The Call for ‘Trust’ in Fintech Startups

  • JJ Hornblass
  • March 4, 2016
  • 0

canstockphoto6633480SEATTLE — The Silicon Valley model for its startups is well-known. Heck, there’s a Wikipedia for it.

It centers on a simple principle: build a business that scales, no matter the initial profitability. And then scale it like mad. Or, in technical terms, build a business that has the potential to multiply revenue with minimal incremental cost. Think Facebook with its gazillions of users.

Indeed, in fintech, scale has been a mantra, too. Venmo, Stripe, Square, Lending Club — these are all ventures that have, to varying degrees, pursued scale, and, to equally varying degrees, succeeded.

But there has been a startling shift in perspective among fintech startups, a shift that surfaced at Bank Innovation 2016 here this week.

“Trust,” not scale, is perceived to be the ticket to success for fintech startups.


“With fintech, we are fundamentally in the business of developing trust with the consumer,” said Matt Oppenheimer, co-founder & chief executive officer of Remitly, a global remittance startup. “A lot of fintech companies miss that. You need a very scalable way to build trust.”

As startup founders who spoke at this week’s Bank Innovation 2016 said, this is distinctly unlike a standard Silicon Valley startup.

“Scaling in fintech is different than regular startups,” said Joseph Prather, founder & chief executive officer of, which offers text banking services. “You can’t race race race to scale.”

Oppenheimer, Prather and others now view “trust as a gateway to other products.” The new fintech model works something like this:

  • build a valuable product;
  • establish its adoption by a meaningful selection of consumers (often by running a proof-of-concept with a financial institution); and then
  • offer those consumers more products.

Vince Passione, Chief Executive Officer of LendKey, the marketplace lender, pointed out that this is Sofi’s model, for example.

“Sofi started in student loans and is expanding,” Passione said. “So far the model is working well. They have demonstrated an ability to start with a single refi product” and then offer additional services.

Passione said that if a company were to use the “trust as a gateway” strategy, there might not be a better product to start with than student lending, Sofi’s first offering.

“There are about 40 million consumers out there with student loan debt,” he said. “If you are trying to get young customers, it is a great product.”

It would seem that venture capitalists get this. Sofi has raised nearly $1.4 billion in venture funding to date, and not all of that is to warehouse loans. Come to think of it, there should be a Wikipedia for this …

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at or 212-564-8972.

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