“There are only two ways to make money in business: One is to bundle; the other is unbundle.” — Jim Barksdale (former CEO, Netscape)
Those who have been working in or observing fintech are well acclimated with this famous quote. But for those who don’t live and breathe fintech, you might wonder what this all means.
Most industry pundits have observed that the early days of fintech involved the emergence of tech-native companies that each focused on “unbundling” a very specific aspect of the financial services stack (e.g., investing, lending, payments, etc.) and delivering them in innovative new ways to their customers. Consider these examples of fintechs and their initial wedge products:
- Investing: Betterment (robo investing)
- Payments: Square Cash App (wallet / P2P payments)
- Banking: Chime (digital bank / savings account)
- Lending: Affirm (buy now pay later)
This approach was different from what end users would normally see from a traditional financial institution which usually offered a full stack of financial products to their customers. Additionally, this wave has been fueled by massive growth in venture investment – with investments in fintech companies growing more than 9x since 2010 and more than doubling since 2015.
But as the fintech ecosystem has matured, what we’re seeing more of now is these same companies are now shifting to “re-bundling” adjacent financial services into their products.
- Betterment: Savings account and debit cards
- Square Cash App: Savings account, debit cards, equities and cryptocurrency trading
- Chime: Early wage access, P2P payments, and credit cards
- Affirm: Savings account and cryptocurrency trading
What is abundantly clear is that the lines between fintech verticals are blurring rapidly as these companies mature and seek to expand their addressable market with new products.
What are the implications around payroll data?
If you’re a fintech founder or product leader, you’re likely thinking through how you’ll embark on your own “re-bundling” journey. At Pinwheel, we believe that many of your choices will benefit from leveraging payroll data, sometimes in ways that are only obvious in hindsight.
Take a simple example of cryptocurrency exchanges. Amidst the recent crypto booms, these exchanges have been on their own rebundling journey with many of them looking more like next generation neobanks that happen to have crypto on-ramps.
As a result, we are starting to see these companies connect to payroll data to enable direct deposit switching for their consumers which is a familiar playbook for non-crypto native neobanks. It would not be a stretch to imagine a scenario where a crypto exchange also starts offering early wage access as a feature for their users to quickly capitalize on crypto asset volatility.
Another example might be around wealth management. Today, these fintechs provide consumers ways to build wealth and improve their financial health. Payroll data could provide them with unique insight into their user’s payroll taxes and deductions and help unlock opportunities for them to deliver new tax optimization recommendations.
While it’s hard to predict all the potential use cases, we believe that the possibilities to innovate around payroll data are limitless.
With all this in mind, it’s our point of view that if you’re already thinking of a payroll data use case that is relevant to your product, it is unlikely to be the last one you’ll benefit from.
Additionally, if you don’t see how payroll data access can benefit your product, we would also argue that it’ll likely come into play as you shift from “unbundling” to “re-bundling.” For example, thinking back a few years ago it might have been hard to imagine why a speculative crypto trading platform might consider neobank-like features.
This is why at Pinwheel, we’ve been laser focused on providing the richest set of payroll data APIs to power a range of fintech use cases. We understand that in addition to providing easy to implement capabilities, having feature breadth benefits our customers as they explore “re-bundling” other products and services from banking, lending, early wage access, and more.
For more information or to learn more about how our APIs can help power your use cases, reach out to our team here — we look forward to hearing from you!