State of Fintech 2025: Everything You Need to Know - Rex & Simon Talk Fintech SPECIAL

I'm feeling pretty amazing. And thank you so much to Jeff for being like an absolute hero and helping us get through this, to the GU at Aperture, and of course to Sardine for giving me the space to do this, because this was – I'm not going to lie – a fun one to put together. I'm excited for going through it with you, Rex. And you might even spot a couple of things that you mentioned when we were draft reviewing it right at the end. Some Rex comments made it in there for sure.

Welcome to the State of Fintech 2025. And the state of fintech is good. We are in the age of the fintech hyperscaler. Yes, we have Nubank with over 100 million customers, Klarna at 85 million, and Revolut – yes, those guys – snapping at the heels. And I think the infrastructure is shifting. We are seeing those hyperscalers coming after the incumbents, and for the first time they're threatened. So today we're going to talk about the broader trends: fintech and AI, embedded finance, some of the banks (because hey, they're still around), neobanks, payments, open finance, big tech and wallets, stablecoins (because they're a thing this year), and of course the scamdemic. So let's get to it.

Goodness. All right, let's do this. So the biggest trend is the fintech hyperscaler. These are fundamentally companies who can be bigger than the incumbents by play some margin. When you think about hyperscalers, you're thinking about Microsoft and Amazon and all of those guys. Stripe – could they be that? Could Nubank be that? But for retail, well, these are not small numbers. They're on the way to hundred billion dollar market caps in some cases, and they're continuing to grow. So this is going to be fascinating to watch, as fintech is only 3% finished. We only have 3% market share. And the market narrative has really shifted. It's crazy how now fintech is back as a consensus. For us who are fans of the space, it should never have really gone away. Maybe it was overbought in 2021, but if you look at the publicly traded stocks, they're all heading back up and they're all doing pretty well.

Right. How long could you keep that up for? I mean, JPMorgan's doing 15%, so if they can stay ahead of that number for long enough, they're doing pretty well. I think this is going to be the next big trend of 2025 and 2026: the IPO window opens. Klarna and Chime have laid their cards on the table, saying that they're looking to go for it. But who's next? I think that's going to be interesting, because it starts to change the perception of fintech in the eyes of the broader investment market and it recycles capital back into the ecosystem. We need those stories. And it's a trickle started right. We talked about Bridge selling for $460 million to a public company, MoneyLion already public but got acquired for another for a billion dollars, Stripe made their largest ever acquisition Bridge also a billion dollars. So these are trickles – these aren't massive IPOs – but these are chunky outcomes, and that builds confidence towards maybe unleashing the fintech IPO flood wave or breaking the dam. So we'll see that. One acquisition has probably made stablecoins the hottest category, if not the second hottest category in all of finance right now. It's crazy how that happens. Neobanks on a pure customer basis are now as big as some of the biggest banks if you just look at their pure customer numbers, and they are just opening up to cross-selling.

You're probably more bullish on Europeans expanding to the US than I am.

Without question. This was the AI in finance. Everybody has a story but very few have real value capture, especially in the incumbents. The amount of death by sort of PowerPoint and pilot is unbelievable. But Klarna are talking about their chatbot that does the work of 700 agents. Just created a massive PR value. And there are a few examples where it's really working and lots of examples where it's really not. We talked a little bit earlier about Bridge's acquisition, but this is the tip of the iceberg of payments companies getting really serious about this space. Just a couple days ago, we saw Nuvo now doing direct settlement to merchants in stablecoins. I've seen three stablecoin-based neobanks this week. It's become a really hot category. And the payments world has gone from no never to how quickly can I get this. That shift is dramatic. Embedded finance – great slide from BCG. Still the single fastest growing net new opportunity despite the bad moon music. And of course 2024 was the year the wallet wars began, when Apple was forced to open up NFC in Europe. It then decided it was going to open up NFC access. And if you're not familiar with NFC – near field communication – it's how they do tap to pay, but it's also how you tap into sports stadiums, it's also how you authenticate passports sometimes. There's a whole bunch of things that become unlocked just from that one piece. And now, whether it's Apple Pay or Google or PayPal, it's open season for who gets to be your wallet. And that's going to be a major trend.

Europe's been ahead of us.

I think it's hard to overstate how important this is to watch. Nubank when it started, they came for little table scraps, and now they're showing up for the main meal. To your point about Robinhood, great case study. Free trading, average account balance years ago was in the hundreds of dollars, now it's about $5,000. But they did their match program and the average balance coming in via match is $81,000. So that moves you very clearly from like the customers that banks don't care about into the mass affluent. So that's going from the scraps to the dinner table. And that's where you start to feel pressure on the incumbents. And that is going to be so interesting. And that happened this year right, the match transfer program, Robinhood doing card. But lots of other examples outside of just Robinhood. Completely.

Should we do fintech and AI?

