590 News From The Fintech Front AI, Stablecoin Strategy & Fintech M&A

Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King. And I’m Jason Henricks.

Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services. From incumbents to unicorns, and from cutting-edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks.

Hello, everyone, and very much welcome to Breaking Banks Europe. We’re very much looking forward to this episode, the news from the fintech front, together with Nick Milanovich. Nick, welcome to the show.

Thank you for having me. It’s good to be here. Yeah, thanks.

Great to have you here. And I’m really keen to explore the US-Europe relationship, a lot on the debates recently, and together talk through some of the developments happening in fintech and sort of explore what’s keeping the market busy. But before we dive in, I’m really keen to learn a bit more about you, Nick.

So tell us a bit about you. What do you do? Sounds good. Well, I am a longtime fan of Breaking Banks.

I’ve been in fintech for 13 years now and spent the first decade of that building products at companies in-house, working on business development, including at a European company, Funding Circle. Then I was head of business development and strategy at Petal, a credit card issuer, and then head of BDA at Google Pay. Cool.

Did you work in Europe for Funding Circle or in the US? No, I was part of the group that became their US arm in the San Francisco office, but we were in London pretty frequently though, and I know that team well. Okay. Did you see a bit of a different approach there between the US and Europe, especially there when you were able to cross over a couple of times? Yeah, I think the Americans in tech are generally more willing to set high targets and kind of push the button a little bit.

I think Americans are kind of cowboys when it comes to their approach to tech in a way that’s a little bit more move fast and break things than the European approach. Yeah, I think we may be a little bit too careful here from time to time, but okay, nice. And then what did you do? So then five and a half years ago, I started This Week in FinTech, which is a FinTech-focused media platform.

We have newsletters, podcasts, they’re not quite with the length of history and reach as breaking banks, and we organize FinTech community events as well. So our largest one is actually coming up in a couple of months this May, Stablecoin. It’s our conference focused on the stablecoin ecosystem, which is going to take place in New York on May 29th with 1,500 people.

Cool. Where did you say it was? In New York City. Oh, New York City.

Okay, that’s pretty timely as well. I think indeed, stablecoins, especially if you mix in the central bank, digital currencies are making up a really fast growing group of crypto at this stage. And there’s a lot of interest in that also, I think in the traditional fiat finance industry.

And so I think indeed, This Week in FinTech is also a brand for FinTech connoisseurs who want to keep track of everything that’s going on. How does that go? Is that a large team? How many people are involved? Or do you mostly run it yourself? No, it started out with just myself, but now we have 33 people on the team working on everything from writing newsletters to our social, to our online community where we have 10,000 people in Slack and 3,000 in WhatsApp, and then running our events. So we try to keep as many touchpoints with the community as we can.

But unfortunately, I can’t live on airplanes and fly around everywhere. And so in the last month, we had events in Sao Paulo, Buenos Aires, we’re organizing one in Tanzania right now, London. And so we have great community members in all those places.

That sounds great. And so you got like teams on the floor there that support the local events. Yeah.

That sounds cool. And I think because I think it’s already quite a nice coverage from India to South America, Africa, and so on across the world. So you must have your eyes and ears open everywhere these days.

That’s also a good thing, because then we can definitely rely on you to keep track of everything that’s going on in FinTech. I try to, but there’s too much happening in FinTech these days for just one person to take to keep track of. Yeah, I recognize that.

You can’t just keep on reading news all day long, right? It’s way too much. But cool. But it sounds really good.

And anything particular that’s going on this week in FinTech that we should know about? So the event that you mentioned, StableCon, sounds really interesting. Any other things that are coming up that we should mark our calendars for? Yeah, definitely. So I mean, StableCon in New York on May 29th is going to be our biggest event, but we’re actually working with a couple of co-sponsors to plan a similarly big one in London in September.

And so I can’t share too much right now, but hopefully we’re going to do one of our biggest ever events in London in about, let’s see, five months now. So we’ll have more to share. Yeah, it would be nice to get you close by to meet in person.

So looking forward to that, Nick. Yeah, cool. So we’re going to talk a bit about the FinTech news.

And so, as you may not have seen everything, I think you’ve seen a lot. So what will be your pick from this month? What did you see that was sort of striking to you? Well, you shared a lot of great suggested topics before the call. And I think probably the most interesting one that you hit on is that a lot of FinTech companies for the first time in many years seem to be talking about IPO plans.

