Conference Presentation, Panel
FinTech: So Much Potential, Too Little Impact?
Milken InstituteJackson Mueller, Thomas Curry, Sallie Krawcheck, Jonathan Larsen, Sasha Orloff, Anju Patwardhan
- The cost of financial intermediation in the U.S. has remained at a 2% equilibrium point for the past 130 years, encompassing fees ranging from seven basis points for broad market investments to 3% or 5% for private equity funds.
- Traditional U.S. financial industries are expected to adapt slowly to technology, evidenced by an average mainframe system age of approximately 38 years, though Ping An plans to replace its core mainframes with cloud infrastructure over the next two to five years.
- China's consumer society has undergone a pervasive technology transformation over the last six to ten years, resulting in the near-total disappearance of cash and the dominance of two companies in the online payment landscape.
- U.S. merchants face significantly higher discount rates (3% to 5%) compared to China's mobile commerce ecosystem (0.6%), while China leads globally in B2C Fintech due to leapfrogging legacy platforms and a lack of consumer focus by traditional banks.
- Regulatory consolidation in China's 2,600 credit providers is being driven by national strategy to become a technology leader in AI, with innovation concentrated among large corporations rather than small startups.
- In the U.S., over 60% of Fintech investments last year shifted to B2B Fintech, contrasting with five years ago when 75% targeted consumer-facing lending and payments, while major players increasingly view Big Tech companies as a primary threat.
- The OCC holds legal authority to issue Special Purpose National Bank charters to non-bank Fintech firms, with the current Comptroller expected to announce a position within the next 60 to 90 days to address regulatory uncertainty.
- Ping An's blockchain platform facilitated approximately $2 trillion in interbank transfer volume in its first 1.5 years and secured a contract with the Hong Kong Monetary Authority to build a trade finance platform with 11 banks.
- Unsecured subprime U.S. credit is identified as the most stable asset class in the unsecured market, with LendUp targeting single-digit loss rates on originations against 15% to 35% loss rates in the traditional subprime card space.
- Asset tokenization via blockchain is forecast as a massive transformative vector, while cryptocurrencies are currently described as massively oversold as an asset class.
- Ellevest, which crossed $100 million in assets under management within months of launch, faces competitive pressure to justify higher fees with proprietary technology despite targeting women and people of color in an industry historically composed of 86% men and 87% Caucasians.
- Automation in Fintech is expected to take longer than anticipated to displace manual data processing, though it will eventually reduce consumer costs; jobs relying on relationships will remain, while repetitive tasks are automated.
- Mobile phones are projected as the next major wave of Fintech adoption in the U.S., currently lagging behind China in payment capabilities, with opportunities to transform the FICO score into a broader component of financial democratization.
- The Milken Institute is establishing a U.S. FinTech Advisory Committee to focus on the impact side of the industry, while partnerships between traditional banks and forward-thinking Fintech companies targeting ignored segments are expected to increase.