Friend or foe? Tech companies are active in fin tech product launches, investing, and partnerships. Should banks be scared?


Corporate investors disagree on whether tech companies are competing with banks or helping complement the services offered by traditional banks as they rush into financial technology,

“I think it’s more friendly than anything else,” said Jai Das of Sapphire Ventures, which is the venture capital arm of SAP. “At the end of the day, I think [tech companies are] filling a niche that the banks just do not address right now.”

“I don’t see how it could be friendly,” said Nagraj Kashyap of Microsoft Ventures, who expressed his group’s interest in fin tech. As an example, he noted that by targeting banking inefficiencies and helping underbanked customers access lower interest rates, startups like Even cut into existing bank revenue streams.

We’ve covered this trend in our unbundling the bank research

“We’re not entering this market to make friends,” Kashyap added. “That’s what disruption is all about.”

The Future of Fintech
A 123-page report covering VC funding trends for fintech and the developments in large categories such as wealth management, blockchain, remittance tech, and insurance tech.

The panel at CB Insights’ Future of Fintech Conference yesterday moderated by Chris Bishko of Omidyar Technology Ventures also included Brendon Kim of Samsung Global Ventures (center in the photo above, with Das to his left and Kashyap to his right). The panelists discussed the high potential for tech firms to establish fin tech service channels in the developing world, while noting the US market may be a longer play, given the deep penetration of credit card tech and the associated banking and payment processing infrastructure.

“The US has fairly well-established infrastructure, so new methods need to be so, so much better than what we’re already doing,” noted Kashyap of Microsoft. “Data from the US shows most [fin tech-based payments] are substituting for other methods, while in places like India it may be a net new payment that didn’t exist in the past.”

“In the US it will always be harder, because there’s always already someone established,” said Das of Sapphire. “I think it’s the long game… [but] there’s always more money in the US.”

The speakers agreed services like Apple Pay and Google Wallet, despite waves of press attention, have shown minimal value-add in the US as compared to swiping a credit card.

Furthermore, consumer adoption follows merchant installation, and merchants need a convincing reason to invest in new infrastructure to support fin tech payment methods.

In Asia, Das noted, tech-enabled financial services have quickly evolved to become integrated platforms. Companies like Ant Financial and Alibaba have created integrated platforms that bring together merchants, consumers, and payment processing, which means all participants have an instant reason to adopt the technology, and less downside.

Most US fin tech startups instead focus on one slice of the banking or payments ecosystem, often meaning that merchants and/or consumers are forced to navigate the switching between platforms (and accumulating fees) as they complete transactions.

Rather than making users “move in and out of different apps” for different types of transactions, said Kim of Samsung Ventures, “whoever has a lean interface … with one UX,” will be most successful.

Transcript

Chris Bishko, Partner, Omidyar Ventures: Well, today, we’re privileged to have three members on the panel who have corporate venture capital experience, so I thought it’d only be fair, before we get started, in light of Fred Wilson’s comments yesterday urging caution on the part of entrepreneurs to take corporate venture capital, to allow at least one of the panelists to respond. And maybe, Nagraj, could I ask you to respond on behalf of the group?

Nagraj Kashyap, Corporate Vice President, Microsoft Ventures: Yeah, I picked the short straw here, so… so I guess my advice to entrepreneurs is to not take any money from VCs because there’s a few bad VCs, so the whole class of VCs, you can paint with that brush and say, “You shouldn’t take money from VCs.” I think the best way to think about corporate VCs is there’s a tremendous amount of maturity that’s happened over the last 10 years and there’s always gonna be some new corporate VCs that have not learned the full trade and so… but there’s a number of very, very good corporate VCs that follow best practices. Also, to be fair, VCs like… corporate VCs then come in and bump up the evaluation but when we try to play in an even playing field, that’s when we’re not liked. I would say, just like anything, as entrepreneurs, you should evaluate every funding source the same way. Be careful who you take money from. That’s all.

CB, Omidyar Ventures: So, Nagraj, the reason I let you respond is you actually got dinged twice because you had the corporate venture capital remark and then, of course, Microsoft being based in Seattle, that was two whammies.

NK, Microsoft Ventures: I got two hits, exactly. No, I’m based in San Francisco, so I don’t get that. Yes.