Yeah, I agree. I think it’s quite interesting to see. We’ve seen, of course, quite an interesting venture wave with some crazy numbers during the pandemic, a big drop after that.

And things seem to normalize a little bit afterwards also in public capital markets. But I think it does feel to me a little bit like it was, especially before March or the dip we saw over the last couple of weeks that most of those news came out. How do you think the current dip in the market, especially in the Nasdaq, where we see, for example, AI companies getting quite some big hits, how do you think that that will evolve? Do you think that that’s just going to continue? If I could tell you how the markets were going to evolve, I would not be running a FinTech publication.

What about the IPO plan? Do you think that’s something really people focus on for a longer term and not going to be knocked out by a few fluctuations in the market? It’s a little bit difficult to speculate right now. And IPO timing is tricky because you want markets generally to be healthy. You want people to be risk on.

You want them to be allocating towards new enterprises. You want there to be a certain level of demand for privately held companies that are brand named when they’re going public. And so you have a lot of very well-valued companies who have been private for a long time.

We’re talking billion-dollar-plus valuations. I think Axios the other day revealed that there are around 375 AI companies alone that are valued at over a billion dollars. And so there’s a lot of sell-side pressure.

People have been locked into these companies as late-stage investors, early-stage investors waiting for liquidity. If you talk about Klarna or Chime, these are companies that are, in Klarna’s case, over a decade old. So there’s a lot of sell-side pressure.

At the same time, it’s very difficult to time your IPO for the markets. People expect it, especially with the new administration in the U.S. that have less of an emphasis on financial regulatory enforcement, that markets would open up, M&A would open up, exits would open up. And yet what we’re finding is that markets are whipsawing a little bit based on the administration’s announcements.

And so it’s not quite as healthy as people had anticipated. And so what you had in December was ServiceTitan, which effectively got dragged to IPO because of the structure of their prior investment rounds. And you’ll probably have a couple other companies in similar positions where continued access to private markets really just is not the best option for them.

And so one way or another, they’re going to go public. But the companies that can afford to wait it out, I think, are more likely to wait for some kind of market stability in order to have the most successful possible IPO. Yeah, I would guess so too.

I think volatility currently is just not so encouraging for IPOs. And how do you see that? Basically, I think we’ve seen quite a bit of venture capital crunch with the rising interest rates over the past years, which, of course, also could actually put some funds in jeopardy that would like to raise follow on rounds, follow on funds, but have a hard time actually convincing institutionals at this moment. How do you see that in the U.S.? Do you think that the supply of venture capital still is going strong? Yeah, you know, Carta has been putting out really great data across venture funds.

TVPI for funds in the vintage years 2021, 22, 23, and 24 is negative up to, I believe, the 80th percentile, meaning there are a lot of funds that have marks sitting under what their investment price was, which have not returned capital to LPs. And so there’s a huge liquidity crunch in U.S. venture. Even with that being said, though, the amount of capital that has been allocated towards venture as an asset class in the last five years is much larger than any of the periods prior.

So there’s a lot of, quote, unquote, dry powder sitting on the sidelines for American technology companies. And the U.S. has much deeper private capital markets in venture than almost any other region. And so on the one hand, you have VCs that have taken a long time to return money to their LPs.

But on the other, there’s still a lot of capital sitting on the sidelines for tech companies. And so you’re seeing these rounds like the 40 billion dollar round that OpenAI just raised, the largest round ever by a long shot. Yeah, no, I agree.

I think that there might be a bit of a mismatch on how the money becomes available and how it’s labeled. But indeed, there’s a lot of dry power still in the market. So I’m curious, indeed, how that’s going to evolve.

From the planned IPOs of the news that came out, what’s the one that you’re looking out for? Is there any particular one that you’re curious about how that will go? So I was just jotting down a couple notes about which companies have formally declared that they will go public this year. And so we have IPO registration from Klarna, based out of Sweden, from the Israel-based trading company Toro, from Circle, the American stablecoin company. And then recently, it sounds like confidential filing from Gemini, the cryptocurrency exchange based in New York.

There’s also a lot of speculation about U.S. neobank Chime and corporate expense management platforms Brexit and Ramp potentially going public this year. And the founders have been talking about it a little bit. So you can see there’s a lot of late stage companies.

