Observations From The Fintech Snark Tank
If you were between 14 and 21 years old in 1991, you might remember the release of Nirvana’s Smells Like Teen Spirit, which debuted in September of that year. The song launched the band into superstardom and became an anthem of teen angst for millions of disenfranchised Gen Xers.
Today, those Gen Xers are in their mid-40s to early 50s, and many (if not most) have jobs, a family, and maybe even children of their own who are experiencing teen angst.
In other words, those Gen Xers have become un-disenfranchised—or more simply put—functioning members of society.
What does Nirvana’s Smells Like Teen Spirit have to do with fintech?
There are parallels between what the disenfranchised youth of the early 90s (and every generation before and after, for that matter) experienced and what today’s fintechs are going through.
Fintech Funk: From Hero to Villain
For the past 10 years, fintechs have been the fair-haired child who could do no wrong.
Like children who are told they can grow up to be president, fintechs have been coddled and touted as white knights who will solve the problems of financial inclusion, financial inequality and financial illiteracy. Fintechs have had a “superiority complex:”
“There’s a notion permeating the fintech industry that fintech startups are somehow more ethical than legacy banks, or that there is a fintech ‘ethos’ that distinguishes fintechs from banks and somehow makes them morally superior.”
That veneer is cracking. Fintechs are seeing massive reductions in valuations, cutbacks in funding, and staff layoffs. According to a Forbes article titled In Fintech, 2022 Is Becoming The Year Of Layoffs:
“Rising interest rates, worries of an impending recession and an abrupt slowdown in venture investment has caused fintech founders to aggressively reduce expenses. Every corner of the fintech industry is feeling the squeeze, from investment apps and teen digital banks to back-end trading software and insurtech outfits,” Jeff Kauflin writes.
Throughout this spring and summer, well-known fintechs announced job cuts:
In addition, Forbes identified nine other fintechs that recently cut jobs without any announcement or public reporting of their downsizing.
The low point for fintechs, however, may have come in the past couple of weeks when Acting Comptroller of the Currency Michael Hsu warned:
“The encroachment of fintech into the traditional financial sector is creating more complexity and the rise of unregulated fintechs will be the impetus of a financial crisis.”
Fintech’s Funk Smells Like Teen Spirit
The fintech “revolution” is looking a lot more like an “evolution” at this point, and reminds me of how we evolve from child to teen to young adult to adult (although, admittedly, some of us don’t quite make it to that last stage).
Although not quite in its teens yet, fintech is experiencing teen angst.
Alex Johnson, author of the popular Fintech Takes newsletter, agrees:
“The parallels to teenage angst are strong. Spending money like it’s going out of style and then having to layoff employees = blowing your meager savings and having to move back in with your parents. Trouble with regulators = my parents don’t understand me. Having your fintech company get acquired by a bigger company (or god forbid a bank) = getting your first real 9 to 5 job and realizing that work sucks. Seeing the rise of Web3 and having a bunch of young talent defect to go work on something cool = realizing that younger people think you’re boring.”
Maybe Teen Spirit Doesn’t Smell So Bad
Although the Nirvana song grew to become the teen angst anthem for Gen Xers, few people really understand the reference to “teen spirit.”
The song’s video shows the band playing in what looks like a high school gymnasium, and, over the course of the song, students watching the band tear everything in the gym down and wreak havoc.
For years, I thought “teen spirit” referred to the energy generated by the teens in the mosh pit of the video, and I couldn’t imagine that smelling very pleasant.
The reference to “teen spirit” in the song is actually a reference to “Teen Spirit,” a deodorant. According to Joe Queenan:
“The phrase ‘smells like teen spirit’ had been scrawled on the wall of Kurt Cobain’s apartment by Katherine Hanna, the lead singer of the band Bikini Kill. Hanna wrote this as a joke because her bandmate Tobi Vail, who was Cobain’s girlfriend at the time, was a fan of the Teen Spirit deodorant.”
So I guess teen spirit doesn’t smell so bad, after all. And—despite the funk that it’s currently in—neither does the fintech industry.
Except that it’s not really an “industry.”
Just as teenagers are a part of the human race (as hard as that is for parents of teens to accept), fintechs aren’t an industry unto themselves—they’re part of the financial services industry.
Rebellious teens often threaten to go off and start their own society, only to grow up, get jobs and become part of established society. Similarly, the key to fintechs’ evolution is to take their part in the existing financial system—not starting a new one.
Every new generation grows to adulthood and brings new ideas, norms, and attitudes to the society it ultimately joins. And—believe it or not—many in the older generations adopt those ideas, norms, and attitudes (if you don’t believe me, ask your mother or grandmother how often they use Facebook or Instagram—you won’t like the answer).
Ironically, although the OCC’s Hsu warned about fintech’s encroachment into the traditional financial sector, fintech’s assimilation into the sector is exactly what fintechs and banks—and their customers, for that matter—need.
Ten years from now, we’ll look back on 2022 and realize that this was the year that marked the end of the Neobank era and the transition of fintech from teen angst to young adulthood.