Trust, stablecoins, and the AI margin squeeze:What McKinsey and QED's fintech report means for banks

Speaker A: Foreign.

Speaker B: Welcome to the Tearsheet podcast, where we explore financial services together with an eye on technology, innovation, emerging models, and changing expectations. I'm Tearsheet Editor in Chief Zach Miller. Fintech just lived through four distinct ages. We have pioneers, growth at all costs. The 2021, 22 hype cycle and the brutal reset that followed. Now we're in a fifth. Bigger, more profitable, and more disciplined than any version that came before it Stripes. Eyeing an IPO in the hundreds of billions of dollars. Fintech listings tripled investor appetite this year. And yet, talk to anyone who lived through 2021 and they'll tell you this doesn't feel anything like that boom. To make sense of that contradiction, I sit down with the authors of a new joint report from McKinsey and QED Investors, two firms that sit on opposite sides of the table from the fintechs they study. Max Flutoto is a, uh, senior partner at McKinsey, where he leads the firm's global retail banking practice and coordinates its fintech work across Europe. Mike Packer is a partner at qed, leading growth stage investing globally for a firm that's been backing fintech since its earliest days, nearly two decades now. We dig into the report's biggest findings. Why the simplest version of banking collecting deposits, making loans is structurally at risk if customers start letting their own AI agents shop for the best rate. And why fintechs have, for the first time, actually overtaken incumbents on trust in Europe, even as banks have closed much of the product gap. And lastly, the massive spread in how seriously banks are actually taking AI from talking about thinking about it to rebuilding their entire operating model around it. We close with each of them picking the one trend out of six in the report they think matters most for the next decade. Great. So, Max, who are you and what do you do?

Speaker A: Wow. Uh, uh, yeah, Max, I'm a senior partner at McKinsey in our German office. I, uh, lead our global retail banking practice and I coordinate most of our fintech work across Europe.

Speaker B: Great. Welcome to the show.

Speaker A: Thank you, Mike.

Speaker B: Who are you and what do you do?

Speaker C: Hey, I'm, uh, Mike Packer, partner at QED Investors, currently leading our growth stage investing efforts around the globe. And, uh, QED has been around for 17 or 18 years now and investing in global fintech at the earliest stages.

Speaker B: Welcome to the show as well. We've had a few of your colleagues on the show over these years, both of you. Um, so. So we're going to talk about fintech trends and what I think is really interesting Having both of you guys here is that you're both looking at the same data from very different chairs. Like one of you is writing checks, the other one is advising the banks on the other side of the table from the fintech. So before we even get into what's in the report that you guys recently published, I'd love to see if there's a place where um, if you guys disagree about what's happening in fintech at this point. Was there any divergence as you were putting this report together?

Speaker A: I mean we could say what happened in the team room and the writing room stays in the writing room. Um, uh, so no, I think it was um, surprisingly uh, aligned in terms of the big trends Now I mean we do play different roles, right? If you are an investor in the space, uh, it is your job to be maybe a bit more of an optimist and it's uh, our job to be a bit more of a skeptic. Um, but I don't think there was a fundamental disagreement, uh, at least not that I can remember. I don't know if you agree, Mike.

Speaker C: I agree. I mean I think uh, we'll both agree that lots of change is happening. We both agree that there are opportunities on both sides of this equation if we go to the incumbents versus the startups. Um, and our perspective on this, again, whether you want to consider this glass half full or glass half empty, is that we're just getting started and there's so many opportunities for the fintech, fintech sector and I think that that weight is maybe a version of where some of our differences are. Um, you know I, I personally think that the disruption that's happening now and the capabilities that the entire industry has, whether it's the fintech startups, the fintech compounding companies that are huge and starting to really uh, continue to accelerate and penetrate these markets and the kind of global incumbents and everyone has big time job to uh, do with the latest and greatest tech.

Speaker A: Great.

Speaker B: And I wasn't trying to sew dissension here. I was just curious if there was a little bit behind the scenes.

Speaker C: We'll find some forms of disagreement, I'm sure.

