Fintech Blockchain are Merging: VC Perspectives

Transcript

foreign hello hi everyone welcome back from lunch um I am akshi federici I'm a founding partner at crack adventures and I'll do a quick background about myself um before starting crack Adventures I was at Kraken exchange for about two years and prior to that I was at status.im and prior to that at consensus um like a lot of folks here at the conference I started consensus's Academy program which certified developers in solidity and before consensus I was in

traditional financial services so I was a director at Blackrock in New York I was also at the Boston Consulting Group for about eight years as part of the core Financial Services practice and I started their hedge fund practice and probably the most relevant experience that I have is that my undergrad was at IIT the University of Technology into computer science so that's how I got into the blockchain space once Joe exposed me to the ethereum ecosystem uh with that I just wanted to jump into the topic for today and it's a quick one fintech and blockchain and the VC perspective there before I jump into that just a quick show of hands how many

people in this room are in the VC space very few okay so I guess the rest of the people will be um hopefully learning something new from the talk um and then how many folks here are founders looking for VC funding gotcha and how many operators that includes developers Engineers product people gotcha okay cool um one last question actually how many people have prior background in financial services perfect thank you for that um okay so let's jump in this is probably the silliest slide in my slide

deck and the reason I bring this up is because people often forget what fintech actually means and sometimes assume that it's a very niche space and that it's very narrowly defined however the definition that I think is the most appropriate for the rest of my talk is the Forbes one where you know fintech is just simply a portmanteau of financial technology so any technology whether it's blockchain or non-block chain that is used to either reinforce or reinvent financial services and the delivery of that is essentially fintech and the reason I wanted to highlight that is because often as a VC and even as a fund I hear funds talking about how

they invest in either fintech or crypto or blockchain and for me it's really not that different at all not just between fintech and crypto slash blockchain but also between pure financial services and the blockchain another thing at least in my perspective is that I really think about our industry as blockchain and you know of course this is evident to most of the people in this room since you're ECC but you'd be surprised how many LPs and investors into VC funds really think about the crypto space as just crypto as opposed to blockchain so that's just one quick thing and of course it's interesting that the street actually you know uses cryptocurrencies as part of the definition of fintech

um so moving on from there I think one of the Frameworks that I use to look at how blockchain and fintech can work together is to Simply divide it up into reinforcing fintech versus redesigning fintech and in the reinforcement bucket of course you have middle and back office optimization that's kind of the most obvious application um and you know streamlining it is core to some of the fundamental tenets of the blockchain that's why it's so well suited but I think going forward things like RPA robotic process Automation and AI can work so seamlessly with blockchain that I think it's a perfect use case for example I think it was in the 1990s that at MIT they

discovered or you know invented I should say OCR right or for example AI is starting now to analyze reports kind of automatically and flag issues and then on the right hand side what is personally most exciting is obviously net new business models I wouldn't say that those are well those are obviously the hardest to accomplish because of hurdles and I guess inherent constraints of the blockchain which we'll get to later but even so there are some very interesting applications so for example all of D5 or even just having digital wallets because at the very simplest at its core they're essentially No Frills bank accounts that are also payment gateways right so that in itself is an

innovation uh in the fintech space of the bad but even more so if you think about for example Insurance underwriting for the most part historically there has been no difference in terms of insurance policies given to people where you know that are you know non-smokers non-alcoholics and just have certain body you know BMI index indices and those are all quantifiable but then for example there are unquantifiable or sort of qualitative aspects that are just not factored into the underwriting process so that's another space that there's quite a bit of innovation going on and that last one is Miss mistite it's actually Global access and um inclusion Global access inclusion that would make sense so that obviously makes

it makes it really exciting so this slide here is quite outdated in terms of the logos that are on here um especially given the markets in the current situation I'm sure there are quite a few logos here that are not relevant anymore but of course there are other ones that we should be adding on here but the point that I wanted to highlight here is that every part of the stack for fintech delivery starting with like the infrastructure layer to the middleware to then the application institutions built on top of it can either be both reinforced by blockchain but also reinvented by blockchain so that framework that I've talked about in the prior slide just kind of applies to all three of these um of the stack and despite whatever has happened in the

markets at least from a VC perspective one of the uh one of the big kind of pieces of hope I guess for us for the industry is that the tech stack today versus when even I started in the space several years ago is just much much better um so digging into that a little bit more and this is where I started to write out the slide and then there was just so much that I could put on here that you know I had to leave some things blank but I in general every aspect of fintech and financial services pretty much today is being touched by blockchain so whether it's Capital markets asset management of course payments and remittances was one of the the early applications but then you know Insurance compliance Etc so

