Video: Future of Finance - North America perspectives

In this video, QED's Managing Partner Nigel Morris and Chief Investment Officer Frank Rotman discuss the findings of the Global Fintech 2023: Reimagining the Future of Finance report that we co-authored with the Boston Consulting Group.

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Show notes

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Nigel Morris is the co-founder and managing partner of QED Investors, a fintech venture capital platform focused on disruptive, high-growth financial services companies. QED has made numerous unicorn investments, including Credit Karma, Nubank, Avant, SoFi, Klarna, GreenSky, and AvidXchange.
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Nigel is the chairman of ClearScore and Mission Lane and serves on the boards of Remitly, Quinto Andar, Bitso, Amount and Current. Additionally, he serves on the board of Ideas42 and Scotia’s Digital AdvisoryCouncil, and he works in an advisory capacity with General Atlantic and Oliver Wyman. Nigel previously worked on the boards of Capital One, The Economist, Brookings, National Geographic, Klarna, Braintree, TransUnion, and London Business School. He frequently keynotes at industry-leading conferences, including Money2020, LendIt, Finance Disrupted and the Bernstein Annual Financials Summit.
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Prior to QED, Nigel co-founded Capital One Financial Services in 1994. Under Nigel’s leadership as President and Chief Operating Officer, Capital One pioneered an information-based strategy that transformed the consumer lending industry.
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Although Nigel grew up mostly in England, he takes immense pride in the fact that he is at least half Welsh. He has an MBA with distinction from London Business School, where he is also a Fellow. Nigel was recognized as a Top 100 Venture Capitalist by CB Insights in 2019 and Midas List member in 2020 and 2021. He is an avid cyclist, but he is happiest when he is at home in Virginia with his wife, four children, and three grandchildren.

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Frank Rotman is a founding partner and the chief investment officer of QED Investors, a premier VC firm focused on the fintech ecosystem.

QED has invested in 200+ companies over the past 15 years and currently has $4.3 billion under management. Frank has made Forbes’ Midas List each of the past five years as “One of the World’s Best VC Investors.”
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Previous to QED Investors, Frank was one of the early architects who helped create what became Capital One. In his 13-year Capital One journey, Frank was responsible for many “firsts” that helped lay the foundation for what Capital One is today.

Frank graduated from the University of Virginia with degrees in Applied Mathematics (B.S.) and Systems Engineering (M.S.).

He writes prolifically on Twitter as @fintechjunkie and posts additional content frequently on qedinvestors.com and fintechjunkie.com

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Read the full report here

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Full transcript

Nigel Morris:

You are listening to the Fintech Thought Leaders podcast from QED Investors, your deep dive into the world of venture capital and financial services with today's digital disruptors. Fintech Thought Leaders brings together the most talented entrepreneurs tackling today's biggest problems. If you are looking to learn more about the hottest trends in fintech, you are in the right place.

Hello everybody. I'm Nigel Morris from QED Investors. I have with me my longtime partner in crime, co-founder of QED, partner and chief investment officer, Frank Rotman. Frank, good morning. Good afternoon. How are you?

Frank Rotman:

I'm doing fine. Glad to be here.

Nigel Morris:

Glad to be having this conversation. We've got this joint study BCG and QED coming together to really take a really hard comprehensive look at the future of fintech. The conversation that you and I are going to have today is a lot around the frameworks, the heuristics by which we have that debate. In short form, on the one hand, we see the ups and downs of what's happened in fintech in the last, I guess three years, three years ago about now, we were in COVID freefall. But on the other hand, there's a whole series of big meta trends that I think continue to roar at the back of fintech and how you think about those and trade them off.

But when we as QED were talking to our investors who have been incredibly supportive of us over the years, one of the questions that we got was where are we in the evolution of fintech? And to what extent are we in chapter two, i.e. at the beginning of a pretty long book and in some places, perhaps even in the prologue, versus are we in chapter eight of that book? That the innovation has largely been already absorbed and the Squares and the Stripes and the Karmas and the Klarnas have innovated and now the peloton has caught up, so to speak.