All right. Yeah, we've covered it in the trends. I'll try and skip through it a little bit. But the application layer I think we can now agree is booming. It was always going to. The initial meme was, does everything end up at the chip manufacturers and the foundation models? Far from it. There are companies generating revenue across the entire value chain. And if you double click on financial services, every bank employee has an AI agent equivalent. These were just the logos I found trying to quickly put together a slide. And you know, not every logo fits in every category perfectly, but whether it's frontend developers or your customer communications or your engineers or your compliance workflows, there's a company that's doing gen AI in that category. But doing the labor piece of it – doing what the humans had to do and the software couldn't.

There's a few incumbents that have got into production with gen AI, but it's by exception. These were the two I found. There are probably others, but it's like a slice of a slice of what they do versus Klarna, who says that they are sort of pretty much shutting down most of their large software as a service providers to replace them, and that they're not hiring anymore because AI is now doing so much for them. And that fundamentally comes from the fact that they've done the hard work on having the data science and the software capability to get the advantage from AI. And most incumbents just don't have that setup in the first place. So they're a long way from being able to use it, and it just takes some longer to kind of execute. So they're left in a very different space.

If you feel like you've fallen asleep with fintech, wake up in 2025 because it's going to be exciting. It really is. And the thing as a nerd for capital markets that really excites me is this was untouched. You were never going to get near Wall Street. It's just too complex, the jargon is too deep, it's too wide. And yet private credit and equities workflows – you can now make a meaningful difference to those workflows. The sort of entry level team of analyst stuff – AI is going to get you a lot of the way. And there's a lot of people in production with this. In fact, the fastest adopters are all the hedge funds and the buy side firms and the private credit funds. They're making a real difference. So this is kind of not like a consumer app that everybody can relate to, but it's what really runs the world of the financial markets, and that's where it's going to rubber hits the road. So I love this use case as well, which is I don't think anybody is thinking enough about what happens when there's an agent sitting inside my phone and I ask it, hey Google, please book me a flight to Antarctica for $300, and it goes, okay, processing your request. I'm pulling your information out of your secure on-device wallet because Apple's made that available. I'm finding you a flight. Okay, I found this one. Would you like me to pay for it? Yes. And all I've said is yes, and then it pays for it using the credential that's on my device, and then it stores the booking inside of my wallet and got the tickets sitting right there. You want that user journey? I want that user journey. But why would that agent select Robinhood versus Chase versus somebody else? If that happens, really these LLMs, these AI agents are starting to make a real meaningful difference to market share. And who's going to lean into that trend? I think is going to be interesting to watch.

So let's talk about banks a little bit, because they're still here. And they had a great year. They outperformed the S&P 500. And there's a lot of doing that like deposit repricings normalized, investment banking fees are back, credit card loan balances continue to rise, base rates are still high, and the US economy's been roaring. And heck, it's even been a good time to be in a European bank, which five years ago would have been the worst thing in the world. So they're feeling comfortable. And I think that's a dangerous place to be, to feel comfortable as an incumbent given what's coming. But what this does hopefully is free up some space for investing in the future and really transforming how you do things. So deposit flight has ended. But what's fascinating is consistently JPMorgan is the one that ziggs when everybody else zags. They're betting on international expansion, they're betting on adding branches when everybody else is closing them. And it's been interesting to see PNC's now followed that. I think you can also say that investment banking fees are following a pick up in overall markets activity. And if markets do continue to pick up through 2025, you can expect those to come back. So it's a pretty good time to be an incumbent bank at the moment.

And I want to also call out JPMorgan. I think they've done a great job for some of their infrastructure stuff. If there's one bank's developer platform that I hear from founders I've backed – they're like, I want to use this thing – it's JPMorgan. You can go to developer.payments.jpmorgan.com, and they say we have API docs. And you can go and you can see their API docs and you can see what products they have. They have checkout, they have global payments, they have online payments. Probably the one I hear about the most from entrepreneurs is they want access to JPMorgan's global payments capability. So I just want to give them a shout out in terms of actually getting developer docs up online, showing up, having a head of developer relations. That seems to be interesting. If anyone has a chance of capturing a decent amount of volume from some of the fintechs, I think they're pretty well positioned to do so.

So kind of – I think the CEO says he hates blockchain, but I saw on their dev portal blockchain deposit account balances in their API registry. So they're not completely sleeping on it.