Speaker B: So let's start with some of those big fintechs that we're talking about. So Stripe is rumored to be going IPO this year and we're talking about above $100 billion valuation. Um, fintech IPO volume has tripled I think since 2024. But you know, having been, we've all been in the industry for a long time. It's like, it definitely does not feel like 2021 now. And I'm wondering if you can talk to sort of like the feeling how things are and how the data also points to the fact that it feels like there's new opportunities opening up in a big way. Like you guys are saying.

Speaker C: Well, I'd say the feeling from the fintech ground is feeling much more positive than it was over the last 12 or 18 months, in part because of some of the um, liquidity that has been seen at the top of the market, meaning the larger size companies. But I think what's fundamentally happening that gives me the most excitement for what fintech can do is what we're seeing with these large companies, private and public fintech companies that are really growing at rates, uh, and adding business at rates that we haven't seen at this scale. And I think that just shows the amount of disruption that they're pushing. Again, you mentioned Stripe. I'm sure we'll talk about companies like Ramp or Revolut, um, and then in the public markets, companies like Nubank and Robinhood. There are some really interesting stories out here where companies have at least gotten bigger than I would have thought ten years ago, uh, when I started this investing journey in fintech companies. And again I look at the way these companies are growing both in terms of growth rates, uh, and most of them in terms of balancing growth and profitability. And then you add this story of kind of efficiency and innovation on top of it and it looks like the sky's the limit for some of these companies. And I think that's flowing itself downstream. Uh, when you look at the later stage kind of growth, pre ipo, early stage growth, which is a, ah, place where we tend to focus as well as the kind of series A, series Bs, which is another um, sweet spot for QED. But we're seeing it all the way down I think.

Speaker A: I mean we're looking for disagreements. We won't find any here. I think the big difference is that it uh, used to be uh, a big trade off between growth and profitability. And some were growing like crazy, ah, fueled by um, maybe rational but surely exuberant, uh, animal spirits in some cases, um, uh, others were then pivoting to profitability, often cutting off growth. And it seems to be that some of the, there are some that have escaped this trade off and are uh, both continuing to grow at incredible rates while reaching profitability first in some cohorts and then also at company level and really at some point their self funding and ipo, uh, becomes a nice to have and no longer a must have. And that gives these companies incredible strategic optionality and that's a big difference. So if you look at the data we had, look at this Fintech, uh, development in five big themes over the years. I'm not going to go through them, but if you compare what you started with Zach, the 20, 21, 22, the big hype versus today we see the share of fintech that is profitable today is significantly higher. Um, uh, we have seen a return on funding. It's not quite as high as it was back then. Uh, but money is available. Um, and most of them are, most of the big ones are already making money today. And that is a, it's a very different situation from what we were seeing three, four years ago.

Speaker C: And Max, maybe if I could just.

Speaker B: Yeah.

Speaker A: Oh, go.

Speaker C: Sorry Zach, but if I could just chime in there. I mean I think what, what it tells us, which was again, um, as fintech investors we certainly drink our own Kool Aid and we, we think, try to think long term and through cycles. But what we're, I think we're seeing and Max alluded to are these companies, um, especially the kind of later stage winners being able to operate in different cost of capital environments. And what we're seeing right now is um, maybe something that's a little more average or uh, sustainable in terms of long run versus kind of our ZIRP eras of 21, 22 that everyone uh, kind of alludes to. And then on top of that we have this kind of deflationary and uh, innovation effect of AI which not only pushes your cost down but it's opening up kind of new opportunities for business. And when you add these two or three things together, I think the, through the cycle view of fintech and again we see this at various scales within our portfolio. Not just these mega companies, we're Talking about companies, 100 million, uh, revenue run rates, 50 million revenue run rates that are able to really kind of manufacture this line of profitability and growth. And so it's not just the big guys anymore that are doing this too. And I think that's a very important learning for this, this part of the cycle we're in.

Speaker B: I appreciate that. Um, we haven't had a podcast in the past two years that hasn't talked about generative AI. And I would say number two in terms of the topic, uh, density, uh, is around stablecoins and I know your research focuses on that. So we're seeing trillions of dollars in stablecoin transactions already. Um, but I'm curious, one of the things I thought was really interesting is very small percentage of that is actually end user payments. And I wonder if you guys could talk to that. What's going on there?