In our internal QED language, we talk about chapter two versus chapter eight. Let me just tee that up as a concept and have you just riff on that a little bit, Frank.

Frank Rotman:

Yeah, I think it's a very, very important topic, especially as a specialist, an investor that specializes just in one thing. Investing is about figuring out if there are generational companies that can be built that are solving real world problems that can create big durable businesses. When you're a specialist, you have to ask the question in the area that you're focusing, are there going to be generational companies built? Is it target rich or are you going to have issues because the trends, themes and the big companies have already played out?

It's absolutely important to understand with the surface area that you're covering, if it's reduced from that of a generalist who would look at everything to a specialist looking at just one thing. How nascent is that thing, and are big companies going to be built? It probably is the most important question to ask if you're busy investing in this space.

Nigel Morris:

We have the luxury of being a fintech specialist now global, now able to start things up and go through the substantial life of a successful company and doing all things fintech. If fintech doesn't have the vitality that we had hoped, and we are really in chapter eight, we've got nowhere else to go, Frank. Is that the point here?

Frank Rotman:

We will have to find a new career for ourselves. The one thing that all specialists have to ask is are they in the right place? I think that's the question that we're asking when we're asking if fintech is in chapter two or chapter eight.

Nigel Morris:

As we set off with our internal debates on chapter two versus chapter eight, and our good friends at BCG joined the fray and were, I think very intrigued at how do we quantify and how do we look for evidence to support the two hypotheses. Talk a little bit about how we frame that up at QED.

Frank Rotman:

Yeah, so it's not like there's a crisp, clean answer where you can just calculate a few numbers and say, hey, we are at chapter three or chapter six. It's really about triangulation, trying to get a feeling for how mature different pieces of the ecosystem are. Because when we think about fintech, it's not just one thing. It's a lot of different things that are embedded underneath banking and other financial institutions. It's not just one geography, it's not just the US. There are things that are happening around the world.

In order to answer the question whether you're in chapter two or chapter eight, you really have to triangulate and use a few different ways of looking at the space or sub-sectors or sub-geographies within. We internally looked at three different methods in order to triangulate. One of them, we call the five pillars of financial institutions. Second one we call the X of X, and the third one we talk about thematic opportunities.

If we go very briefly into each one of them, the five pillars of financial institutions. If you think about what banks do and what other financial institutions do, they tend to fall in five big pillars. There's the storage of money, which is about deposits. There's the movement of money, which is about payments. There's lending, which is about lending. There's investments which includes advisory, settlement and custody services. And there's the transference of risk, which is insurance.

When you think about all of these different profit pools within banks, they fall into the different pillars and those different pillars are going through different S-curves, different changes, different things are happening at all times. When we look at the US as an example, we have to look at what's happening within the US within deposits. When we look at Europe, we have to look at what's happening in Europe within insurance.

It gives you a vista to actually look at the ecosystem and break it down into pieces, and I think you'll see in the BCG report, BCG worked really hard to figure out the profit pools that are sitting within these different pillars and what innovation is happening in different GOs in each space, because without that context, it's very hard to figure out whether you're in chapter two or chapter eight.

Nigel Morris:

The profit pools are massive, aren't they? If we take worldwide financial services, which includes banking and insurance, we're talking about a $12.5 trillion, absolutely stunning number. In many countries around the world, financial services represent 20, 25, even high twenties percents of GDP, and if we look at the economic rents, the returns over the cost of capital. Financial services often right up there, higher than any other industry in many geographies.

Frank Rotman:

If you actually look globally at any major stock market, and you look at the major companies, the top 20, top 30 companies on the stock exchanges, a few of them are banks in every country. There's a reason for that. It's not because these are really cool companies that people are just dying to invest in. It's because they're really profitable.