CB, Omidyar Ventures: So financial services, it’s a vast market covering many sub-sectors: consumer payments, merchant payments, consumer lending, business lending, insurance, asset management, wealth management, just to name a handful of sub-sectors. When we talk about large tech companies like Apple, Google, Facebook, and Amazon playing a meaningful role in financial services, what sub-sectors are most prized for their participation and why, Jai?

Jai Das, Managing Director, Sapphire Ventures: You know, you have to take a look at some of the stuff that’s going on in China and India, right, where if you look at what Alibaba is doing with Alipay and, you know, with Tencent. So if you look at bringing what they have done over to the U.S., the people who are in the middle of transaction who have the trust with consumers in kind of providing them goods and services, they’re probably the one who will ultimately also be the ones handling your money, handling your payments. So yes, Amazon, Google and Facebook, all of these guys are going to be… I think have a big play in financial services. There’s no doubt about that.

CB, Omidyar Ventures: And Brendon, any particular sub-sectors you think might be most impacted?

Brendon Kim, Managing Director, Samsung Global Innovation Center: Well, I think it’s all about this. It’s all about these devices that we carry in our pockets that we don’t leave home without. Like when I leave the house and I forget my wallet, I say, “You know what? I don’t need it.” But if I leave this behind, I go back and get it, right. This is our portal to everything that we do today and we’re gonna do in the future.

And so from a Samsung perspective, it’s all about connecting our consumers to the services that they love and that they enjoy and it’s all those companies that you mentioned but this is the initial portal. And so from a Samsung perspective, you know, we’re engaged with the consumer at this level. We want to give them the best experience and the best connections to the things that they wanna do and so that’s why we’re interested.

NK, Microsoft Ventures: From the Microsoft specific perspective, we are viewing ourselves as an enabler for digital transformation and I think the interesting thing with anything that does have digital transformation as a second-order effect is change that happens much more rapidly once you’re completely digitized. If you’re in a physical industry, it takes a little bit more time to get disrupted. Once you get digital, the rate of disruption actually increases. So from our perspective, helping our customers through going through our process is sort of where we’re going to end up being.

JD, Sapphire Ventures: So I would say that it’s going to be interesting, whether… which brand, in some ways. It’s a brand, ultimately, who you trust, right? Whether it’s going to be like an Apple, Samsung because they’re going to try very hard because they are the ones, the devices that provide that or it’s going to be a brand like Amazon or Google, which you kind of use as an app and Google has a play in both. But that’s going to be the interesting part, I think that’s where the competition is going to be. It’s like the device manufacturer, the guys like Apple and Samsung, are going to be like, “Hey, we don’t want us to be kind of just a dumb pipe like what has happened to Comcast on the ISP side”.

BK, Samsung Global Innovation Center: I mean, I think we all have our strengths, right. And so we’re all gonna play to our strengths. And for the Samsung side, our strengths is in the devices and the things that people have in their pockets. And so how can we guide a consumer from a device kind of perspective and launch their experiences, right? So whether it’s through Samsung Pay or through other services that we have. Amazon has got their strengths and they’ve got the biggest world… world’s biggest store or one of the biggest stores, I guess.

CB, Omidyar Ventures: So Brendon, let me follow up here. I don’t want to quite let you off the hook in terms of selecting some sub-sectors you feel will be most impacted but you mentioned consumer. You mentioned payment. Do you think payments is going to be the best beachhead for these companies or is it lending or asset management, wealth management, as you think about just the consumer side of financial services?

BK, Samsung Global Innovation Center: For the companies that you mentioned?

CB, Omidyar Ventures: Yes.

BK, Samsung Global Innovation Center: Again, I think they’re gonna come from their various strengths. So for an Amazon, I think it’s gonna be about the e-commerce and allowing them to facilitate… anything that sort of reduces friction to the purchases they make from Amazon. I think it’s… that’s where they’re gonna come from. You know, I think from a Google side, they want to be on the device too. They’re on the device and so they wanna be about payments. They want to facilitate payments. But they’re also… if you look at Google ventures, they’re investing in trying to take advantage of the networks that they have and interested in a personal… P2P lending, things like that, where…

NK, Microsoft Ventures: So we talked about consumer payments. That seems to be the first foray a lot of the companies have done and it’s really not done well. I think that was one of the things we talked about, Chris. I would expect that, you know, sort of in the retail setting, the experience is not that much better but I think the one interesting thing that has happened over the last few months.