I would guess the median valuation here is probably around $3 to $5 billion. But Klarna famously raised in 2021 at a valuation of $46 billion. And then more recently, it drops to about $6.7 billion.

And now it’s targeting an IPO raising about $1 billion at a $15 billion valuation. So these are big, big rounds. And I think Klarna is going to be a really interesting bellwether, because they seem to be very resolute in moving ahead.

They’ve retained a number of banks. They’ve filed for IPO. The founders have been talking about this.

They’re probably going to go into quiet period soon, if they haven’t already. And so it’s a high growth business. It’s a large business.

They had $2.8 billion in revenue last year, and it grew 25% year over year, which is pretty rare when you’re already at that revenue size. But it’s also a lending business. And traditionally, markets don’t like valuing lending businesses much like tech companies.

Do you think they’re very often being called a buy now, pay later company, which I think doesn’t do them justice, right? It’s definitely a significant part of their business, but they do a lot more. They’ve got a banking license. They provide payment reels, I think, across a lot more places than they do just lending.

So how would you look at that? If you’re an investor, I think you have to look at the relative revenue and income composition of the different components of the business. So you see this a lot in the run up to IPOs. Companies kind of get famous for one main product that they’re bringing to market.

In Klarna, it was buy now, pay later loans. And that makes up the vast bulk of their operations, of their revenue composition, of their customer touch points. But in the run up to an IPO for one or two years, they launched a lot of other products.

And Klarna has been really good at this. And so they’ve moved into payments, they’ve moved into banking, they’ve launched commerce products for facilitating online transactions, and they’ll continue to launch those products. But when you look at what’s actually driving the business, all these new products, the kind of idea is we want to create the appearance that there’s a lot of upside here because we’re exploring a lot of new industries and new adjacent verticals.

But most of the business still happens to be a lending business. And I think Wall Street doesn’t usually value those types of businesses as tech companies, but they value them more as lending businesses. But there are exceptions.

A firm has had their stock do very, very well over the past couple of years. No, I agree. I think that’s quite true.

I think it’s always fun. Let’s say generally, of course, I think they started out in payments, but in payments, it’s pretty hard to make money, especially in Europe. So that they actually moved into the buy now, pay later part where there’s much more money to be earned, I think makes a lot of sense and gives them a lot of edge over other payment firms.

So quite interesting as well how to see how that will evolve also when they are at the capacity to raise more funds after their IPO to see where they will invest that money to further growth. Agreed. Agreed.

Yeah. And the other ones that you find noteworthy, especially since you’re, for example, also in the stable coin world, would you find Circle an interesting one to follow, for example, or any other that you think is interesting for people that are more aficionado with the crypto world? Oh, definitely. Coinbase is a publicly listed company, but they’re a centralized cryptocurrency exchange.

Circle is actually issuing crypto. And so it’s a little bit of a rarity for a potential public company in the US as an issuer. Notably, Ethereum and Bitcoin aren’t centrally issued.

Solana is run by a foundation. So for a cryptocurrency issuer to go public in the US, it kind of signals that there’s a different regulatory appetite. And I think everybody is interested to see how that company performs when it goes public.

Investors. So Circle, I mean, for people who aren’t familiar, Circle and Tether are incredibly elegant businesses in that they are effectively running something similar to a money market fund where they collect dollars on behalf of their users, invest them in very low risk underlying assets, normally collect interest income off of those assets. In Circle’s case, it’s mostly US treasuries.

And then the users have a token that’s basically indexed to $1 that they can use in cryptocurrency exchanges. And so the business effectively prints money quarter over quarter because it’s just clipping that interest margin. The issue is that it’s subject to rate changes.

And so investors tend to discount the revenues that they’re collecting through their interest margins. So let’s say we go into a recessionary period, central bank slashes rates back down towards zero. All of a sudden, that has an impact on revenue and it’s kind of outside of Circle’s control.

And so, again, it can be really interesting to see how the market values that. Yeah, definitely. Very interesting one, I think, indeed.

And would you also think it fits well in sort of these stablecoins getting into a more regulated area, where I think before it has been also definitely a cowboy area. You see that, actually, I think regulators are starting to discover that there’s a heavy reliance on these stablecoins for increasingly for all kinds of financial infrastructure. Do you see that? Is that a debate as well in the US? Yeah, definitely.

