Podcast September 28, 2021

How crowdfunding & Open Banking open up Fintech

Why are more and more Fintech’s turning to crowdfunding in addition to traditional VC investment?

Because being accountable to the people actually using your product incentivizes you to shape it to their needs.

That was a key consideration for today’s guest Edoardo Moreni, CEO at Emma Technologies  when funding the company’s money management platform, which offers a wide range of banking and investment options to its users.

In this episode, we discuss:

  • How Open Banking has opened doors for wealth management
  • Crowdfunding vs. VC investment
  • The future of Open Banking, Wealthtech and NeoBrokers

Open Banking, open doors

Open Banking has been a huge revolution and we’re still at the beginning of it.”— Edoardo Moreni

Open Banking opens up new scenarios. The first one is payments. Open Banking is not just about accessing accounting; it’s also about initiating payments. It also allows us to request or send money, and we can even do internal transfers.

The next big update for Emma, coming in the next six months, is the ability to make recurring payments between a person’s accounts. This change poses a threat to the overdraft market because a tool could get your permission to move your money whenever you know that you’re likely to get an overdraft.

We can now build a production on top of your own existing accounts with open banking. It’s been a huge revolution, and we’re still at the beginning of it.

Crowdfunding vs. VC investment

The VC round is straightforward. We know the amount, the valuation, the high years, and the low years. It involves a big process, talking to 50-60 venture capitalists all in hopes of closing with just one of them.

“Crowdsource investors are people that use the products on a day-to-day basis. They can provide more feedback than anyone else .”— Edoardo Moreni

Crowdfunding is similar to traditional VC investment except that you’re not talking to 50-60 people. You’re talking to thousands, maybe tens of thousands of people.

It’s a volume game.

Crowdfunding is no different from VC in one key sense, though — investor psychology. Both processes run on FOMO, the fear of missing out. Think of it this way: raising money in the U.S. is metrics-driven and based on numbers. Raising money in Europe, however, is like dating. It’s about passion and fear of missing out.

The future of Open Banking, Wealthtech and NeoBrokers

“We didn’t want people to invest in a black box, we actually want people to invest in a plan and a team .”— Edoardo Moreni

Open Banking — We’re going to see companies raising money and starting up every week. Within 2-3 years, 90% of those companies will be completely wiped out. Only the strongest will survive. But will that strongest 10% actually get acquired or will the founder have to prove that they can sustain long-term growth? That’s the big question.

Wealthtech — We’re probably only in the first year of the cycle. We’re seeing movement, sure, in both the U.S. and the UK, but nothing has really penetrated. Let’s give this one 3-4 years.

Neobrokers — Super exciting future here! Just the fact that we can bring trading to 90% of the population in a simple and easy way is enough to drive a lot of innovation. More than that, we have the addition of cryptocurrency. While stocks are accessible through formal investing, crypto is still hovering around 1-2% penetration. We need to get to a point where everyone can buy Bitcoin or Ethereum — maybe 19% market penetration.

The bottom line for Edoardo? He’d rather ride the roller coaster than wait in line for the next 30 years.

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Until next time!

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