How many folks have used the pin… chip and pin now? How many of you think that’s better than what was existing before? So I almost… this is a discussion I was having with my colleague is because there was not an obvious, I think, frictionless perspective from the mobile payment side that a lot of the Apple Pays… almost the industry moved this pin to make the experience worse. So then the experience using the mobile phone looks better. It’s more of a conspiracy theory than anything else, so… because now if I go and I try to do a pin transaction, it is so much more painful. And if I can do an Apple Pay transaction, that’s much better.

CB, Omidyar Ventures: I think that’s a great point you’re making and for all we discuss large tech companies participating in financial services, I would classify their success to date as kind of underwhelming and we’re… we’ve all recently read about Apple Pay fizzling. Google Wallet’s had fits and starts. Facebook’s finally launching P2P payments but it’s been on the come for several years. And Amazon Payments’ a great product but largely a walled garden solution. What’s going on here? Why aren’t we seeing more progress? I don’t know. Nagraj, you had some strong views in this or Jai?

JD, Sapphire Ventures: So one of the things I wanted to also address before is that the question in the sub-sectors and answering your question also. Did you also ever think about regulations, right? I think the industries where tech companies and entrepreneurs and people… private companies starting up, any area that you go in where there’s a… potentially a lot of regulation that can come down on you, that’s where it’s going to be hard for people to really compete, where the banks will always have a huge advantage. Where somebody was saying that when you want to partner with them, they have like a 150-page book that you have to do. So I think those are the areas, when you look at it, kind of regulation… how much regulation kind of applies to what you’re trying to do is probably an indicator of how successful you are going to be.

On the other question about payments, why payments haven’t been successful, you know, we are an investor on our company called Paytm out of India, which is the largest mobile wallet now in India, with about 150 million users. And one of the things that they have figured out also from Alipay is that payments just by itself doesn’t mean anything, right. If I just go do payments, why do I want to switch from using my credit card or the way I used to pay to do something else? There has to be a reason for you to start using a new device like Apple Pay or a Google Wallet or things like that.

And I think that is what fundamentally they have not done anyway for me to kind of have a reason to use Apple Pay. Yeah, I can use my Apple Watch and pay for something but it’s not that convenient. I can also pull out my credit card and do that. But I think fundamentally all the wallet and the payment companies have not solved is the reason for consumers to use their new way of paying, right. There is why… anybody here, what efficiency you get by using Apple Pay or Google Wallet… and maybe it’ll come someday that you can just walk up and they’ll know who you are and Starbucks gets prepared in advance. Your latte gets prepared by Starbucks in advance but we are not there yet.

NK, Microsoft Ventures: I think that they…

BK, Samsung Global Innovation Center: I think… go ahead.

NK, Microsoft Ventures: No, go ahead, Brent.

BK, Samsung Global Innovation Center: I think it’s both the points that you guys are raising. Is it easier to do something that’s new or is it easier to do the old way, right? And so when you looked at things like Samsung Pay, you have to think about… to your point, what’s the other things that I can do? What’s the value? What’s the…why’s it better to do this than pull out my wallet, right?

So for me, a vision of that is what we’re already doing in Korea, right. So if you look at what’s happening in Korea with Samsung Pay, Samsung Pay allows to you to… sure, it allows you to make payments at all these retail stores but it also stores all your loyalty information too… membership information so that when you make that transaction, you don’t have to think about, “Oh, do I have to put in a phone number so I get credit for this on my rewards card or whatever?” It just automatically happens, right. You use Samsung Pay for transit, so it… .you touch and go.

You use it for ATMs. In Korea, you can actually… think about… me and you are in a Starbucks cafe or something like that and think, “Okay, I gotta go around the corner and pull out a couple hundred dollars or whatever.” I can actually start that transaction on Samsung Pay and then walk up to the ATM, put the phone on the pad, out pops the money, right. You’ve gotta… you’ve gotta… I think it’s a lot about… through these kinds of services, you’ve gotta get people used to using this device.

