Fintech Trends for 2020— Facebook Project Libra, Amazon, and Millennials: The Ledger
Now that we've had a little more than a week to decompress from our time in Montauk for Brainstorm Finance, we've been reflecting on everything we learned and culling the key trends that emerged from our discussions with top executives. (We've also been upgrading the Fortune.com website, which you can now enjoy with faster load times and enhanced encryption—though the process resulted in some backend issues that prevented us from sending this newsletter Monday. We'll be back to our regularly scheduled time next week.)
That's why, in lieu of a guest on this week's "Balancing the Ledger," the three of us—Robert, Jeff and I (Jen)—jointly hosted the show, rehashing the conference and the soundbites that echoed beyond the stage.
Here are a few of the most salient predictions and themes we gleaned:
1. Facebook may struggle to launch its Libra Cryptocurrency
As Facebook announced its Project Libra the day before Brainstorm Finance kicked off, naturally it was the talk of the conference. But one persistent theme tempered attendees' optimism: Skepticism that the cryptocurrency could actually get off the ground. "Libra is a very exciting moment when it launches—certainly the question is if and when it’ll launch," Barry Silbert, the CEO of Digital Currency Group, told Fortune on the sidelines of the conference.
Jeremy Allaire, the CEO of Circle, pointed to regulatory hurdles and other complexities involved with creating a stablecoin backed by not just one fiat currency, but a basket of various nations' monetary notes. "I think that’s something that both individuals, businesses and governments will have to ultimately get comfortable with, so it’ll be interesting to see if Libra is able to launch and how that’s perceived," Allaire told Fortune in a separate interview.
2. Big banks aren't really all that screwed
Adam Dell, who sold his company Clarity Money to Goldman Sachs's consumer bank Marcus and now serves as its head of product, made some headlines with his pithy comments at Brainstorm Finance: "There are only two kinds of banks— there are banks that are screwed, and banks that don’t know they are screwed," he said.
But his employer, Goldman Sachs, didn't seem to fall into either category, nor did the other big banks that were represented by their CEOs at the conference, with their vast global scale and trillions of dollars in assets. (Compare that to fintech startups and challenger banks, where even the leading companies have yet to amass more than a few billion each.) Fortune executive editor Adam Lashinsky put Dell's comments directly to Citi CEO Michael Corbat, who responded, "You’re screwed if you’re in denial. and I would say as an institution we’re absolutely not in denial." Citi would be "dead" if it stuck to the status quo, he added, "But we’re a 200-year-old institution that’s reimagined itself several times, and we are very much in that process today." Corbat also described himself as a "true believer" in blockchain technology.
Bank of America, whose CEO Brian Moynihan opened the conference, also offered a telling statistic to illustrate why his company wouldn't be left behind: "We have more blockchain patents I think than anybody else does now," he said.
3. Amazon could come for banks
As my colleague Jeff Roberts put it on this week's show, "Amazon has all the ingredients to be a bank." One main ingredient: Its close relationship with customers. Added Robert Hackett, "If you look at some of the consumer sentiment, people like Amazon way more than they like their banks."
At the conference, though, Patrick Gauthier, vice president of Amazon Pay, threw cold water on the idea: "The fact that we can build something doesn’t mean that we should," he said. Still, he didn't entirely rule out a banking foray sometime further off in the future—nor did he scoff at the idea that Amazon could very well build a bank if it wanted to.
The following day, Citi's Corbat was asked whether he feared that Amazon or another big tech company would build a competing digital bank. "It's a question we get asked frequently," Corbat acknowledged. "I don't know their ambition or intentions per se, but what I would say is, we don't take anything for granted and we're not dismissive. We're not dismissive of Amazon, I'm sure we'll get to Facebook—anybody who's got a couple billion users, I think you need to pay attention to." It's clear the big banks aren't writing off Amazon as a potential competitor one day.
4. Millennials' net worths are bulging
For years, the popular narrative around the millennial generation has been that their heavy student debt burdens and the fact that many of them graduated during or around the Great Recession would condemn them to a dimmer financial outlook than prior generations. At Bank of America's last count, in 2018, only 16% of millennials had saved at least $100,000.