I've seen some profit statistics thrown around where if you look at companies that for six, eight, 10 years in a row are delivering $10 billion or more worth of earnings, every single time banks are showing up on the list and there only are a few companies that make that list. When we talk about fintech being a thing, it's not just about solving problems. It's about attacking giant profit pools within different sectors within an ecosystem that arguably is 20% of GDP in some countries and in some others even more.

Nigel Morris:

When we look at some areas of venture, the opportunity is the creation of completely new white spaces, tabular rasus that are yet to be built. I mean, take current conversation on ChatGPT. I mean these are new universes that are going to be opened up in some ways. Whereas a lot of fintech is attacking these enormous profit pools that exist where the incumbents are blessed with inertia and information asymmetry and scale and regulatory access that really can be profitable and create enormous durability in their business models.

Frank Rotman:

That's right, and part of the art of investing is figuring out why now. If businesses can be built, they will be built. When you start to ask questions about why now in fintech, why are fintech starting to attack these giant profit pools? There are S-curves of technology that have come into play over the past 10 years.

Think about mobile as an example of entirely new S-curve that the financial institutions that were incumbents weren't very well-prepared for, which gave an opportunity for a next generation of fintechs to come up, deliver a product or service with an entirely new technology layer. As these S-curves come into play, these giant profit pools are now in play, and with these profit pools in play globally, that's where the opportunity is.

Nigel Morris:

The first methodology of the five pillars, and we can break down each of them and say, where is each of these pillars in their Fintech evolution? And do that by geography of course, as well. That's a methodology of tearing it apart so it's not one homogenous glob. We can start to peel the onion and look at the growth rates in each place and where the comparative advantage is.

Frank Rotman:

The second one is a methodology we think of as the X of X, and it really applies a bit more internationally than to the US, but it's really talking about the art of the seen. Once something has been discovered, then other places or other companies can look at the art of the possible and say, wow, do we have similar problems? Could we build a similar company? Could we assemble a solution in a similar way?

Once something has been seen, it can't be unseen. Once Stripe has been created to create a digital payments gateway that with a few lines of code, you can basically be taking payments. It's hard to unsee that. It's hard to unsee the scale of what can be built. Then the question becomes somewhere else in the world, is there a Stripe that has yet to be built? So if a Stripe does not exist in Africa as an example, then we can say, should there be a Stripe of Africa, the X of X?

When you see big gaps, you have to ask yourself, is the ecosystem ripe for a giant new company to come out of nowhere and really start to take over from the incumbents? Asking those questions will surface some really interesting opportunities because the geo or an ecosystem might or might not be ready. If it is ready, then the incumbent might try to attack it and continue to grow in that space. Or a startup might emerge that understands the geography incredibly well or the ecosystem incredibly well and can take inspiration from the original X and say, what could we steal from that? What could we borrow from that in order to build a very similar company but in a different space?

When we talk about the X of X, it really is a bit more about staring at some of the emerging geographies and saying, will there be a Nubank of India? Will there be a Stripe of Africa? You can take a look at the giant incumbents that have basically grown up to be fairly large fintechs, the PayPals and the Blocks and the Stripes of the world, and look globally and see if there's opportunity.

Nigel Morris:

If we go back 25 years or so, when you and I were at Capital One, we were able to take the Capital One model that was hatched, seen, if you like, using your framework here in the US, and we took it to Canada, the UK, to France, to Italy, to Spain, to South Africa.

Now in every one of those geographic leaps, we had to augment the model. We had to understand the regulatory climate. We had to understand the cultural issues. We had to realize that the origination methodologies that were used in the US were all different, but the core comparative advantage that was Capital One in those days was very relevant across geographies. I've heard you say that the null hypothesis should be that if it works in geography A, it can work in geography B, now let's explore that. Tell me about the role of customization or mutating the core idea once it's seen into other geographies.

Frank Rotman:

The art of building a business is really about matching problem statements with solution statements. A problem statement is basically an entrepreneur looking at an ecosystem and saying, here's a big unsolved problem and it's so large and so profound that people are willing to pay you more for your solution than it costs you to manufacture. That is the hypothesis when a founder really comes to the table and says they want to build something.

