Seven Highlights from Money20/20 2024 Europe
What better way to start the 2024 Money20/20 event than with Artificial Reality? Speakers at the Money Beach Club party at the RAI center! Sand, Chaises Longues, Umbrellas, Drinks, etc.
1. DriveWealth’s Expansion into Bonds
DriveWealth, traditionally known for its fractional stock services, is now venturing into bonds. This move highlights an emerging Fintech trend: fractional bonds will come to market for retail via high-growth Fintechs like Revolut empowered by DriveWealth.
This shift is crucial as fixed-income markets, previously overlooked due to low rates and OTC complexities, become more accessible.
I spoke with DriveWealth team members at the Money Beach Club party on the eve of the Money20/20. DriveWealth is a WealthTech whose motto has been Empowering Investing and now is Embed Investing. They have enabled many Fintechs and more to access US equity markets, ETFs, and other Securities. They are a Tech enabler, not a distribution channel. They have been a leader also in fractional investing as a service.
DriveWealth supports high-growth companies like Revolut, Cash App, MoneyLion etc.
They are starting to offer services around bonds. The bond market is huge (in 2022, $133 TRILLION), mainly OTC (Over-The-Counter), and the lot sizes are prohibitive. The impact of fractionalizing bonds that typically trade in $100,000 lots, is immense.
Talking to DriveWealth it dawned on me, why we haven’t seen much democratization in fixed income. That 40% of the infamous 60/40 portfolio has been left behind while the 60% part of it has been cannibalized one thousand times. Single stocks and most ETFs have no margins. The order flow is what is left of them and the derivatives business on them.
Of course, as rates were low and fixed-income markets are OTC and not standardized, they were no low-hanging fruit for Fintechs.
Somebody has to educate the world how to invest that 40% part of the 60/40 portfolio which has been traditionally dealt with through Money Market Funds (MMFs), some ETFs and mainly fixed income funds which charge 1% and 2% fees.
2. The Evolution of Fixed Income: Tokenization and Beyond
Now we are seeing ONDO Finance[1] leading the market in tokenizing US treasuries and other cash-like financial contracts, Blackrock and Franklin Templeton tokenizing MMMs[2]. PV01 is a new entrant focused on the tokenization of the debt capital markets, starting with US Treasuries. How can I not love their name[3], the fact that they are regulated and have the first batch of Treasury bills live on-chain.
These are the first steps to improve tokenization. It is the unbundling stage. Tokenizing individual US treasuries instead of at the fund level, is progress.
However, I must also highlight that we are still captives of that damn SPV layer in Bermuda or some such jurisdiction but until we get the US Treasury itself to issue on-chain, we have to live with that.
Imagine a world where US Treasuries are issued on chain. A major game-changer for Collateral management.
3. Revolut’s Ambitious Plans
I met David Tirado from the Revolut team at the Speakers lounge who oversees the commercial side of the business and was on the opening stage the next morning (100% Tech background).
When I asked David about their target market, he said EVERYONE.
Revolut continues its vision of becoming the “Everything Bank.”
David mentioned 4 million users for Revolut family products!
Current areas he chose to highlight on stage:
The Blur of Travel and Fintech (FX, eSIM)
Loyalty (RevPoints)
Investments (130% Q1 yoy)
Savings (MMF in 22 countries +)
Credit (6 countries live)
What I found confusing is the Revolut lingo. They talk about Branches but they are referring to their localization, and presence in certain countries.
Revolut plans Portugal branch to smooth expansion into country
4. AI’s Growing Influence in Financial Services
Needless to say that AI was a hot topic at Money20/20, with discussions on its applications in payments, banking, and trading.
NVIDIA & AWS AI Summit highlighted the importance of scaling AI initiatives rather than piecemeal implementations similar to Cloud implementations in the past two decades in Financial services.
It also became clear that Banks that have already set up their `AI factory` are looking into double the number of use cases than prior to this upgrade in computing power. The whispering was around 800–1000 use cases of AI are being in the factory as we speak. I do want to make clear that NOT all this is GenAI.
Examples of AI in action that I heard at Money20/20 include BloombergGPT, Bunq’s fraud detection efficiencies, Capital One’s recommendation systems, PayPal`s- accelerate data processing to save on cloud costs, HSBC`s developer augmentation and workflows in native languages.
The emphasis on AI literacy from the chairman of the Board all the way to the secretaries, audits, and ethicists, was very much emphasized. Listening to Clara Durodie on stage was a highlight for me. Follow her work and look for the update of her 2019 Book `Decoding AI in Financial Services`.
On stage she suggested when building AI to inquire :
‘Would you be comfortable with your children or family using the tool you are building?’. She was very critical about the current lack of resources in addressing security, ethics and governance issues.
She was outspoken about the biases in AI, both the gender bias and ingrained biases in language.
5. The Rise of Digital Wallets and Payment Innovations
Naturally, this theme remains core to Money20/20 .
The European Payment Initiative (EPI) highlighted that the combination of Digital Wallets, A2A payments, and QR codes, are impacting the payments landscape. Digital wallets in Europe have low adoption — c. 30% compared to the global average or 50% (transaction numbers).
From the panels I managed to attend, Mastercard`s messaging about
tokenization and biometric authentication for e-commerce was everywhere. They said that by next year, fraud will be a $ 10 trillion business!
6. Capital One’s Secret Sauce: Leadership and Vision in transformation
A fascinating insight from hanging around the water cooler at the conference was the leadership style of Capital One’s founder, who, at 75 years old, remains deeply involved in the company’s transformation. His commitment to communicating his vision to employees for four full days each year is a testament to the power of strong leadership in driving innovation and change.
This the root of Capital One`s evolving transformation that makes the company be one of the successful Digitally-native Financial services (not born but transformed) and now is №2 in financial services companies as ranked by the Evident AI banking index.
Did you know
USC and Capital One Establish New Center for Responsible AI in Finance — USC Viterbi | School of Engineering
People matter and leadership matters more than ever. Why? Because we are in an era of change that is complex. It is about grasping the interconnections between technological advancements and socio-economic and environmental trends and taping into these opportunities. These Fast Future Blurs (as we call them in our new Wiley Book) hide opportunities for leaders to shape our Future.
People (empowered by Tech) shape our Future.
7. Everybody is looking for distribution channels.
No comment. 😉
[1] Ondo Finance is a tokenized real-world asset (RWA) platform. They are not a blockchain. They teami up with both Layer 1 and Layer blockchain networks
[2] RWA.xyz tracks these markets. https://app.rwa.xyz/treasuries
[3] Anyone that has been in Fixed income trading of any sort, is familiar with PV01 — the sensitivity (the 1st order derivative) of the debt asset to a 1bp change in interest rates.
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