melio is focused on improving invoices and non-card payments (ACH, wire, etc.).
Companies in this category, similar to the consumer ones, offer products like cyber and P&C to their customers. Often, they are innovating on the distribution or underwriting by focusing on underserved segments of the market.
Financial management & workflows
This category is arguably the meatiest within B2B because it encompasses the suite of products that enable companies to manage their finances — to track, plan, and account for revenue and costs. This spans ERP and accounting, AP/AR reconciliation, spend management, bookkeeping as well as equity management. Onplan, for example, is building modern FP&A software for finance teams to make scenario planning and collaboration faster and easier while Appzen is streamlining the compliance process.
These companies are lending capital to businesses. Similar to insurance, they are often building unique distribution or underwriting capabilities. Settle offers invoice financing for e-commerce, while Pipe focuses on SaaS businesses.
These companies are providing banking services to businesses. Like its consumer counterparts, companies in this category are generally targeting underserved users and offering a more tailored experience with better UX, integrations and products. NorthOne, for example, targets small businesses and provides them with value-added features such as integrations to more seamlessly sync data, mobile payments, and budgeting.
I’ve previously shared my view of the opportunity for enabling infrastructure and a market map of the fintech infrastructure market and its subcategories. These companies provide the picks-and-shovel building blocks that power fintech use cases. This is important to emphasize—they can power traditional fintechs but also non-fintechs that want to include financial services in their offering. This is a growing trend that I continue to be bullish on. I’ve grouped the landscape into nine use cases:
Identity, fraud, and risk
Data aggregation and normalization
Income verification and payroll
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