They pair it with a solution statement, and that solution statement says, remember that big problem that we just talked about? Well, here's how I intend on solving it. Here's how I intend on building a business that can deliver a solution that people are willing to pay more for than it cost to manufacture.

Now, when you look at these giant companies that have been built, it's a perfect pairing of a problem statement and a solution statement. The solution is the solution for the problem.

When you go to a new geography or you look at building the X of X, I think it's important to realize the problem statements are very similar, but the solution statements might look different. If you look at the example of is there a Stripe for Africa? Well, the idea that there needs to be an e-commerce payments gateway that could be enabled with a few lines of code. That is a very, very interesting solution statement. Now, how it's delivered could be very different because of the regulatory environment. It could be very different because e-commerce merchants look different. The fraud rates could be different. The KYC could be different.

Nigel Morris:

The rails can be different.

Frank Rotman:

That's right, and if you think about the pillars of banking, things like movement of money, which is a big thing, payments. Very different in the US with the rails that exist internationally with the rails that exist country by country.

Nigel Morris:

Yeah, right.

Frank Rotman:

Again, I think the problem statements are actually very similar. They're not identical. Every country has its own nuances. Consumers, small businesses and enterprises behave differently. But I think where the profound difference comes is in the solution statement, and it needs to be customized by geography.

Nigel Morris:

We've seen a lot of people out there try to lift an idea from geography A, plunk it into geography B, and try to force fit it. Often as not, it ends in tears. Five pillars is the first framework, the X of X is the second. The third one is thematic opportunities.

Frank Rotman:

The question of why now is a very important question in building any business, and thematically, the why now could pop out of nowhere for any given opportunity or any given subset of the ecosystem. There could be a regulatory change that all of a sudden makes things possible now that weren't possible before. It could be that a new set of rails is now available that was built or infrastructure, a middleware layer has been built that makes assembling a solution different now than it was in the past.

It could be there's a new S-curve that is emerging around a new technology. AI being an example of one that's in the news all the time now. On the regulatory front, if we want to give an example, like narrow banking is now back in the narrative of what people are talking about. If regulatory change is made to allow for narrow banking, well now there's going to be an opportunity for a set of new companies and innovation to take place in this space.

We've seen some of these interesting opportunities, these thematic opportunities. An example is that within banks, so many products and services are still managed using spreadsheets and the ability to build built-for-purpose software to do what spreadsheets were doing before is creating a whole new set of companies within the banks that are basically replacing spreadsheets with built-to-purpose software that's much easier to use, much more controlled, makes fewer mistakes and costs less money.

We're seeing various ecosystems that built-to-purpose software be built to replace archaic ways of doing business. That would be an example. AI would be an example. Regulatory change would be an example of thematic opportunities that you have to say, now is the time to build this. Whoever gets off the ground first with solutions that are adopted by the market will have a competitive advantage and hopefully build a business.

Nigel Morris:

Yeah, Frank, one of the things you and I have talked about is post-COVID as a quite marked contrast to pre-COVID. The incumbents have really grown in their perspective on how they can partner with fintechs, for example, and on the thematic opportunities, how the value added chain is now being busted up. Fintechs that previously the banks would've said, you are not industrial strength. We can't put you into our tech stack. The banks are now integrating, certainly the most progressive banks are integrating fintech into that tech stack.

With that comes the full promise of embedded finance where clunky old analog paper-based data systems become now digitalized. Costs for efficiency goes up, auditing capability improves. AML and KYC is better. But from a revenue perspective, you now have opportunities to cross-sell and upsell with surgical precision and the windows exist. How exciting is that space?

Frank Rotman:

Yeah, it's very exciting, and this dates you and me a bit, in the 30 plus years that we've been in the space. When we first started in banking, everything you had to do was rip and replace, right? You had to take your old systems, you had to rip them out, and in order to get new functionality, you had to replace them with the next generation of whatever the software service was.

