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A16z The Fintech Newsletter. October 2024 Fintech Newsletter: Fintech isn’t dead. AI is driving a new beginning (Category Strategy)

#Strategy #Fintech #Management

I've been subscribed to a newsletter from the Anderssen Horowitz Foundation for a long time, but I usually flip through it quickly. Here. October letter I liked it, it had interesting articles.

1) Fintech isn’t dead. AI is driving a new beginning Ators began with technological product cycles: PC Era, Internet Era, Cloud Era, Mobile Era, AI Era, and then showed how AI can great help financial institutions in automation, for example, compliance of employees who have been in the United States for the last time. 20 The fifth fastest growth in the number of seats in companies

2) Why You Shouldn't Fear "Trading Like A Bank" A basic article on how bank valuations work based on their capital, and why fintech companies often get a larger multiplier. Simple and accessible about the importance of ROE (return on equity). Investors tend to rate banks by P/B. (price-to-book) the ratio, which is calculated as the capitalization divided by the amount of equity capital of the company. This multiple is an abbreviation for residual income models that predict the “excess” returns a bank earns, that is, the difference between its return on equity. («ROE») and its cost of equity. A coefficient multiple of 1x means that the business will earn a ROE equal to the cost of its capital.

But fintech companies are usually characterized by a higher ROE, due to two reasons.

  • Higher net profit - usually fintech companies are able to offer products to more marginal customers cheaper.
  • Asset turnover. Many fintech companies are able to generate more dollars of income per unit of assets than traditional banks, as their business models are usually based on commissions in addition to interest income. Commission revenue streams are not limited by the size of the asset base (unlike interest income) They can therefore contribute to a higher turnover of assets.

Further, the authors give examples of Western companies that are skilled in fintech, even if they have a banking license: (American Express, Nubank)

#Fintech #Management #Strategy