NK, Microsoft Ventures: I think it’s also… the data from the U.S. actually shows that most of these new payment instruments are mainly substituting. They’re not net growing the payment. While the example that Jai gave where somebody like a Paytm user might… it’s almost like a net new payment mechanism that didn’t exist in the past.

So I think in the U.S., the infrastructure is fairly well-established. There isn’t an issue with access. So some of these payments have to be so much more better than what you’re already doing. While in places like India, where a consumer just didn’t have any way to make that purchase in the past, now has a way to make the purchase, adds to the purchase sort of velocity and that’s net new purchases that were not occurring in the past.

CB, Omidyar Ventures: So is the opportunity for the Apple, Google, Amazon, Facebooks of the world greater in emerging markets than it is in maybe the U.S. and western Europe because they have this… what you’re describing as more of a zero to one opportunity?

JD, Sapphire Ventures: I think the opportunity is equally here. Maybe in the U.S., it’s just longer because to… just what Brendon said, that is… if that was offered to me by Google Wallet or whatever, that I could go to the ATM and use my phone for everything, yeah, I would absolutely use it.

But to get all of that and get everybody coordinated is going to take a lot longer and you don’t know who’s going to win in that whole battle that’s going to go on. But I think it’s the long game and I think ultimately when you look at emerging markets versus the U.S., you always end up making a lot more money in the U.S. no matter what. So it’s a longer game but I do think that it’s not like you should just abandon and just go to emerging markets to… for the payment stuff.

BK, Samsung Global Innovation Center: I think in emerging markets, you don’t have the ingrained habits. You don’t have the big institutions. You don’t have the… again, as you said, Chris, you’re going from zero to one, right. But in… I do think it’s going to take longer in places like the U.S. but then there are smaller markets.

One of the reasons that Korea is a great test bit for some of this stuff is it’s a contained market where there aren’t multiple regulatory bodies and lots of different players in the space, so the coordination there can happen much more quickly. So smaller markets, even though they’re developed, might be places where you see those kinds of things take off.

CB, Omidyar Ventures: And talking about the promise of innovation, at least in payments, I’ve heard multiple references to Asian leaders. I’ve been inspired, I think we all have, by the success of WeChat and Ant Financial. What lessons should the U.S. technology companies be taking away from their success?

JD, Sapphire Ventures: Go ahead.

NK, Microsoft Ventures: Are you asking me?

JD, Sapphire Ventures: I can take it if you want because I’ve been on the board of Paytm and Ant Financial came in and I think what they have done is that basically they’ve created a network to some extent. They have not only… they’ve gone after not only the merchants first so that they provide the payment services and they’ve provided all the tools for merchants but increasingly they have also started doing things on the back side, where Ant Financial is now one of the biggest banks, the second largest bank in China, right, where they are providing services for their consumers. And so this whole network that they have created kind of gives them an ability to keep everybody within the network and not go out.

So they don’t have to pay these transaction fees to Visa or MasterCard or anybody. They kind of do everything themselves. Everything is within their network. And it’s hard to replicate that in the U.S. because you don’t have this green field opportunity here and I think here, a company like Square and stuff, they’re all going after one part of the equation, where they’re going to do the payment and then the merchant and then on the consumer lending side, people like OnDeck and all of those guys. And so far, they’re kind of trying to do the lending part and kind of almost becoming like the bank for the next generation of people, the millennials.

NK, Microsoft Ventures: Yeah, I think with the China example and the India example, the China example is really a little bit more green field, less access to existing payment instruments, a network that already has a lot of people using it. I mean, that’s one thing that… a combination of those two are harder to find in the U.S. One of… it was Qualcomm. One of its more spectacular failures was we… when the phone started taking off, mobile phone, we went to India and one of the companies we had, Obopay, which nobody will remember here…

BK, Samsung Global Innovation Center: I do.

CB, Omidyar Ventures: I remember.

NK, Microsoft Ventures: You remember? Okay. That’s fine. We thought it was right. The same thing, it was green field. Let’s go enable Indian consumers to be able to pay using the phone. And it was, at that time, the regulatory regime was not conducive, even though it was green field. Basically getting both sides of the demand and supply got… getting both started the same time was very, very hard. Now I think a lot of the regulatory burdens have gone down. You have now networks that people are already on, so the combination leads to, I think, faster option than in the U.S., where I think that combination is very hard to figure out, where you have a platform that’s widely used and there’s less access to payments and green field opportunities.

