We recently had the pleasure of attending the Money20/20 fintech conference in Las Vegas. It was an immersive and incredibly informative event, featuring speakers and thought leaders from many of the major U.S. and Canadian financial institutions, fintech innovators, major retailers, e-commerce and social media platforms and investors. Money20/20 is described as the largest global event focused on payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology.

Democratization not Disruption:  A number of speakers noted that, rather than characterizing fintech innovation as "disrupting", they preferred to view it as "democratizing".  It was a sentiment echoed repeatedly by representatives from both innovators and incumbents that embracing potential partnerships between financial institutions, traditional retailers and traditional service providers on the one hand, and new technology such as payment service providers, online and mobile commerce and alternative capital platforms, on the other, is likely to result in a significantly improved customer experience capable of reaching a much broader base of consumers and clients.

A Key to Success is Friction: Or perhaps, more accurately, reducing "friction". A number of speakers re-iterated that, in their view, a key to winning customers was reducing "friction" from the transaction experience.  Several speakers noted their view that building the best customer experience will translate into completed transactions and brand loyalty, and a key focus for any business should, in their view, be to identify "pain points" or other points of friction within their customer interactions, such as complicated verification processes, or re-directions to external sites to complete a transaction, and provide tailored, seamless solutions to address what they refer to as "friction" points.

Compliance: Early and Often: A number of panels focused on the key importance of regulatory compliance for fintech innovators.  A panel on anti-money laundering and other U.S. regulatory issues, which featured, among others, the FBI and U.S. Department of Justice, stressed that it is never too early for financial service or technology providers to focus on regulatory compliance. Even if the products or services of a fintech business are not currently regulated, it is likely that their customers or other business partners will be regulated at some point, and so it is key for a fintech business to ensure that its product is appropriately compliant with industry standards and regulatory requirements in all applicable jurisdictions.  Our takeaway from this session was that companies, even at the very earliest stages of development, should be building and assessing their compliance programs, and that compliance programs should be expected to evolve on a continuous business as a fintech business evolves.

When it Comes to Financing, Timing Is Key: When it comes to obtaining external financing, be it seed round, venture financing or growth capital, the experts agreed that timing is critical.  There were a number of panels featuring seasoned venture capitalists invested in fintech, and many agreed that seeking financing at the right time and stage of development of a fintech business is as critical as how much money is raised. Timing financing rounds to line up with key inflection points in the development of the business will allow capital to be raised that reflects both the current stage of development, and also the near term potential that can be achieved from that financing.

Can We Please Stop Calling them Unicorns?: Another venture financing hot topic was the so-called "unicorn" (referring to the sought-after billion dollar valuation that many technology businesses and investors are chasing), a term for which many people expressed dislike.  Several speakers were of the view that there was likely some recent overpricing of valuations and potentially some market correction ahead.  There are currently an estimated 125 venture-backed private companies with a valuation of a billion dollars or higher, but one venture capitalist cautioned that those valuations are based on private market financing valuations and are not yet validated in the public market. Another investor noted that venture financing valuations based on typical preferred capital forms of financing are often not true measures of the underlying business value. These venture capitalists encouraged businesses to raise capital as needed to achieve goals and to keep an eye on burn rates to avoid the adverse consequences of raising financing at a prematurely high valuation in pursuit of membership in the elite "unicorn" club.  Another venture capitalist noted that the majority of exits occur at under USD$600 million, and where those firms have been appropriately valued in their venture finance rounds, those exit valuations can be considered just as successful and profitable as billion dollar exits.

These are just a few snapshots of what people were talking about at Money20/20. The overall sentiment of the industry's leaders and innovators was clear: the fintech industry is expected to continue its exponential growth, expanding to new industries and revealing new opportunities in the very near future. Stay tuned for more updates from us on this exciting space.

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