These projects were huge. They would take years and they would take tens of millions of dollars, and they would usually be over budget and behind schedule and not deliver the functionality that was wanted by the enterprises.

These were giant decisions about chasing new functionality versus making do with the functionality that existed. I think over the past 10 years, that entire concept of rip and replace has gone away. Occasionally, there will be a time when a big bank decides to replace its core or replace something that's incredibly important to how it functions its core system.

But instead, a middleware layer has emerged that allows the linkage of new functionality with the old cores. Now it's not rip or replace, it's about adding. It's about abstracting the system that actually calculates everything at the atomic level from the front end functionality, the ability to present new offers, the ability to add new things to the system.

I think with this advent of a middleware layer, the ability to abstract it from the core system, it means that banks are now more willing to talk about adding that functionality. One big piece of functionality that's been added is embedding financial service products into experiences and core systems that exist already in the market.

Instead of having to pay the tax of finding customers in the open market, you now can find them where they are. If there's a system of record for an ecosystem, system of record for transportation, system of record for music, a system of record for, I mean fill in the blank with any ecosystem that exists. There are systems where all the customers are and they do whatever they need to do to function in that ecosystem.

Now, instead of having to find those customers in a different place, you can go directly to them and embed payment solutions. You can embed lending solutions. You can embed insurance solutions so that they never have to leave the experience they're in, and you can find all the customers in one place.

Nigel Morris:

In the end, everything becomes fintech or an opportunity for everything to become fintech. From your three frameworks, the five pillars, the X of X, the thematic opportunities. Now let's go to what this means for incumbents and for fintechs.

Frank Rotman:

Yeah, so I think there are a couple obvious insights that come out of the BCG study. One, I remember talking to you about it when you saw the numbers. The numbers are staggering in terms of the profit pools that still exist out there that are owned by the incumbents. If you look at the fintech share of the overall profit pool, it's still tiny, and this includes some very mature fintechs like the PayPals of the world.

Nigel Morris:

It's actually low single digit, Frank, I think of the $12.5 trillion, 2% of all financial service revenue is in the hands of fintechs.

Frank Rotman:

Yeah, I mean again, it's such a small number that if you believe that a startup has certain advantages over incumbents, it's not saddled with legacy tech. It can actually snap out a very single product and have unity of focus with a small team on solving that individual problem, which should give them speed and give them solutions that are better than generic solutions. If you believe all of the things that make up what a startup is and the advantages it has over an incumbent, hard to believe that with the trajectory of money pouring into the ecosystem, talent pouring into the ecosystem, the big problems that still exist out there, that it's going to remain in the low single digits for fintechs if you fast-forward a decade.

If you actually look as an example at all of the top 20 banks in the US and you say how many of them are branchless. Well, the answer today is none. All of them have branches. Every single one of them,

Nigel Morris:

Even Capital One that started as a branchless platform in order to access low cost, durable deposits got into the banking business.

Frank Rotman:

That's right, and you have to ask yourself, and for me, it's a narrative violation to think that 10 years from now that none of the top 20 banks will be branchless banks. Where is that going to come from? Is it going to come from the incumbents shedding their branches completely, or is it going to come from a new challenger starting without the legacy infrastructure of 50 by 50 boxes on street corners that people walk into to get their financial service products?

Nigel Morris:

An example there being Nubank in Brazil, Frank, that has ascended in the time that you and I invested in them to now 70 million customers and don't have any physical apparatus at all.

Frank Rotman:

That's right. In the US, there are still so many problems that you can look at that are not solved. How many people would raise their hand and say that applying for a mortgage is a magical experience? It's a huge ecosystem and it's still a lousy customer experience for a whole host of reasons. How many people would say that wiring money internationally is an easy thing and a solved problem? Well, there are companies that are still tackling that, but it's still not the easiest thing in the world for a typical consumer to move money.