BK, Samsung Global Innovation Center: I think, from our perspective, what’s interesting about those services in China is it’s creating a different kind of UX, or user experience. So here in the U.S., we’re very much used to having apps on our phone and each app does a specific kind of transaction. And you’re going in and out of these apps and initially that was the better experience than going to a browser on your phone because the apps were just much faster when they were native and they got you to do the things that you wanted to get done right away.

But now, with the proliferation of apps and different kinds of things that you want to get done, it’s a hunt and peck and in and out of an app kind of experience and what some of the Asian players have done with their messaging platforms is to have one UX where you can get multiple things done. And so for me, it’s a question of how do we look at the UX on the mobile device a little bit differently? What’s the next kind of user experience that you wanna create on the device that consumers find really easy? And that’s the lesson that I think I’m learning from those examples.

JD, Sapphire Ventures: If that’s true, then Snapchat is going to win out, right? You’re going to use Snapchat for everything.

BK, Samsung Global Innovation Center: You know, I don’t know if that’s exactly it but I think there is improvement for the kind of UX that we see here and whoever develops that next user experience can reorder everything behind it, right.

CB, Omidyar Ventures: Yeah.

BK, Samsung Global Innovation Center: Reorder the whole ecosystem behind it.

CB, Omidyar Ventures: Brendon, I think that’s an incredibly important remark and let me just build on that. I recently read a fascinating blog by Tom Noyes, who is a payments entrepreneur, consultant, and operator. It’s called Payments… I think it was called Payments in the OS and he talks about the next generation of Apple Pay, which is gonna focus on mobile commerce and how payments will effectively be embedded in the Safari browser. And Android Pay is going down a similar direction and Facebook will embed payments in the customer experience in a way that it almost becomes invisible, like when we all use Uber. What are the implications for both consumers as well as traditional financial institutions of this trend towards payments becoming baked into the OS?

BK, Samsung Global Innovation Center: Well, I think for the end consumer, hopefully it’s a better experience, right. So it’s more…it’s a more frictionless kind of experience for people. I think some of that’s already happening. So if you look at what’s happening in Korea again and again with Samsung Pay, when you’re making these online transactions…

CB, Omidyar Ventures: By the way, we’ve given you three commercial breaks, so you’ve had your quota.

BK, Samsung Global Innovation Center: On the phone, what’s happening is with… in the same way that you pay in the store, when you put your thumb on the fingerprint reader, it fills in all your information and authorizes that transaction. So it’s… again, I think it’s a… whoever has that winning interface or maybe it’s the guys that own the OS have the opportunity to reorder all the things behind it. So you have the opportunity to promote one brand over another, one payment processor over another. So I think that’s really powerful.

CB, Omidyar Ventures: Yeah.

JD, Sapphire Ventures: Yeah, I think that also, the other challenge is going to be how do you combine online and offline because that is an area…okay, fine, it’s embedded on the browser and I can pay if I buy music or if I buy something…transaction online. I get it done. But then I also, I will still be buying physical goods at some point or the other. How does it get put into a POS system or how does it… so that if I’m going and buying something or buying a train ticket, it gets kind of all embedded. And that’s the network that I think what you were saying in Korea that has happened and that is… just by embedding it in the phone is great but if they don’t operate… right now, I have an Apple phone and my friend has a Samsung phone and I wanted to transfer money and those two things don’t talk to each other, how am I going… and then I have to depend on Visa to do that and I think it falls down at that point.

CB, Omidyar Ventures: One question I had asked you, Jai, though is if you have a very effective mobile commerce experience for consumers, why couldn’t the solution for addressing the POS be, “I use my mobile phone to make in-store purchases, as I can at the Apple store…”

JD, Sapphire Ventures: Yeah.

CB, Omidyar Ventures: ”…but I’ll also do it at my supermarket, maybe at… maybe down the road.” Could that be possible?

