Recently John Best and I battled through nasty weather and spotty internet to trade thoughts on the stories with the biggest impact on payments and fintech in 2022. The audio version can be found here but for those who prefer the written word, I’ve collected a convenient summary with additional detail in some instances.
Ethereum’s urge to merge- In September the second most widely held cryptocurrency completed its long overdue and often delayed cutover from a “proof of work” to a “proof of stake” model. This complex maneuver- which some experts doubted would ever happen and others thought might trigger a fiasco- ultimately went quite smoothly. It also reduced Ethereum’s energy footprint by more than 99 percent according to many estimates, charting a sustainable path forward for other digital coins. What the merge *hasn’t* done yet is boost ETH’s price as JB predicted, but given the broader crypto landscape (see below) that may not be so surprising.
Inflation, the Fed and the end of “free money”- There’s no shortage of culprits on which to pin the surge in inflation that began in late 2021. Whatever the cause, rising prices spurred the Fed to raise interest rates at an unprecedented pace over a mere nine months. This put an end to the era of “free money” that had fueled a flurry of business investment, which in turn led to…
Venture capital funding/valuations press pause- I feel strongly that the headlines tend to mischaracterize this trend, but the reversal in funding fortune undeniably had a major impact on the fintech world in 2022. With debt suddenly more expensive, investors became far less willing to empty their pockets for money-losing companies. As a result new investment dried up for startups seeking additional funds, and valuations of both public and private companies plummeted. Look a bit closer and you’ll discover the equity markets aren’t totally dormant, they’re just not as overheated as the prior two years. And plenty of venture capital is waiting to be spent- once founders reconcile themselves to the idea that their companies won’t fetch the price they expected in late 2021.
Payment systems get political- I’d love to know what percentage of Americans had heard of the SWIFT network before February 2022, when Russia’s invasion of Ukraine prompted global banks to ban the outlaw nation from the cross-border settlement system. The intersection of payments and politics hit closer to home in September when Visa, Mastercard and American Express announced they would implement a newly created merchant category code (MCC) for gun sellers. The controversial decision, which followed years of activist shareholder requests, does not block gun sales but makes them easier to identify. The process is far from perfect- diversified retailers like Walmart and Cabela’s will not carry the code, for instance- but that didn’t prevent a lot of heated rhetoric and overstatement from both sides.
FTX and other implosions- Another case where the casual headline reader likely misinterprets the takeaway, but the impact of the situation is undeniable. Ironically the FTX debacle says nothing about crypto’s valuation or underlying security- the issues stem from classic shortcomings like lax controls, an absence of regulation, and old school business malpractice (we’ll let the courts decide whether it’s fraud). But the downfalls of other upstarts like Voyager, Celsius and BlockFI may have further implications for the development of the decentralized finance (DeFi) market- and may serve to confirm that trusted intermediaries like credit unions play a valuable role after all.
There are plenty of other stories we address on the podcast as well- the impact of continuing supply chain issues, “credit push” fraud (often associated with Craigslist and Zelle, to the extreme consternation of both) and the ongoing drawdown of what some have dubbed “excess deposits,” which earns my nod for the most misleading term of 2022.
None of these stories will organically evaporate on New Year’s Eve, so expect to hear more about them in the coming months- on the BIGCast and elsewhere.