Fintech Stacks: The Craft Beer of Enterprise Software
The explosion of financial technology companies in recent years mirrors the rise of craft breweries over the past decade. At first glance, the financial stack looks like a dynamic landscape filled with innovative startups. But under the surface, the technology infrastructure is still controlled by traditional enterprise vendors - the Budweisers of fintech.
Just as craft brewers rely on long-established breweries and distributors, many flashy fintech apps depend on stodgy backends like Oracle, SAP and Fiserv. The startups build custom frontends and user experiences, but hook into old-school core systems to process transactions and store data.
For example, Chime and other consumer neobanks boast slick mobile apps. But they still route card payments through payment rails controlled by the big banks. Expense management darlings like Ramp and Brex may have reinvented the user workflow. But they integrate with legacy accounting systems and ERPs to sync data.
Even disruptive blockchain projects often just move money from legacy bank accounts to crypto wallets and back again. The beachhead innovation sits atop the same old financial plumbing.
The platforms with the most escape velocity typically focus on greenfield opportunities with less legacy baggage, such as payroll automation and cryptocurrency exchange. But those examples are rare.
This isn't necessarily bad - leveraging established infrastructure allows startups to focus on the user experience and scale quickly. But it does limit how transformational their technology can be. The next wave of fintech innovation may require a rebuild of core systems, not just a fresh interface.
In many ways, the dynamic mirrors craft beer. While new breweries and brands emerged, distribution and production remained dominated by giants like AB InBev and Heineken. The insurgents relied on the old guard's pipes and trucks. Fintech has its Revolution and Dogfish Head. But the industry's backbones look much like decades past, with a fresh label slapped on top.
The winning startups don't just ride the existing rails. They lay new ones.