even when I look at this chart I try to use that lens of what is just simply reinforcing and augmenting current Solutions versus what is net new so for example in let's see Asset Management So within Asset Management you know tokenization of assets or even just cryptocurrencies as an asset class let's say is an innovation versus traditional Asset Management um and then on the insurance side for example same thing tokenized reinsurance markets um very very Innovative versus the traditional industry and then of course you have the entire slew of the compliance kyc AML Etc stuff that is more kind of augmenting uh or streamlining um but yes this is I guess for me the takeaway is that every single aspect of

financial services not just fintech is um essentially going to use blockchain so some of the hurdles um I think on the left side we are pretty familiar from like an operator Tech uh you know product perspective uh with respect to the infrastructure itself so obviously scalability in terms of you know um transactions but second Etc et cetera but then also um you know things like interoperability or integration with Legacy systems um access I mean it's like both sides of the coin I think philosophically speaking when we look at businesses the question is great this is globally accessible but you do kind of need an internet connection for it so how does

that actually work in your business model and revenue model for the target audience so those are the kinds of practicality questions we're looking at when we look at projects and then on the regulation side um there are I should have actually called that legal and Regulatory as opposed to just regulation um but there are still questions around jurisdiction so if the blockchain is truly Global how does liability work if there are you know if there's a breakdown or if there's some sort of like a liability question that comes up in one jurisdiction but was initiated by a programmer in another jurisdiction is it the programmer of the smart contracts that's liable like who is actually the libel party uh these are things that haven't actually been solved from a legal perspective another kind of

interesting thing for me in general was that apparently there is no there is no legal court at in any country globally that has yet recognized the blockchain as an immutable Ledger or proof of ownership and this was like a mind-blowing thing for me which is like in our community we're just kind of sitting there and saying obviously the technology has you know provides all these different things but from a if if anything were ever to be taken to court and if someone was like here I have this how house and I own this asset because of this certificate on the blockchain it really truly in the in today's legal system globally just does not hold up um and these are things that we have to you know really really think about when

we when we look at projects so the next thing here that I quickly wanted to highlight though especially given the markets and in the last like year and a half in the VC space because this is sort of switching to okay so what's the activity in the VC space with respect to crypto fintech blockchain what is really interesting is that roughly eight to nine of the 50 top Innovative companies in fintech for two years consistently in the last you know in the last two years have been crypto slash blockchain first companies um and I believe that for the one for the list last year I think other than two of the players there pretty much every other player uh every

other player has been a unicorn right obviously we'd have to adjust for the markets recently but I think it's extremely encouraging from a VC perspective um to see this um this is kind of my take on fintech Financial Services blockchain those three completely being Inseparable and indecipherable going forward in distinguishable distinguishable I should say from each other going forward is that there are more so than ever traditional Financial Services institutions uh that are betting on the blockchain and crypto space and it's almost become a table States at this point for them to have you know a group that is actually providing this to customers or investing in it or looking

at it to enhance their own products and offerings and Technology Etc so and this data I don't think it has a date on it but essentially it's from I believe August of last year so a little bit dated uh but it's it's representative so then the last two slides that I have here was kind of in the same way the same vein to say what are the big Financial Services institutions the traditional ones that are investing in investing in blockchain in in blockchain sorry um and I think since I'm at ECC maybe this is fresh in my mind versus consensus uh a few weeks ago or months ago I can time is a blur um is that there is a there is obviously

a lot of frustration from a regulatory perspective in the United States and there's this view that a lot of innovation in crypto fintech blockchain Etc is going to come from external to the United States particularly in developing countries Etc and I think that that is absolutely true but what was really encouraging for me when I looked at this and these are the top uh banks in terms of the size of their investments from a VC VCR perspective into the crypto space the majority of the sizes of the checks as well as the number of players on this page are actually United States so that's extremely encouraging and I feel like you know from from our perspective that would be a huge win from a regulatory perspective if this can all be turbocharged

we shall see what that what that means in terms of the markets and and you know the current situation but it was really interesting to watch that this is this is sort of the case um so that's kind of the end of my presentation I did end a little bit early um because I know that we were supposed to have q a time at the end of the presentation um but I do have to run to catch a flight in a couple of minutes but I will be happy to take a couple of questions at this point if someone had any that was easy cool thanks guys [Applause]