Speaker A: It's 1%, um, 1%. I mean there's these numbers that are just incredible, uh, uh, incredible scale and probably since writing it, uh, I'm sure the number has gone up again. What we call is 35 trillion USD in annual stablecoin transaction, which are incredible numbers. Um, even in the new age of SpaceX iPodOS where numbers all seem to have gone significantly bigger, this is still a massive number, but only 1% of that. And if you estimate around 390 billion uh, uh, uh, USD is really end user payments like remittances or paying suppliers or things like this. Everything else is arbitrage trading, uh, crypto, native activity. And um, I'm not saying that's not important but it's something very different. And um, uh, so when you see this, these very big numbers, we shouldn't forget that in terms of real end user use cases we are still incredibly early. Uh, although at very, very fast growth rates of course. And I think that's also important. It is no longer something which a few crazy startups do. Um, all the big ones, ah, ah, uh, are looking at it, are experimenting. Jamie Dimon already said a while ago that you need to be there to learn and experiment. Ah. And these are very serious players who are playing still for end users at relatively small scale compared to the global economy.

Speaker C: Yeah, it's hard to disagree with the data. Um, and I think we should lead into maybe a version of what Max you just alluded to, which is maybe differences between stablecoins and tokenized deposits. Because I do believe there are a couple interesting trends to unpack there. But Zach, I think your point is spot on. We're still kind of searching for what's the real economic major case of uh, stablecoins. And again everything that's remittance is a major uh, you know, uh, sector. Right. And all the remittance companies are playing here. From Western Union to Felix Pagos, which is a company in our portfolio, everyone's in the middle remitly another company that we were early investors in. But so everybody's kind of playing in that space. But it's a very, very small portion of the economy. What I do thinks happen with stablecoins is it's let the cat out of the bag I think on the value of real time settlement and We've seen this in other ways throughout different payment networks and different payment schemes, whether it's pix, uh, in Brazil, which I've spent a lot of time on, uh, throughout my career, or even things like Fed now that have been kind uh, of pushed and working. And so I think this kind of the value of real time settlement is I think the thing that people are most excited about and what stablecoins need to become the next uh. I don't know if it's 10x or 100x depending on the scale of where we think the future is or how fast things are growing. But they're going to need a tailwind like a agentic payments use case or they're going to need a tailwind like connecting into multi networks like connections into the banking system. I don't have a great prediction um, for you on whether tokenized deposits, I'm using air quotes for those listening tokenized deposits or stablecoins kind of win in the long run. But what's absolutely true I think is everyone's moving to this world of um, you know, closer to real time settlement and then the infrastructure around that. That's the exciting thing I think to be, to be looking at now. So anyway, I opened a few things there but um, I think Max, you're spot on and it's still early innings. Um, but I think that stablecoins is kind of a network as a rail and tokenized posits as well. We're going to have to integrate these things into the banking system in the world of global payments. And that cat feels out of the bag to me.

Speaker B: I want to shift a little bit maybe. Mike, we start with you on this next question because it's specifically around investing and the report showed some growth equity capital shrinking I guess from 45% of investment in 2019 down to 25% today. So it's uh, that kind of barbell forming between early and late stage. And we're definitely hearing that with some of the guests on this show. Where does that leave? I guess this is specific to qed like where does it leave you guys in your sweet spot right now. And has that change how you write checks or to whom you write checks?

Speaker C: So um, yes, I think would be the short answer. Uh, and I think the major change that the market is seeing is a version of what I was talking about earlier with the mega uh, private fintech companies and their ability to put capital to work. Right. I think in a world where people can put money into stripe versus a series B or C Company that has a lot of risk but the return or growth profile looks the same, they're going to pick the stripe. I mean it's the same thing we're seeing with anthropic or OpenAI in forms of the SaaS market or the middle market of kind of growth equity. Overall I think there's a fintech version of this, but we've basically divided the world into uh, three chunks as it comes to our later stage investing. First and foremost, what we're looking to do is double down on our portfolio winners from the early stage. Uh, and that would be kind of as companies get the Series C, Series D and we have the inside knowledge to back those companies. That's a strategy that we've kind of always done and will continue to do and look for. And then we have what um, would be a typical, you know, early growth investment would be um, what we would call emerging fintech winners. These are the super high growth series CD companies that are attracting lots of capital and lots of talent and kind of breaking up industries. The difference between this, this segment today versus three, five years ago is the pace of change and growth. These companies are growing incredibly fast. So if you're a smaller company, the bar has raised for how fast you need to grow and how fast you need to ship product. And again that's a function of where the overall kind of technology, uh, innovation economy is. And then the third part is these kind of what I'm calling fintech compounders, right? These are the guys that are only getting stronger, that are continuing to accelerate. So that's how we've changed things at the early stages. It hasn't changed a ton, but happy to touch on some of that too. But the biggest trend that's here is the length of time these companies have stayed private.