At Brainstorm Finance, though, executives painted a different picture of millennials. "They're not all sitting in their basements smoking weed all the time," said Andy Rachleff, the CEO of Wealthfront, a robo-advisor whose customers are primarily millennials. And, he added, "They’re in the wealth accumulation phase of their lives."
Walt Bettinger, the CEO of Charles Schwab, meanwhile, said that hundreds of thousands of millennials are now flocking to the brokerage annually, and make up more than half (53%) of Schwab's new accounts. Their average net worth? $350,000 in household assets, Bettinger added. "So the average millennial we’re winning has that level of affluence today already.”
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To the Moon… Goldman Sachs' CEO says the bank is exploring blockchain payments and stablecoins. Facebook's Libra may find the greatest adoption in India and Africa. Cryptocurrency gets The Onion's satire treatment: a Rolos blockchain for "digital caramel assets." Former Fed nominee Stephen Moore is working on a "decentralized central bank" for cryptocurrency. Bitcoin's rally shows it's "probably here to stay." A Bitcoin fund outperformed all others in the second quarter of the year. You might be able to time the Bitcoin market after all. Central bankers are looking at cryptocurrency more seriously. "Coinbase effect" sends a newly listed cryptocurrency's price soaring.
…Rekt. There's a diarrhea-causing illness called Crypto that's spreading in swimming pools. Bitcoin tumbles back down. Hedge funds are shorting Bitcoin again. Cryptocurrency app demand hasn't bounced back along with the rise in crypto prices. Facebook's Project Libra partners are still weighing whether to participate in its governing association. JPMorgan's defunct digital banking app Finn was doomed by internal discord at the firm. Illicit Bitcoin spending is set to hit a new record this year. An increase in cryptocurrency mining is stressing Iran's power grid. "Crypto mafias" may be replacing the PayPal mafia. Lawyers anticipate Facebook's Project Libra will result in tax nightmares.
January 16, 2018. Remember that day? It was less than a month after the Bitcoin price had touched $20,000, and the cryptocurrency seemed to be in free-fall, a meltdown that would last for more than a year.
But last week, on June 26, Bitcoin hit a 2019 high of about $13,796, according to CoinMarketCap—its highest level since January 16, 2018. Although the price has since given back some of its gains, if it begins surging again, it's hard not to think that $20,000 Bitcoin—or above—might be in reach again soon enough.
MEMES AND MUMBLES
Ride 'til I can't no more. It's officially summer: It's hot outside, crypto winter is finally thawing, and even Game of Thrones fans are done worrying about winter in Westeros. That means Crypto-Twitter has nothing better to do but create memes for our collective enjoyment, like this brilliantly entertaining cover of Lil Nas X's "Old Town Road." Someone using the handle @TheCryptoBubble over the weekend released a spoof version of the song on YouTube, entitled "All Time Lows." (Due to technical difficulties, images aren't currently showing up in The Ledger newsletter, but it's worth clicking through to the video.)
The lyrics include the following verses, to the tune of "Old Town Road":
I'm gonna buy these alts because they're oversold
I'm gonna buy 'til I can't no more
I got my altcoins by the bag
Throw 'em on my back
Got my ledger on my neck
Buying all these shitcoins
You can keep your Bitcoin
I am broke as hell
But I will never sell
I'm never selling nothing
It may be odd timing for an altcoins anthem: While Bitcoin has rallied significantly in recent weeks, alternative cryptocurrencies have not come along for the ride, according to an analysis by The Wall Street Journal. Still, this tune will be playing in my head through the holiday weekend, and likely in yours now too. You're welcome.
FOMO NO MO'
"We’re going to have competitors, whether it's a cryptocurrency competitor or another fintech competitor. We’re going to have competitors. I tell our people, don’t guess, you know they’re there, you know they’re coming, you know they want to eat our lunch. Assume it."—Jamie Dimon, CEO of JPMorgan Chase, in a recent interview with Yahoo Finance