For businesses, it's even worse, so where the consumer problem might be kind of, sort of, or mostly solved, for businesses moving money cross borders, it's still a very, very difficult thing to do. It's taking up a lot of time, money, and effort from companies to manage this and make sure that the money gets where it needs to get to on schedule. There are huge classes of problems that have yet to be solved, even within the US, let alone going to other geographies where even access to basic financial service products is in question.

Nigel Morris:

I hear you say there are some powerful advantages of being able to start a business from scratch. New tech, verve, energy. You can target specific segments or distribution channels with more clarity. You don't get caught up in the historical incumbent apparatus. Then two, you're saying, look, there's huge profit pools and there are loads of problems yet to be solved. Who could believe that we've taken the friction out of money movement or access to lending or those things?

Talk a little bit about the incumbents, Frank, because they're not just passively watching all this happen, are they? How are incumbents reacting? And if you were giving advice to a CEO of one of those 20 banks that you mentioned, what would you be saying to them?

Frank Rotman:

It's always been a question about buy, builder, partner, and the banks have been notoriously bad at making the right decision for themselves because it's just difficult. A lot of times the right answer for a bank would be to buy, but buying requires paying a price that the market would clear the business at. Sometimes the right answer is to partner, but to partner requires changing approval processes and figuring out how to compromise at the margin on things that banks are used to having complete control over.

And building is always the easiest answer that a bank will default to, and then they decide that they're going to build something and realize that they don't have the talent. They don't have the internal budgets in order to pull off what it takes to actually build something from the ground up. They more have an apparatus that slows things down rather than speeds them up and gets to yes answers every day, which is really what building a business is about.

Nigel Morris:

If I might add, so many of them are having to deal with massive tech debt. I mean, i.e. their appetite for refitting old technology and creating new technologies is far greater than their tech budgets and talent capacity allows them to go after. Hence, as we mentioned earlier, they're much more inclined to be willing to partner with the fintech community.

Frank Rotman:

It's interesting because building is where there's a massive amount of value because you're solving the problem for the first time and can capture outsize market share if you do it well. But it requires the ability to experiment, the ability to make mistakes, the ability to undo decisions that you've made. All of these things are things that would come with organ rejection within organization of size, not just banks, but any incumbent in any industry. They're not very good at that.

What we talk about at QED is making sure that our founders fall in love with the problem statement, not their own solution statement, because they have to wander their way in through experimentation to find a solution that the market wants.

The problem with banks building is that they fall in love with their solution statement because it could take them a year to ship the solution. They almost put down in writing what they think the answer is going to be, and they have to be right because they're getting approvals for it. They're coding to it, they're putting a lot of money behind it, and they're not very good at experimenting and undoing and then having different decisions made. It's just not in the skillset of banks that have very stringent approval processes.

For banks, I know a lot of them think they can build things. They'll look at a team in the startup world and say, there's only 10 people there. Why would we pay all of this money for 10 people that have assembled a product over a three-year period? We could do the same thing faster. We could do it cheaper. The answer is, maybe you could, but I'll tell you, you can't.

For a lot of the banks, it really comes down to are they going to be good partners or are they going to be good buyers? In order to be a good partner, you need to be good at integrating the technology of a third party. I think banks are getting better and better at integrating the technology of a third party. They have to get better at recognizing that everything you do is about taking on some level of risk and trying something new is risky.

As long as the banks are willing to try and fail, or experiment and integrate with a tech provider that's trying to find a solution in the marketplace, the chances of that succeeding are modest to high. Buying something is something that a bank, as long as they could see their way to the right price with the right enterprise value, really the skill is about leaving the company alone and not trying to integrate it directly into the way the bank operates, because that's the easiest way to actually kill the new technology.

Starting off very slow and leaving it independent, and then over time figuring out which pieces could be integrated within the bank is going to be very important. But also buying is challenging because retaining talent is very hard once you buy the talent. Keeping the pace of innovation very high, when now you have your own regulators looking at it and you have your own compliance people looking at it. The art on buying is making sure that you can still treat it like a startup within the confines of a bigger company.