Speaker A: I think that's, I mean, I couldn't agree more. Your stat, Zach, is correct. Uh, the same time this growth capital piece has shrunken a little bit, but it's more or less where it was five years ago. The early stages continued to grow at a 7, 8, 9% CAGR. And what has really, really gone up is the late stage funding ipo. Uh, volumes as you said earlier, have gone up, uh, uh, 3X. So healthy growth at the bottom, a lot of growth out of, from basically nothing, uh, ah, at the very late stage and the middle has been slower. Um, and that gives this, um, this, you know, even though there wasn't much of a, of a, of a volume change in the middle, everything else has been growing. So it now looks like, it looks like the barber, uh, you talked about.

Speaker C: I do, I do think we still are in an interesting time with the, you know, growth stage companies from 21, 22, 23. Right. These companies are the ones that have had to prove the most and were likely overvalued the most in terms of their private market marks. And so that creates a lot of complexity when it comes to how with the cap tables look for these companies, how they are thinking about future return on investment and can they reach the scale or stage of some of the companies in front of them.

Speaker A: A hundred percent. True. I'm not going to name names. Um, but there a few very big funding rounds in uh, 2122, uh, led to valuations which today probably wouldn't happen anymore. And uh, I mean it also gave these companies a lifeline. Right. And gave them time to live off these big checks for a while to try a pivot or two and to refine their business model. And some of them will come back strong and some of them potentially won't. Um, uh, that's right. So I think, I think there's a. I mean I wouldn't call them zombies, but there's quite a few who are sitting on complicated cap tables from that moment. Uh, still today.

Speaker C: I. Max, I think you're. I totally uh, agree with your point into the word zombie. I mean I just think it's very hard for the market to tell who's a zombie and who isn't if you're not really, really close to the inside. And again when you can same fund, same firm can go put money in revolut ramp even anthropic OpenAI in recent years. Why would you try to figure out who's a zombie or who's not? So I think there's just a risk adjusted return that needs to come back to that middle part of the market.

Speaker A: That's right.

Speaker B: Max, have you seen the same thread follow through I guess to We've always held that bank's ability to partner and partner at speed and scale is a differentiated skill and has been and will be. Um, have you seen this impact who banks are willing to partner with or how they get partnerships done

Speaker A: man. Uh, this is a topic that's a hard one. We could do a whole podcast in my career and I wish it was easier. It is difficult for these big organizations. Um, there's the big make or buy question. Uh, um, they for a long time Fintech was a disruptor. Ah going after their profit pools. Um, and uh, a lot of also dismissive comments of senior management incumbents. Um, oh these are just niche models. It's all uh, VC funded. Unit economics don't work. This will go away. And on some business models they were right and they did disappear and on some of them very clearly burned. Right. And we now have these, these, these very successful scale companies that, that Mike has uh, has mentioned. As you, as you realize I'm trying to avoid naming names. It always gets me in trouble. Um, but we all know who we're talking about so, so I think that there was a lot more of this, this competitive stance a while ago. Now then fintech changed and we see this big shift towards what we call horizontal fintechs which saw uh, uh, very much um, a growth share above uh, above what they had before in our latest data. And these companies are trying to you know, make incumbents more efficient, more effective, more uh, better at hyper personalization, better at customer service, better in their core processes. And there's a lot of partnering going on and um, uh, at a, at a degree which we hadn't seen before, um, now I also speak to many founders and senior people at scaleups who are incredibly frustrated by how slow banks are to make decisions, um, and how difficult it is to navigate these organizations. Um, uh, and I get it right, they sit on very different incentives. Uh, but when they do get it right, uh, these partnerships are massive win win situations. Banks continue to sit on huge uh, customer basis, huge balance sheet, huge core business, huge legacy business which they need to serve in a more effective and more efficient way. Not all of that they can do in house. Uh, and they are partnering with specialists left and right, be it on conversational, uh, AI, be it on ops topics, be it on new workflows. Um, and I mean I think that the speed of this has certainly increased massively. Right? Massively. We still have the specific situation in banking that it's such a regulated business, uh, and that you can't move fast

