As we at MiddleGame Ventures (“MGV”) begin to put money to work in our latest fund, we have completed a series of deep dive reviews of the FinTech startup landscape in B2B and B2B2C financial services to help structure how we prioritize our efforts across the broader fintech ecosystem. This blog, the first in a series, is focused on Open Banking (OB).
Open Banking, seeded by forward thinking regulation in the UK and EU (PSD2) and accelerated by new technologies and customer preferences, is redefining the role of global banking services and opening up a host of new businesses along the way. MGV has already invested in two companies that are championing trends in this space (Minna Technologies and Railsbank). Our research has uncovered over 500 early stage startups attacking the opportunity across multiple vectors including middleware technology providers, platforms, and privacy tools. In short, there is a lot of energy and opportunity in this space.
Over the past decade, the banking paradigm has radically changed with the rise of dozens of new channels and platforms that are disintermediating traditional providers of banking and payments services and broadening the scope of customer engagement (e.g., SMEs). As these trends play out, we believe the payments and application layers in the OB ecosystem are best positioned to benefit, while incumbent banks will need to revaluate and reinvigorate their value proposition. Whereas, other non-traditional financial verticals stand to benefit from the expansion of payments and finance rails.
Customer expectations (transparency, tailor-made products, omni-channels), new entrants (big tech, fintechs, neobanks), new technologies (API integrations, cloud banking, DLT), and regulations (PSD2, GDPR) are the core enablers for OB and will drive the expansion of OB-like innovation beyond the banking and payments sectors. As OB schemes proliferate, Open Finance and Embedded Finance will dominate the future of FinServ, leading to the emergence of a meta financial universe that blurs the financial and non-financial sectors (more to come on these themes later).
Six MGV Focus Trends in Open Banking
We have organized our research and investment efforts around six key trends, that implicate payments and banking, in addition to other financial services verticals:
These trends in Open Banking and beyond tie into MGV’s “3D Finance” meta thesis, which encompasses the transformation of financial services around a core of Digital, Distributed and Data-Driven processes. Within 3D Finance, we have further developed investment themes that focus our attention on the transformation that is just beginning to unfold across the financial services industry, many of which were highlighted on MGV’s introductory blog.
If you are a high-potential FinTech startup attacking core pieces of the Open Banking/Open Finance value chain or if you are an incumbent seeking to identify opportunities within these emerging ecosystems, please reach out to us . We are committed to supporting the transformation of financial services over the next decade and welcome any and all feedback and opportunities to engage constructively on a shared vision for the future of financial services.
Stay tuned for follow up posts on additional verticals of interest to the investment team, including: Capital Markets & Asset Management, FinData, ESG, and OmniFi (our term for the spectrum of blockchain and DLT based centralized to fully decentralized finance).
In addition to the MGV team, underlying research credit goes to Antonin Gury-Coupier, with support from Inder Takhar and Matt Lobel.
From time to time,