Nigel Morris:

A real challenge culturally for incumbents that have survived for 100, 200 years to be able to embrace that level of innovation and risk where so much of the culture is about risk and mitigation.

Frank, let's go back up to the big picture again as we close out this conversation. We started off by saying that there's a question about whether or not we're at chapter two versus chapter eight. You and I do have a dog in this hunt, don't we, in that we both passionately believe that we're in the early chapters of this book.

Just a final statement, a final commentary here. You and I have worked together for 30 years, I think this year. How has the opportunity changed over the arc of these 30 years? Are you less excited or more excited about what a QED can do and what breakthrough fintech platforms can do now versus five years ago, 10 years ago? What's the arc of the opportunity and are we accelerating or are we decelerating?

Frank Rotman:

It's a very good question. I'll start by saying I'm actually more bullish on the next 10 years building seminal, durable companies that can compete with the incumbents and thrive in the public markets than I was over the past 10 years. In some ways, the past 10 years, 15 years, was really v1.0 of proving the art of the possible within fintech. Some really interesting companies did emerge. But it really was just the art of the possible and a lot of the companies that were built, they were built in a very particular way, in a very particular interest rate environment with a very particular amount of capital that was flowing into the business that was free flowing.

I think this next 10 years is going to be a bit different. A lot of the infrastructure layer has been built so that now the ability to connect all of the dots. Think of it as the Lego blocks now exist, and now it's about assembling them into different configurations that are going to be really interesting. A lot of the work over the past 10 years was really the precursor to what could be built going forward.

Again, a lot of new rails, a lot of new functionality have been built, new APIs, digital has been embraced, UX, UI is now understood better. We now have a wave of AI coming, like there's a lot of really interesting things from an infrastructure standpoint that have been built.

But I also think because of what's happened with the shift in environment, businesses are going to be built in a much healthier fashion going forward. I think that we're going to be layering a more pragmatic way of building businesses, a more historical way of building businesses on top of this new infrastructure, and on top of the art of the possible and what's been seen.

The combination of better, more disciplined business building, profound problems that we still can see and we know exist, the ability to actually assemble the building blocks in a different way. Actually, by the way, a lot less expensive than what it cost in order to assemble the building blocks five, 10, 15 years ago. I think this next 10 years is going to be much more seminal in the long-term story arc of fintech than the last 10 years.

Nigel Morris:

I totally agree, and who would've thought that a Capital One could emerge to challenge American Express and City and Chase 25 years ago, 30 years ago? Who did the Brazilian banks think that a new bank could emerge out of the ground to challenge them at their very foundation? Who would've thought that Credit Karma could have 110 million customers and democratize access to credit bureau data?

I think there are dozens of these companies that will be forged in the next five years. I think the opportunity set is massive. The thing I would add to the missionary work that we were involved in the early days, the building blocks and the art of the possible, is that the next generation of founders will stand on the shoulders of the last generation in terms of learnings, in terms of skills, in terms of what can go wrong.

You and I have talked a lot about the physics of banking. We believe passionately that specialists matter because credit and fraud and AML and KYC and regulatory climate management, these are very tricky concepts and we only have to look at SVB and the issues there to point to how important asset liability management is as a foundational skillset in the physics of banking.

We'll leave it at that, Frank. You are passionately in the chapter two camp, as am I, and I think we look forward to just an amazing opportunity set going forward. And there we are. Frank, thanks for your conversation.

Frank Rotman:

Here's to the next 30 years.

Nigel Morris:

This has been the Fintech Thought Leaders podcast, your deep dive into the world of venture capital and financial services with today's digital disruptors. QED is proud to provide the best advice you can get. To learn more or to read the full show notes from today's episode, check out QEDInvestors.com, and be sure to follow QED on Twitter and LinkedIn at QEDInvestors, and thank you for listening.

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