Speaker B: and break things, can't move.

Speaker A: You cannot just, you simply cannot do that. Um, um but still they also realize they need to move fast and in many cases partnering with someone, uh, someone else, uh, is the much faster option. So we have seen a massive acceleration and also in some cases a uh, learning of how to work together uh, over time and uh, I would say a faster and better collaboration uh, across incumbents and attackers. So 100% max.

Speaker C: I'm curious if you see that like across um, you know, the full spectrum of the type of clients you work with or you see a differentiation, I mean in this paper we talked a little bit about the, you know, the incumbents who kind of lean more in. I feel like when I talk to senior leaders at banks, you know, their, their combination of there's so much to do, we have to like everyone's asking about this AI thing, we got to be careful. And then it's like okay, but how do we focus? Um, and I feel like the, the, the ones that are moving fastest have kind of figured that out. I was just, you know, how much differentiation do you see on that side?

Speaker A: Massive differentiation. I mean m. Massive everybody. And I think Zach, you said earlier there's no podcast here without the, the, the term gen AI being thrown around. There's also no senior management meeting in banks that doesn't talk about AI. So everybody on paper, everybody is all in on AI. Um, but if you dig a little bit deeper, there's massive differences, right? And in some banks it is literally AI on paper. So there's someone talking about, talking about, thinking about potentially doing AI in some cases and then there's some who have, have a few use cases uh, in the works. They're experimenting and trying to learn while maybe rolling out copilot. And then that's the, the, the, the, the scale of the AI strategy. And there's others who are all in who are saying we will double down on my conversational banking. We think this is going to be uh, the most important channel for our customers and we will build it now and we'll be early in the market and it will change how we serve customers. There's others who are going all in on uh, software, uh, development, uh, uh, at massive speed. And banks sit on these legacy system. There's a ton of old coal to be refactored so a massive opportunity and some are doing, are going all in and not only changing individual use case but changing the whole operating model of how they work, of how work gets done. But that requires more than just experimentation. That requires a top down ambition, a clear um, view uh, on how these lighthouses are being chosen, how they're being funded, how the central guardrails are being set. We are still in this regulated industry which we talked about, there's tons of guardrails you need to think about, um, and doing that in a top down way without killing bottom up. Experimentation requires conviction, uh, money focus, uh, and boldness which some have. And I think those will be the runaway winners of the next five to ten years uh, because they will, they will accrue the benefits. And I do think that some of These structural um, cost reduction that will come from AI will be competed away. So some of that will flow to customers as a benefit, uh, and which will be fine for the ones who are early adopters and who have a lot of margin to pay out from the ones who didn't adopt, uh, are already low margin today and when then this margin pressure kicks in, uh, they will be in trouble. And there's one additional topic and I'm jumping with, but I think it's so important. Um, in banking the simplest way of banking is collecting deposits and giving loans. That's the old, the simplest form of doing banking. And that core model is at risk, right? If customers use their own agents to optimize deposit pricing and send money to different banks who become dumb product providers in the background, margins will contract. And the ones who uh, are not doing the efficiency part of it uh, are going to sit with reduced margins on the same cost base, which is not a great place to be in. So massive differentiation in terms of AI adoption and economic impact I think.

Speaker B: I'm glad you mentioned differentiation because that leads to my next question. But this is on the fintech side. One of the lines that I really appreciated in the report was that um, a uh, feature is no longer a fintech and we've definitely seen a lot of examples of that. We don't have to name names anyway even, even some of those companies that may have started with the feature, I think the successful ones have rebundled and found a way to provide more completion in terms of the product offering that they have. But in a world where a feature isn't a fintech then products are less differentiated and that actually means trust and distribution seems to be the moat. Um, I'm kind of curious, we can start with you Max. Is there a way to measure that? Like you know, is that, is that, can you pro, can you, can you operationalize that?