So that leads me neatly on to our friends at the neobanks. And as mentioned, retail banking is massive and it's growing. LatAm has Nubank, Europe has Revolut. Where's that for the US? Well, maybe it's Nubank themselves. They are in the Americas and they're looking to do international expansion. Maybe it's Revolut. They have a stated strategy now of getting a license or a charter as quickly as possible when they enter a market. They've just got one in Mexico, they've just secured one I think in Dubai or the UAE. They will potentially show up. And I've better not bet directly, but I've counted against Revolut multiple times. I've been a naysayer and they keep proving me wrong. So I would not bet against these guys to get a charter in the US and become a massive company in the US at some point. They're not going away and they're just going to keep going. And Robinhood moving into more banking – they have high yield credit card, doing the asset transfers. Maybe it's Chime – maybe they're able to move up market. Maybe it's a Cash App or a Venmo with new leadership under Alex Christ. Or SoFi, you know, has been doing some acquisitions and expanding there. So we've got a lot of people, and SoFi kind of goes after that more prime lending base because they start with the student refinancing. But that kind of follows the Gen Y folks that they got as their first cohort. They're wrapping other products around them. They could become the hyperscaler. Could Cash App now go and get a charter? Will we go look at the Bank Holding Company Act under a new administration? Will that start to change what people are doing? Will we see the OCC start granting new charters? Does that change the conversation? Will it be Robinhood as you say? We've seen MoneyLion get acquired, but the financial inclusion space is bigger than a niche, but it's probably not the prime segments that the banks really care about. Chime, they're on the way to IPO, but then they're not trying to compete with Chase still. Will they get a charter? And I think this is the big story for this section. A firm go get a charter, because Klarna has one in Sweden and it gives them a different type of balance sheet. So who's going to get charters? And then will that go after the heartland? Klarna launched a credit card. So you've got all these people who are waiting in the wings to move in against the banks. I'll also call out Upgrade, the founder of Lending Club, Renaud Laplanche. His new company is five, six years old now, originating $10 billion a year and growing. The pandemic set them back a little bit, but they're in a great position. You've also got Walmart and Ribbit Capital – Walmart has some absurd amount, something like 30 million Americans interact with Walmart on a monthly basis. Massive distribution channel, not something you hear about a lot in the press, but where could that be in three years? So there are a lot of people who can scale dramatically in a way that recently, and I want to give a shout to the guys at Wise who don't get a lot of attention. But now if you look at them, they are moving a meaningful amount of cross-border volume. Citi is the biggest money center bank in the world, and Wise is moving a serious amount of money across borders. They got 7.2 million customers, half a million small businesses. But here's the thing I didn't know: they have 92 banks. So if you are a small bank, if you are a neobank using Wise for the infrastructure, it actually makes a lot of sense for cross-border. So the unbundling and the rebundling is the theme that enables the hyperscalers to sort of happen.

Speaking of payments, JPMorgan is still the 900 pound gorilla. They are massive, they're continuing to grow. And processing payments for Amazon really, really helps. However, Amazon now also processes with Stripe and with Adyen, who are growing faster. So if this was a straight race, if we ended it here today, JPMorgan no contest, hands down they win. But if you play this forward a decade, what does this chart start to look like with those growth rates? And I think that's going to be the big story for payments – it's an all-out fistfight for market share at this point. Now Stripe, what makes them special is because they are indexed to growth companies. Those companies become massive enterprise clients incredibly quickly, so they get this spike in volume. 82% of tracked AI companies from by Y Combinator are Stripe customers already. OpenAI is on track for $3.7 billion of revenue in 2024 and will do $11.6 billion in 2025. That's a massive client that started as a tiny little thing. What is that as a total of the previous chart? Like 1% or something? To go from 0 to 1% of the entire payment processing of JPMorgan in one year for a new customer is pretty crazy.

Exactly. It's an accelerated checkout, but it also supports pay by bank that they can connect into as well. This was crazy: Stripe Link represents nearly half of the outgoing traffic from Stripe.com. That means if you're hitting a checkout page, half of that is hitting the accelerated checkout. It's just wild. And part to play in that in terms of helping connect those bank accounts and making it frictionless for folks to plug in multiple payment credentials. Especially, it's going to be interesting to watch PayPal in the next year as well, because they didn't necessarily shock the world, but my goodness did they get their mojo back. They're not necessarily as profitable as they used to be, but they are pushing in a big way. Look, they became an alternative processor for Shopify. That was the banner Stripe client is now processing with Adyen and with PayPal. And those are sort of your big three of the hyperscalers. And then of course, if we're in payments, let's not forget that Visa and Mastercard did settle an antitrust suit, but they might have more coming in. The card networks, they've got their own battles to fight at this point, especially with an administration that looks after small businesses maybe a little bit more and might come back after that space. And of course, Capital One potentially with Discover could be in the conversation.