JD, Sapphire Ventures: It’s possible. It’s the cost of just replacing the existing infrastructure, right. That is one of the things with the U.S. it’s always going to be harder is because there’s already somewhat established… look at… the chip and pin took a long time in the U.S. because people… retailers are like, “Why should we pay to put that in” until the… I think the payment companies or the processing companies all said, “Hey, if you don’t do it, we’re going to charge you extra for fraud and things like that.” So there has to be some re-motivation for them to kind of institute all of this online to offline and that’s always hard in the U.S.

CB, Omidyar Ventures: One of the very lucrative and profitable products that gets pulled along with payments oftentimes is unsecured consumer credit. So when we talk about the various tech companies, we’ve been discussing taking more control of the front-end of payments. What does this mean for the banks that are right now enjoying all this credit card profitability? Are the companies we’ve been discussing friends or foe?

Maybe I’ll just touch on some interesting initiatives. You know, Google is an investor in Lending Club. They’re also an investor in Credit Karma, which is a very successful lead-gen solution for credit-oriented lenders. But on one… on another hand, you have Bill Me Later with PayPal, so are tech companies friends or foe to the banks in this area? What do you think, Nagraj?

NK, Microsoft Ventures: This is one of the few ones I don’t have a big point of view. I’m not an investor in any one of those, so hard for me to tell. One of the…

CB, Omidyar Ventures: Come on, you’re on a disruption panel. That’s never stopped anyone. Just take a view.

NK, Microsoft Ventures: Well, we, at Microsoft, are not doing it but I think… I don’t see how it could be friend. I just don’t see how this is a friendly… they’re not getting into these markets to be friendly. I think they’re getting into the markets to do it in a different way and that’s what disruption’s all about. So I’m betting on them being foes in some capacity at least. And the one point I’d make is in… going back to developing countries, it’s even a little bit worse because it’s not just the tech companies that are coming in. Governments are coming in and becoming foes to some of the traditional credit card issuers.

Essentially, if you look at what India has done, they’ve got Aadhaar, which is a whole identity platform they’ve rolled out and after that, they’ve rolled out many, many different instant payment mechanisms that don’t require any of kind of credit bureaus and so that sort of… there is attack, I think, from… whether it’s from the government side or from the tech companies. I don’t think it’s a friendly venture.

JD, Sapphire Ventures: So we are investors in OnDeck, right, OnDeck Capital and my colleague, Dave Hartwig, is… he’s on the board. I think that it is more friendly than anything else because at least what we see is that the banks, because of regulations, could not lend to certain people, certain category of merchants and things like that. So in some ways, these companies are coming in and filling that void.

Now, a lot of them might not be doing all the checks and balances that a bank has to go through and that kind of opens it up for more regulation or whatever but I fundamentally don’t think that’s it’s a friend or foe kind of… enemy kind of relationship. I think they can both… because these company startups will never have a trillion dollars in assets like these big banks do, right. And these big banks have to figure out how to deploy money and make money out of these assets that they have. So in some ways, you know, it’s this growing pain that’s going on between all the other consumer lending companies that have grown up.

First of all, there’s too many of them, so there’s always going to be consolidation. But at the end of the day, I think they are filling a niche that the banks just cannot address right now.

NK, Microsoft Ventures: Again, this is good that we are on a counter panel but I think one of the companies we did invest in was Qualcomm’s company called Even. And if you think of the… the concept behind Even was that the people who get hit by the worst credit card rates or by the worst interest rates are the people who can least afford it.

And the reason that happens is there is some amount of predatory lending going on because they cannot predict their income. So if you don’t know from week to week what your paycheck is, that leads to uncertainty and you actually take on these debts that then you have a vicious cycle and so I think somebody is benefiting from that today. What Even ended up basically doing was figuring out a way to make that predictable. So guaranteeing a certain level of income for folks who are working not full-time but sort of 30, 35 hours… and if you then… especially get them predictable income, they’re not gonna be borrowing at the rates they were. They’re not gonna fall into debt traps.

So whether it’s completely friend or foe, it’s uncertain but there will be some losers because of the inefficiency in the system and the way they’re… some folks are being exploited. So I think that… is it always good solutions which take out some of the profits that folks are making today.

CB, Omidyar Ventures: And I think that might fall under the… what you’re describing is a different approach…

NK, Microsoft Ventures: It’s a different approach.