Speaker A: I mean, um, yeah, I mean there's a couple of dimensions to that question. So we, we regularly ask um, banking customers about uh, how they see banking, how they, who they bank with, how they think about switching banks and so on. And two numbers I've always looked at uh, in detail were who do you trust and how happy are you with the services you receive. And um, in the past, a few years ago you always had attackers being much better in the quality of the service provided and really lacking on trust. Now over time the incumbents have actually caught up. They've built better apps, they've built better digital journeys, they've shamelessly copied what the innovators are doing the right thing to do by the way. I mean there's no shame in it at all. So the banking apps I work with personally, uh, I've gotten 10 times better. So they really caught up on the quality thing. But the fintechs have also caught up on the trust side. And you can cut the data by region and by year and it's not always true. But in the European average in our ah, last report we actually had the fintech with a higher trust number than the incumbents. Now that's a survey data. It's not the same thing as actually sending money somewhere and you can put lots of caveats on it, but I think this just the stated trust advantage is no longer really there. Um, however, I mean not generally as an average. Right. I mean there's some institutions which clearly have a lot of trust, others maybe less so. Now the other point is distribution and customer access. Um, today banks have tons of customer access. If you look at touch points, um, uh, again as an average, uh, 15 years ago banks had 30 to 40 touch points per year with their customer. Today it's above 200. So uh, it's like four or five times a week that there's a touch point. Many of them mobile. There's lots of touch points. Um, that is worth a lot of. Right. Um, now of course uh, some of that is moving into gen AI interfaces, people using ChatGPT or Claude for uh, uh, questions about product selection, advice, maybe even uh, uh, transacting in the end. Uh, so I think this, this, this touchpoint advantage clearly exists today, but I don't think it is necessarily secure for the next five years, certainly not for everyone. So on both things I would say banks had a massive advantage. They still do have an advantage but they need to work hard to keep it.

Speaker B: Mike, how about you? Uh, does it impact your investing and the companies you continue to help build?

Speaker C: Absolutely. I mean I think we just like most investors over the last three, six, nine months have tried to figure out what is a moat in the age of Genai. And I think we firmly agree with Max's viewpoint here, which is trust and distribution become much more valuable. Now I actually think that the data I would weigh uh, that you mentioned uh, at Max is this kind of trust catching up. I mean this is just a huge boon for the fintech industry. Um, now how do you gain trust? How do you measure trust where you kind of started? Zach, that is extremely hard. Um, you know I think uh, it's the uh, experiences with your customers it's the relationships with your customers. Especially if we're talking about B2B. Um, it is, you know, it's related to capital. Do you have like, the perception of capital or the actual capital to run the business that you say you're going to be in? It's about permission and access, which is a regulatory function in, uh, a lot of the markets that we're talking about here. And so you kind of add all these things up. And my partner, uh, Victoria wrote a great, uh, post a few months ago. Maybe throw it in the, uh, show, uh, notes or something about the moat, uh, being trust. So we've been really debating this, but I think it's measured across a few of those things. And so when we're looking at new business opportunities, we're trying to test the. Okay, what happens in 12 or 24 months or actually in some cases even two months. Right. Because product can be caught up to so fast. You know, how do you actually judge the traction, um, and the kind of, and you know, the um, uh, the trust, if you will, that they're, they're getting at the early stage become that much more important. And I think the other thing that's happened which has given us kind of more this fintech boost, and Max, you alluded to it, and it's, I think it's written in the paper as well, is the bigger fintech companies not only getting the trust, but they're pushing the distribution, uh, advantage now, right. You have Nubank with 100 million customers. I don't know the latest customer count of Robinhood, uh, or Coinbase, but just in the last year, both of those launching major new product initiatives, um, and just me personally, as someone who experiments with both platforms, um, was like, oh, should I really think about a Robinhood or Coinbase credit card? I've had this Amex Platinum for a very long time. Don't worry Amex, I still love the car. Uh, but I think these were questions that no one was willing to ask. Uh, and, um, I think that whoever figures this kind of combination out is going to be a major, major winner.