Which is really exciting. Crypto has kind of a mixed history and there have been a lot of perverse incentives. People who were insiders effectively dumping on retail.

A lot of people using hype to drive up the speculation value of currencies that ultimately didn’t have a project behind them. Hacks, exploits, that kind of thing. Stablecoins are very different.

It’s a crypto product with real world use cases. And the most interesting use cases, the most compelling ones actually happen outside of the US or outside of more, quote unquote, developed countries. And so, you have people really building financial rails on stablecoin payments in countries that have more limited financial infrastructure, which is really exciting.

Because a lot of this is what Fintech has been talking about doing for the past two decades. But it operates in a regulatory gray space. And so, you have on the one hand, people who are saying crypto is effectively just regulatory arbitrage.

Stablecoins only work because they’re not regulated. On the other hand, you’re saying no, decentralized rails are actually really a lot better for nimbly building financial services products, especially in countries that don’t have really robust payment infrastructure. And so, in the US, finally, people are saying, hey, let’s think about a regulatory approach to crypto payments that actually works.

And so, in the Senate and in the US House, you have two different bills that have been introduced. The Stable Bill and the Genius Act focus on actually providing a regulatory pathway. Okay.

Yeah, cool. I think it’s definitely, it’s a really interesting development. I think, by the way, also in quite some developing countries, you see that actually the big driver behind it might actually be overcoming regulatory hurdles for example, being able to export your capital.

But that’s again, it’s been designed originally as a parallel system to the current system because the designers saw its flaws. So, I think it was never intended to fall in line with the current system. Yeah, you have different considerations and incentives for different countries.

So, Nigeria, the CBN Central Bank of Nigeria has been very anti-crypto. But one of the issues that they deal with is that the Naira, the local currency is devalued because there’s supposedly a lot of capital flight outside of Nigeria. And so, they view crypto as a vehicle for facilitating capital flight, which is why they’ve clamped down on it so hard.

I think a lot of countries, central banks worry that they might not be able to enforce monetary policy if it’s easy for people to just hold their money in other currencies. Yeah, I think it’s general, the fear of most central banks that they will lose control over the money supply, right? I think that’s generally their game. And if crypto would get generally accepted as a payment means, it would be hard to control for them the money supply.

Yeah, agreed. This show is brought to you by Alloy Labs. As much as we love talking on the show, we believe that action is more valuable than talk.

Alloy Labs is the industry leader in helping fearless bankers drive exponential growth through collaboration, exclusive partnerships, and powerful network effects that give them an unfair advantage. Learn more at AlloyLabs.com. Alloy Labs, banking unbound. So, we talked a bit about the IPO and the capital markets and some of the stablecoin crypto world.

What else did you pick up on that you think was interesting? Maybe let’s talk a bit about the old guys. What’s happening with the larger banks in the US? It really depends what part of the banks you’re talking about. So, banks themselves are actually all focusing on stablecoins this year and how they can interact with them.

I think a lot of people who work in the stablecoin space have told me that they are getting just hounded by banks to talk with them about how they can have a stablecoin strategy. Now, my guess is that maybe this is a little cynical, but I think in 75% of those cases, a bank CEO just wants to be able to go on a quarterly earnings call and say, yes, we’re looking at stablecoins. The same way that two years ago, they said they were looking at AI, and four years ago, they said that they were looking at blockchain.

But for a quarter of them, they are now allowed to custody crypto, and they are now going to be allowed to facilitate digital payments using stablecoins. And so, I think that there could actually be some really interesting bank-led projects in the stablecoin space that are going to get delivered. Outside of that, you have whipsawing driven by the markets that banks are dealing with right now.

And so, they’re collecting record as of the past decade, record interest on deposits, and deposits are rather sticky. But it’s unclear that rates are going to stay up. And so, it’s unclear that this kind of golden goose revenue stream in this economy is going to persist.

The Atlanta Federal Reserve just forecast that there’s going to be an economic contraction this year, reversing their predictions up until the end of last year that there would be continued economic growth. At the same time, you have this administration’s tariff war with our biggest trading partners that is driving a lot of market uncertainty. And so, it’s really just hard to invest in a period like that, especially if you’re focusing on anything that touches hard materials.