CB, Omidyar Ventures: …from the traditional approach. Although I do agree with Jai too that the capital intensity of lending might be something to maybe make the Googles of the world think more in terms of a Lending Club kind of model, where they can basically have others fund the credit.

NK, Microsoft Ventures: That’s right.

CB, Omidyar Ventures: I wanna ask just two last questions. As we’re talking about the changes in payments and some of these big tech companies potentially controlling the front-end, I wanna know, where does that leave Square and PayPal? I think it’s interesting that they seem to be going deeper in terms of the way they’re trying to engage. PayPal recently invested in Acorns, which is a savings enablement solution. They acquired Xoom, a remittance platform, and Square has a budding SME lending practice. Are they gonna look maybe more like banks over time, in terms of what they’re doing?

JD, Sapphire Ventures: I think that… we are investors in Square. Yeah, so I think they’re going to probably look more and more like what Alipay has kind of done on the merchant side, where it’s basically they provide all the things that is needed by merchants to kind of go and fulfill what they need to do, almost like when we were investing in Square. We thought of Square as being kind of the ERP for all these small merchants.

So they don’t only do the payment but then they do the inventory management. They do the supply chain. They create a marketplace potentially for them to buy together and get the same leverage that a big retailer could get, right. So they kind of become that. They have to. And PayPal, the same way.

CB, Omidyar Ventures: Brendon, do you have a view on that?

BK, Samsung Global Innovation Center: Yeah, I think with any kind of industry that’s progressing and maturing, it’s gonna feel more institutional, right. I don’t think they’re ever gonna be banks. I don’t think Square is gonna be a bank.

CB, Omidyar Ventures: That’s right.

BK, Samsung Global Innovation Center: But they’re… all these companies are looking for growth and sometimes you don’t find growth in the exact area you’re in so you look for what’s my next area? What can leverage what I have today? If it’s a network of consumers, what can I add to that… what can I deliver to that network of consumers to make me grow? And so I think that’s just a natural progression.

JD, Sapphire Ventures: And the other thing is that Square initially and also more and then PayPal over time, they’re also doing new kind of merchants. They were addressing a market or a segment of the market which could not process credit cards.

BK, Samsung Global Innovation Center: Yeah, it was underserved.

JD, Sapphire Ventures: Underserved, right. So that is where they’ve kind of… and now, of course, they’re growing up the chain a little bit but that’s where kind of they’ve made their mark because the merchants could not process credit cards.

CB, Omidyar Ventures: So maybe one last question to wrap up. As you look out over a five-year period of time, you think about the role that these large tech companies are going to play in financial service. What is gonna be the most striking change in the landscape or the customer experience that you’re forecasting?

NK, Microsoft Ventures: From a Microsoft perspective, we are really going to be a software provider. I think that’s the way we look at it. So I’m… kind of hard to me to tell what the other tech providers are doing.

BK, Samsung Global Innovation Center: Well, I think for me, I’m not gonna have this in my pocket anymore.

JD, Sapphire Ventures: So it’s hard. If I could predict the future, I wouldn’t be sitting here. I would probably be on a beach, having made my money. But I will say that I think if you look at Asia, what WeChat has done in the payment, there will be a messaging platform that kind of dominates in terms of a lot of the payments. Is it Snapchat or is it Facebook Messenger? I don’t know but there is a potential for one of them to really be kind of your transaction platform for your phone.

CB, Omidyar Ventures: So let me… let me ask you as a follow-up there. So when you think about Apple, Facebook, Amazon, and Google, will the biggest participant in financial services therefore be Facebook, as we look out over five years?

JD, Sapphire Ventures: Potentially. My bet is either Facebook or Amazon, either of those two or both.

JD, Sapphire Ventures: I’d love to hear from the other two, Jai. Which one of the four?

BK, Samsung Global Innovation Center: We’ve got a vested interest in those four that… none of those four are it.

CB, Omidyar Ventures: Okay. Samsung… and what about…

BK, Samsung Global Innovation Center: I didn’t say that.

NK, Microsoft Ventures: I’ll just say that…

CB, Omidyar Ventures: Other than Microsoft and Samsung.

NK, Microsoft Ventures: I’ll say, contrary to what Brendon is saying, I’ll still be carrying that wallet in five years.

CB, Omidyar Ventures: All right. Well, thank you, guys. Thank you to the audience.