Let's do it. And all these things are related, right? Because part of what's powering all the payments and all the wallets are the developments around open finance and open banking. And I think open banking has found its killer app. It used to be nice that you could sign up a little bit faster and you could do some fraud checks because you had accelerated KYC because you could pull existing information through. But really payments is where it's happening. And you're seeing pay by bank in the wild. And of course payments are getting the realtime payments rail. There is RTP that's been around for some time, but FedNow is rapidly growing. Look at that quarterly growth. Realtime payments are going to be a reality in the US very, very quickly. And of course if you look at Europe, it took a little while, but you see in the data now this is a major part of what makes open banking – the payments experience. And what happens if you start to decouple the payments rail from the line of credit? In Brazil and India, it's now common for pay by bank to be the rail for a line of credit. So rather than having a credit card, I'd have a credit wallet and I'd pay via FedNow. That would be disruptive to Visa and Mastercard.

So stablecoins are having a renaissance. Stablecoins were a big deal a few years ago, and then they felt like they weren't that stable when Terra Luna happened. But now we've realized that most of them are Treasuries backed and people like them. And that shifted the vibe in crypto dramatically over the last 3 years. In 2022 we were talking about FTX and crypto crash and Elizabeth Warren's anti-crypto army, and now we have banks in Europe who are issuing stablecoins and doing repo facilities on a public blockchain. We got a new US administration, so this means institutions and even banks can start to move forward and feel more confident about moving into the space. But the payments companies are leading. Sneaked in the Gary Gensler open to work in the top right there – it's the meme that just won't die, nor should it. But the Stripe acquisition of Bridge really got everybody excited. But the questions that always come up are, isn't this just for trading and bots, and isn't it just kind of not really about the supply? People are buying the stablecoins, but that's not payments volume. But there's a lot of apples to oranges data. So the best thing when you double click on it is look at some of the Visa data. They estimate that there's $677 billion of adjusted transaction volume using the stablecoin rail across 2024. It's not the biggest rail in the world, but its growth rate certainly is there. And remittance flow, look at that chart, you're sort of getting over $100 million per month. Extrapolate that growth rate and it would go – well, you can't assume the growth rate will extrapolate, you could say it could all go horribly wrong. There are a bunch of caveats. But don't forget that SpaceX does treasury management using stablecoins. A US company is doing dispersements. Nigerian consumers are holding USD all through stablecoins. These things aren't going away. And this one is possibly my favorite slide in the whole deck, because we are now finally seeing institutional payments where global corporates are making cross-border payments using a stablecoin. Imagine I'm in Kenya and I'm importing oil from the Middle East. What I would do historically is do that via Swift, and it might take me two weeks, and then there's money, there's oil on a ship, and there's payments, and these things are completely disconnected. What stablecoins give me is the ability to automate all of that if I have a bank that would take the stablecoin messaging and the stablecoin layer as settlement and do the underlying settlement on its books and records on its systems. And there are banks out there doing this. This is not a crazy idea that you could buy oil with stablecoins. It is happening. And it's not all a bad thing. In fact, most of it is just because it's a better cross-border rail. The vast majority of this is legitimate, it's been fully sanctions checked, it's legitimate trade. Swift is an amazing way to let 80s mainframes communicate with each other across multiple hops to send international wires. There's no reason why we need to keep using it to do global payments.

This is Simon's podcast, I should add. You should check it out, Tokenized, wherever you get your podcast guys. The scamdemic. I think this is going to be another big theme for 2025. We lost over a trillion dollars to scams in 2023 according to the Global Anti-Scam Alliance. 70% of those go unreported. And the loss per capita in the US is $3,250, which is absolutely crazy, absolutely massive.

Yeah, it's all in. And one thing on the scams: we talk a lot about replacing interchange or Visa or Mastercard, but they ensure consumers against this. So if we're going to move into a real-time payment rail, it's not just figuring out incentives and rewards, it's also figuring out all of these questions about if someone does get scammed, who pays for it? Zelle got hammered for this. What the reimburse – and I'll come to the reimbursement methodology in a second. But the other thing that's happened in this space is deepfakes at KYC are up something like 2,000%. It's crazy now – it's from a low base. But the problem with deepfakes is they're so cheap, they're so easy to do. There's a report I saw earlier today that something like 50% or 45% of scams are now AI generated. It's just crazy. And you can beat most KYC with even liveness detection. So if I'm holding up my phone and doing a liveness detection, the deepfake can beat that too. And we've done it with Sardine – we can KYC as Tom Cruise to most institutions around the world quite easily with a deepfake. And it's crazy how much of a leaky bucket this is, because that's our most important protection for the entire financial system. And if you think you might be getting scammed, always get off the phone and reconnect with that person. I had a founder recently, sophisticated individual, gets a call and it sounds like it's his mother's voice in the background, she's been kidnapped, and they're demanding payment. And then the only reason it didn't actually end up sending the payment was he texted his dad and it's like, oh that's not – crazy, isn't it? Like you get this stuff is insane. It will trick you. This stuff is getting very good and adversarial.

Yeah, thanks for coming. That was awesome. And thanks for all the work you did to put that together. Thanks to Jeff as well. Shout out to those guys. And Aperture and Sardine. So appreciate you, Rex. Thank you.