The history of merchant acquiring |Rise of the full stack acquirer

Ayden was the next pick for the Fintech PM guild’s next 10k session. As I dug through their financials, I realized that I wasn’t familiar with the history of the business they were in. Why does merchant acquiring exist as an industry? What is the history of this business, why does it exist the way it does today? Let us take a step back and take a walk through memory lane.
 
To understand any system it is useful to have a framework around the core jobs to be done in the system. In a payment system, money is the main asset exchanged between parties and there are three main jobs to be done.

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Access to the central bank, the final frontier for fintech?

I’ve been spending some time thinking about the long term implications of increasing central bank intervention (primarily the US Fed), and how that changes the landscape of banks and fintech. What follows is an attempt to flush out an idea of how Fed intervention is good for fintech in the long run.

I have a simple framework to think about how banks work. Banks have two sources of profit, user profit, and risk profit. User profit is what customers are willing to pay for services that provide value. Some examples are, charging for managing your investments, the entire process of giving you a loan (origination fee), converting currency, processing payments, etc. Risk profit is what banks earn by the nature of providing maturity transformation and inventory facilities. Some examples are loans (compensated for taking credit risk) and market-making (compensated for taking inventory risk).Read More »

FinTech businesses, platforms or not?

I’ve been deeply interested in understanding what actually makes a platform business a platform¹ business ?— are there any patterns? How do platform businesses actually win? Is there something unique about them or is it all just branding? This is a particularly insightful question to ponder on as, if you talk to any company today , you are certain to hear “ we are a platform”:). Everybody wants to be a platform or at least positions themselves as one. How does one separate the wheat from the chaff?

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Data data everywhere

Big data dilbert

In todays hyperconnected world data is often touted as a competitive advantage. A cursory google search provides a lot of self evident truths “use big data” “Analyze, insight, execute” “Big data will revolutionize your business” , what does this really mean in practice? To gain a true competitive advantage you need to have a comprehensive data strategy which consists of both a simple and relevant mental model and the associated operational structure and processes to actually make it happen.Read More »