3 Key Takeaways from Money20/20 USA

Here are the three key takeaways from Money20/20 USA.

BaaS Opens Opportunities to Reduce Infrastructure Costs 

The first of the major Money20/20 takeaways looks at the expanding payment landscape. We’re seeing a plethora of payment providers pack the payment space (say that three times fast!). This includes challenger banks, FinTechs, smaller banks, and card processors. These organizations have plans to expand, creating an increased demand for banking-as-a-service (BaaS) solutions. 

For financial institutions looking for opportunities to get out of on-premise infrastructure, BaaS solutions can offload the high costs of on-premise services. BaaS solutions act as a one-stop shop that can onboard new providers and provides the same services available from bigger banks. BaaS allows traditional financial institutions to transform their existing legacy banking systems to more agile, cloud-based alternatives. 

This shift enables more banks to participate in faster payment services like Early Warning Systems’ Zelle to offer faster payment products for their customers. It also opens new avenues for providers to join the latest faster payment infrastructure systems and scale efficiently. This is critical as the faster payment landscape expands with the planned launches of FedNow in the US and Canada’s Real Time Rail next year. These new schemes will compete with existing schemes including ACH and The Clearing House. 

BaaS solutions are offering payment providers a chance to reduce overhead costs and pursue their expansion goals while delivering the payment experiences their customers want. We expect BaaS solutions to expand as more providers enter the market and consumers expect faster, safer payments.  

Embedded Finance Blurs the Banking Lines

We also saw a growing share of non-finance companies encroach into financial services. An attendee pointed out that the long line at Starbucks was one of the biggest takeaways to come out of the Money20/20 USA conference. Not because of the lattes or the mochaccinos. It was because Starbucks is morphing from a coffee company to a fintech thanks to embedded finance capabilities.

Starbucks is not the only retail company entering the embedded finance space. Food delivery platform DoorDash is putting embedded finance in the hands of customers, drivers, and restaurants. Using the platform, I can order pizza from one local restaurant, buffalo wings from another, and mozzarella sticks from a third. My entire order can be split across different restaurants and picked up by the same driver. Payments occur entirely within the platform between customers, drivers, and restaurants over a variety of different payment rails. 

Or consider home supply stores like Home Depot and Lowes. Instead of requiring cash or a credit card payment at checkout, shoppers can provide a social security number to lock in a low-interest rate. After they provide this information, customers can pay off their purchases over a 36-month period. This type of fixed loan option is likely to gain in popularity as consumers contend with an uncertain economy.

As embedded finance services gain in popularity, non-banking businesses will need to focus on how to keep these payments secure. The world of banking carries a different kind of responsibility than that of retail. If retailers issue a loan that later proves to be fraudulent, they’ll need to understand the risks they take with each transaction. 

Is the Cryptocurrency Winter Coming?

Cryptocurrency has been the hottest takeaways at Money20/20 for years. But this year, it felt like the temperature was changing. There was noticeably less talk about cryptocurrency this year compared to previous events. 

Attitudes on crypto appear to be significantly shifting. The financial services world is moving from hype to hard questions. After years of talk, it’s time to start discussing the next stage of crypto’s evolution and how we’ll see it applied to real-world use cases. Once these use cases are launched, what kind of adoption rate can we expect to see? 

In other words, it’s time to think about how crypto will measure up to the hype we’ve built in the past decade. From what we saw at Money20/20, the market is ready to shift from ideation to implementation. 

Taken together, these insights from Money20/20 spell big changes for the financial services landscape. New financial players are entering the space and non-financial organizations are taking on more banking responsibilities. Meanwhile, crypto is facing greater scrutiny as investors look for real use cases after a lengthy period of fanfare. Stay tuned for how these changes start to take root in the financial services space.

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