Do I want to open up a new factory or plant in the US? Well, I’m not sure because I don’t know what my input cost is going to be like because we’re kind of going back and forth on tariffs. And so, companies are taking out fewer corporate bank loans to make new investments. They’re kind of sitting on the sidelines.

M&A, people assume that when Lena Kahn was out of the FTC because she’s blocked so many high-profile M&A deals over the last four years, that there would be an M&A boom. But market turbulence has also made it really hard for companies to predict what they can do with their balance sheets. And so, M&A is also kind of frozen when people are expecting it to recover.

And so, I think everybody is kind of just sitting on the sidelines right now. Sales and trading desks are alternately doing very well because of asset volatility or finding it really difficult to predict and create cohesive strategies because they have to kind of turn on a dime with the regulatory agenda. Yeah.

Yeah. No, I think that’s a very thorough analysis that you put out there. Quite interesting to compare that.

And so, do you see, how do you look at, let’s say, the retail banking side? So, I think there’s, right, we read about HSBC, for example, actually discontinuing an app. I think we’ve also seen that before with, I think it was JP Morgan or Goldman Sachs, also discontinuing some of their sort of their own neobank projects over the past years. So, how do you look at that? So, I think it’s well becoming a new phase, I think, with FinTech as well, where they, it’s become much less experimental and much more about, you know, straight to business.

Yeah. You know, HSBC launched this app Zing, which was meant to be a competitor to what Wise and Revolut are already providing to their target customers, basically facilitating simple in-app cross-border payments from the HSBC app and web dashboard. I think when you launch a new product, you have to have a compelling argument for why you’re the right company to launch that product.

And banks have a lot of inherent advantages. Banks have an incredibly low cost of capital. I mean, three main advantages, incredibly low cost of capital.

They’re a regulated entity, so they have permission to operate in these spaces. And they have a large distribution advantage. They have existing customer bases that they can sell to and cross sell to.

And they have existing marketing teams that can go out and create brand awareness. Those are three significant advantages, low cost of capital, regulatory green light, and large distribution. But if you have, you know, multi-billion dollar companies like Wise, which is publicly listed, or Revolut, which was last valued at over $50 billion and is facilitating, you know, more than a billion dollars a year in cross-border currency transactions, you know, their advantage is that these companies are really good at building, scaling, and launching fintech products very nimbly.

And so it seems like a weird product to compete with. You’d really want to go into spaces where you don’t have kind of a scaled fintech competitor competing against you, where you’re not providing anything that’s notably different from what they are already. Yeah, so do you see, I think I can understand the strategy if they would incorporate it into their own offering.

Because I do believe indeed that, let’s say the disruptors, they might have a head start, but I think a lot of traditional banks, they got like, you know, a year, year and a half to catch up with their offering, because their customers won’t run away all of a sudden, right? So they have some time to actually recover and sort of level up their own service offerings. But generally, indeed, you would want to do that under your own brand and not set it aside as a separate app, because that app then becomes a single competitor for this external party that’s already doing much better. Exactly, exactly.

Yeah, it’s funny, it’s funny indeed to see that strategy. So I think, yeah, it feels like more of a defensive maneuver than anything else. But it doesn’t, it’s not a defensive maneuver that necessarily plays to the strengths of the bank.

Yeah, no, I agree. I agree. I think a lot of people actually just wanted HSBC brand on top of their product, rather than something else.

So I think it’s quite interesting to see. And so do you see, let’s say, if you talk about FinTech, M&A, it’s been a bit quiet now, due to market volatility, as you discussed. But do you see generally that there’s still appetite for larger financials to pick up on some of the innovations? Or do we actually see that that’s also a tougher environment, post-COVID? I mean, it’s going to be very idiosyncratic.

You’ll have, you know, we invested in a company in 2021 called Power, founded by Randy Fernando, who was building a credit card embedded issuing and servicing platform. And they were acquired by Marqueta about 18 months later, the public FinTech issuer for about $275 million. You know, this was a big outcome.

It was a great outcome for the company and for their investors. And it’s because Marqueta specifically had this long history in issuing debit cards, but didn’t have much of a credit card infrastructure. And so it was the right product for Marqueta to insource and use to complement their existing product offering.

