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 is the Executive Editor & Publisher of Bank Innovation and CEO of Royal Media, its parent company. He can be reached at or 212-564-8972.

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