Speaker A: And it's a generational thing too, right?

Speaker C: That's a great point.

Speaker A: Uh, uh, if you look at, uh, the younger generations, traditionally less attractive in banking because they have less money, and in banking, revenues per customer grow over the life cycle and come much later than in other industries like telco. Um, but these young customers, a, are much more attractive customers than they used to be. I mean, in Europe we have seen a big boost in young people investing Much earlier, both in crypto but also in equity markets. That makes them more attractive customers. Um, and in those segments not for all customers but for many. These new brands are just as trustworthy or the more obvious choice than many of the incumbent banks. And we now take a step back and think about where money sits. Um, um and we recently looked at this in our uh, reports uh on wealth. Um, not surprisingly money sits with very old people and we are going to see a massive wave of inheritance in the next 10 years go massive reallocation of uh, who controls wealth to younger people now, not to very young people. It mostly people that uh inherit are mostly older than us here on the call. Um, um but to women and to a different generation which is already a big, big disruption I think which will shift market shares massively. And then if you think about the next generation thereafter, then we go back to our earlier point that these have very different brands in mind than maybe their parents or grandparents had.

Speaker B: I want to close our conversation with um, shifting our perspective forward. Um, I know the report had, I think it was six different arenas um, which, which embodied the next wave of fintech. I'm not asking you guys to, I'm not sewing dissension again but I'd like each of you to pick like what you find the most interesting of those six.

Speaker A: Mike, feel free to go first Mike.

Speaker C: Yeah, well I'm trying to rack my brain on which, which six, uh, I

Speaker B: have it in front of me. So we had Digital asset infrastructure, agentic AI, data infrastructure, AI driven wealth advice, horizontal insuretech. It was more than 6 maybe identity and Trust Infrastructure.

Speaker A: Um, I'm happy to start. I mean I can tell you what I'm working on now most. Right. And I think there are all six important, that's why we put them there. The ones where I do most of my work right now, which is probably maybe a good indication of the next few years is a, the middle and back office focus. Um because there's so much uh, efficiency potential and there's so much still manufactured half automated processes. Um, um where agentic AI is perfect for making it faster, better, less error prone and smoother. I think this is a massive, massive area of impact surely for the next three, four years. And number two we uh, we talked about this, this, this wealth topic.

Speaker B: Right.

Speaker A: I um, do believe in uh, the, the human channel for some decisions but I also think that um, uh, you know AI can play an important role in, in serving customers for sure in the affluent and lower end private banking space. Um and I Think this will be a, uh, so much more efficient channel that I do think we are going to see significant relocation of volumes over time. Um, so this is not going to be like the, you know, the we go to space, uh, disruption. Uh, but in terms of immediate impact, these are two where everybody's working on right now. And I think we're going to see new business models and significant market share shift and significant efficiency gains in the pretty, pretty short term.

Speaker C: Yeah, well, we also agree in all six themes. I appreciate you bringing my memory on each of the six here. Um, I was between wealth and the agentic when you listed them out. I think wealth would be much more of a risk adjusted play. I think everything Max, you just said, I firmly believe is happening, we're seeing in the markets. Um, it's going through multiple transformations at once with kind of a generational uh, tailwind on it. Um, and so we're extremely excited about a number of plays there. Uh, we just made an investment in a company called Zox, uh, which is kind of offering solutions to ria big RIA shops that are kind of helping with a bunch of the efficiencies on how to manage clients, how to get better advice. And so anyway, we love that space, but I think I'd go agentic generally because it has the potential to, if, if the agentic economy becomes uh, something that is uh, quite substantial in the world economy, that's just going to be such a massive tailwind. Now that's if number one, if number two is how much change do you actually need to the financial system? And I think there's a good debate going on there. But in terms of like the biggest disruption across the, the entire board, that has the potential to just be a massive tailwind over the next couple decades. And so I think that would be the one that has the most upside to me.

Speaker B: Max, Mike, thanks for joining us on Tershi podcast today.

Speaker C: Thanks. Enjoy it. See you back.