But that’s very idiosyncratic. You know, there’s only one Marqueta, and there aren’t going to be, you know, 20 other buyers for 20 other companies that look like Power. And I think in banks, you’ll see the same thing.

We’ll see bank FinTech M&A, for sure. Sometimes this will be product-led M&A. Sometimes it’ll be acqui-hires.

It’s really going to depend on that bank’s strategy and how a FinTech can complement it. But the one thing I think you can kind of predict is that there’s going to be a lot more diligence in bank FinTech M&A now, having seen the J.B. Morgan-Frank case just settled in the last week. And so for anybody not familiar, Frank was, I believe, a student lending app that claimed that it had a million or four million customers.

I forget what the exact number was. And it turned out that they fabricated those customers. And so when J.B. Morgan acquired them for $175 million, they were going through the customer list and found only 10 customers actually ended up responding and opting in to J.B. Morgan’s product offering.

Then when they were going back through emails, they found that the correspondence where the founder had, I say allegedly, but now confirmedly fabricated those customers. And you just, as a bank, that’s going to have a chilling effect on any kind of M&A, where you really have to evaluate whether this company that’s used to, in Silicon Valley, you’re encouraged to kind of overstate your success and to fake it until you make it. Well, that doesn’t really work for M&A.

And now everybody’s going to be a little bit more diligent. Exactly. Now, I think, let’s say, overstating your potential is still something different than overstating your history, right? And I think that’s something you definitely want to be careful with.

Here in Europe, of course, we also have our cases. Wirecard, for example, that was also putting everyone on the wrong foot and even dragging in, let’s say, regulators in that field where they were expecting. They were actually also getting the trust of the regulators defending them for alleged attacks by short sellers.

It was a huge black eye for Boffin, Germany’s regulator, because, you know, Boffin kind of was notorious for making it difficult for new fintechs to register. And then at the same time, you know, they had kind of come out publicly in defense of Wirecard, which it turns out was just running a massive fraud. Similar situation with Greensill, the lender.

Yeah, exactly. Yeah. Yeah, I think that’s quite interesting.

And it’s a shame, because indeed, I think that’s just going to radiate through the whole industry, where actually companies might just be fighting to do the right thing, but they still have to fend off this being suspect of, you know, just fabricating everything. So due diligence becomes much harder and tougher, I think, as well for a lot of companies because of that. Yeah.

Yeah, quite interesting, I think, indeed, to see how that would go. And indeed, definitely also if that situation with Frank is going to also, again, put everyone on edge to make it harder. Of course, we got in Europe, we got some regulations as well coming up with Dora, for example, that also scrutinizes the whole supply chain of finance much more than before, where which also could actually put at least a bit of a break on some of the outsourcing waves that we’ve seen before.

Do you see that that’s something that’s being discussed as well in the U.S.? It might be, for example, more focused on cybersecurity resilience? We certainly seem to be in, people are calling it a golden age for fraud. And there are a lot of ways that you can approach that topic. But we’re seeing people who have very publicly committed securities and wire fraud and white-collar crime being pardoned for committing those crimes.

We’re also seeing kind of record numbers year over year for people who report that they’ve lost money in online fraud events. What I think is kind of driving this is more people are managing more and more of their lives online to start with, and including financial services and payments. A lot of people continue to get brought online every year who may come from generations that were not very used to using the internet.

So elder scams are taking off in number in the U.S. And whenever you have a new technology, whether it’s crypto payments or generative AI, for any new technology, normally the people who are the most able to quickly exploit that technology are fraudsters. Fraudsters are a very leading adopter of any kind of new tech because it creates a new vertical for them to perpetuate fraud. And so the cybersecurity and defense companies kind of have to play catch up because you’re always in a position where you have to respond to emerging fraud vectors.

And so right now, we’re kind of in this what they call golden age of fraud or golden age of scams. But I think that that’s going to kind of collapse on its own as well, too, and there will just be better fraud tooling available for consumers and for banks in the next few years. Yeah, I’m also very curious about it.

I think you need also, let’s say, the geopolitical climate where you also see, for example, state supported criminals on one hand is also posing up risk. And indeed, there’s a lot of, it’s very easy to fool consumers at this moment. And generally, indeed, financial services are, when there’s a transaction in the end, financial services are the ones to have to take up the mess.

Yeah, why don’t you ask? Generally, indeed, normally, if you have to go to industry or gambling to find the latest fintech innovations is my thought about that. Because indeed, you very often see that less regulated areas just tend to speed up innovation much faster rather than the densely regulated areas. Yeah, totally agree.

All right. I think we’re almost heading towards the end, but I’d really like to pick your brain on other things that you’ve picked up on and weren’t able to share yet, Nick. I think there’s tons of things probably going through your head, but if there’s one thing you’d still like to share with us, I’m really curious to hear.

No, I mean, you’ve hit a lot of the topics that were top of mind for me over the last couple of months. There’s more that we could talk about. Cryptocurrency asset prices, which have been in kind of a historic run up, whether Stripe is going to IPO, whether Plaid is going to IPO.

But I feel like we’ve kind of talked about the big ones now. For me, what I’m excited about is that I invest in pre-seed and seed stage fintech companies, and we started to see a recovery in later stage rounds as well. Series A’s and series B’s are happening at a rate that we didn’t see over the last couple of years.

So I hope there’s just continued health in the market. Yeah, cool. That’s good to hear indeed.

It’s been quite tough on that area. So it’s nice to hear, and especially if you’re in the early stage, you’d like to have these follow-on rounds be concluded successfully, of course. Which areas are you focusing on predominantly? Which area are you sort of trying to focus on type of customers or type of technology? The types of companies that I normally like are companies that facilitate payments, software companies working in financial services, and data aggregators or APIs, companies that do a good job of collating information.

That’s generally what I like. Yeah, I think that’s also there. If we revert back to the fintech M&A, I think over the past year, if I would summarize what most deals I saw, if you talk about big versus small acquisitions, it was mostly in the data space.

Companies collecting ESG data, geospatial data, and so on, and helping very often in the rec tech space, helping large financials stay compliant more efficiently. I see a lot of deals there, especially in that space. Quite interesting, yeah.

And so you’re not running behind AI craze that much? I think we’ve seen a lot of running behind that, of course, and everybody needs to do something with AI, but in the investment space, I think it’s quite tough. Well, I’ll say this. A lot of people in tech have seen the Carlotta Perez hype cycle or the S-curve, where you basically have a new technology that takes off and it’s overhyped, and then people realize it’s not actually delivering on the promises, and it goes down in enthusiasm.

And then that’s where you get the real interesting building, and that’s where you build towards long-term promise. We’ve been towards the top of the AI hype curve for the last year or two years. And so right now, AIs are very richly valued in a local sense.

It’s difficult to get into an AI company around at a lower valuation, even if they don’t have any track record at all. Some of these companies will work out fantastically, and continue to do well. A lot of them will probably see that the reality doesn’t live up to the promise.

And so I think we’re waiting a little bit and investing patiently where we see that there are good opportunities and good value that are being explored elsewhere, but we’re not going all in. Because I think right now, it’s a little bit too early to make any really strong opinionated, declarative statements about where the AI space is going in fintech. I totally agree.

I think it’s quite tough. It’s probably one of the industries where AI potentially has the least impact because it’s so heavily regulated. You see a lot of constraints of actually applying AI if you compare that to, for example, social media marketing companies that have much more their hands free to just use it at will.

Or the fraudsters, for example, as you mentioned. Cool. Nick, I’m afraid we already have to wrap it up, but please mention again, what’s the date again of Stablecoin? When do people need to come to New York? Yeah, thank you for calling that back up.

And thanks so much for having me on the show, Don. It was great to meet you and get a chance to talk. I know we’re being kicked out, but I would love to see anybody who is interested in stablecoins on May 29th in New York City, and they can find the conference online at stablecoin.com. It’s like stablecoin without the I, stablecoin.

Great. Sounds really good. It’s been great to have you here, Nick Milanovic, founder and Fintech enthusiast in chief of this week in Fintech, a great media to keep track of everything in Fintech.

Should you get bored of Breaking Banks Europe, for example? No, you should just, of course, never do everything. So this was episode number 264. My name is Don Ginsel.

I’ve been really happy to host you and really nice to be talking to you, Nick. Good luck there in the US and looking forward to meeting you in person soon. Thanks, everyone, for listening.

Talk soon. Thanks again. That’s it for another week of the world’s number one Fintech podcast and radio show, Breaking Banks.

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