• What is Fintech 2.0 and what new opportunities are there?
  • Stockhead reaches out to Zepto CEO, Chris Jewell
  • ASX stocks competing under Fintech 2.0


In the early days of fintech, an era often called Fintech 1.0, pioneers introduced distinct and isolated financial service offerings.

The startups that blossomed in this era offered consumers solutions to specific pain points – like P2P payments, micro-investing, or savings.

US-based Venmo and LendingClub for example built businesses by unbundling specific banking products and features, and acquiring users one by one.

But this approach led to a problem that still hasn’t been entirely resolved today, which is that they offered a fractured customer experience that forced people to use multiple apps.

The Fintech 2.0 approach meanwhile, which is where we are today, focuses more on what’s often called “rebundling”.

This is where multiple services are being integrated into one single place, a place customers can manage all their financial life around.

Moreover, fintechs that tend to succeed these days are those who are considered an infrastructure play – ie: the platform providers that existing B2B and B2C organisations can build on to create new products themselves.

This trend, widely referred to as embedded finance, is dramatically expanding the size of the fintech market opportunity, and reshaping the distribution model for financial services.



According to Jordan McKee, fintech research director at S&P Global Market Intelligence, fintech players under the Fintech 2.0 regime are evolving into more of an ingredient that’s getting baked into the services consumers and enterprises are already utilising.

Enterprises like Shopify and Uber for example have been using this strategy effectively to drive revenue growth and increase product stickiness.

Essentially, an “As a Service” market opportunity has emerged under Fintech 2.0, and this revolves around enabling enterprises to outsource the infrastructure required to deliver fintech products.

This emerging service has been loosely called Fintech as a Service (FaaS).

“Many leverage the infrastructure of Fintech-as-a-Service providers to reduce the complexity and investment associated with launching fintech products like payments, banking and lending,” said McKee.

Ultimately, this trend is reshaping the unit economics associated with offering financial services, because it has made launching a new fintech product or startup so much easier and cheaper.

This segment is also rapidly attracting venture capital, with private FaaS startups raising more than US$5 billion since the start of 2021.

“We firmly believe that many of the next decade’s largest and most important fintech companies will be those offered on an As-a- Service basis,” said McKee.


New breed of players

In Australia, the major players competing under Fintech 2.0 broadly fall into three layers.

“You’ve got the rail payment companies, which sit at the core,” says Chris Jewell, the CEO of Zepto, a rapidly growing account-to-account (A2A) payments technology innovator.

“At this layer, you’ve got big players like MasterCard, Visa, Amex on the ‘cards’ side, and you’ve got the New Payments Platform (NPP) and Direct Entry [BECS] under the Reserve Bank on the ‘bank accounts’ side.

“The next layer down is infrastructure, which is Adyen and Stripe within ‘cards’ or the banks. And on the bank accounts side it’s the banks or it’s Zepto,”.

But if we dig deeper into the next layer, which is the horizontal layer of application, there’s a proliferation of fintechs emerging there, creating new possibilities that are not anchored to the way things have always been done.

Moving to a horizontal business model has allowed these smaller fintechs to monetise their technology and expertise by providing services to other financial institutions and businesses.

“They’re creating new opportunities. There’s payment processing where small players are just absolutely dominating where access to infrastructure is not available unless via a third-party,” Jewell added.

“They are absolutely offering fintech-as-a-service.”

Some fintechs are even specialising in ever more niche functionality and services.

These smaller FaaS players are increasingly nimble and reliable, allowing businesses to assemble piece-by-piece the precise tech solution they need for whatever it is they’re aiming to deliver.

Jewell says Fintech 2.0 or FaaS represents an opportunity for both fintech companies and traditional financial institutions to work together and leverage each other’s strengths to create more innovative financial products.

“I definitely see that as the next opportunity for fintech because we’re using the emergence of different things like Web3, or Open Finance and real time payments.

“Throw ChatGPT into there, and who knows what’s coming down the line?” he added.


Which ASX companies fall under Fintech 2.0?

Jewell believes that as time goes by, the horizontal bar of innovation will be limitless.

“Every day we see it edging further and further, creating more and more opportunity,” he said.

For Zepto, partnering with other fintechs has helped the company increase its own customer base and access new markets.

“But how we stay relevant is with a value offering that is not constrained by an infrastructure partner that we cannot continue to extend horizontally with.

“I think that’s where Zepto plays a really important part as an infrastructure player,” Jewell said.

On the ASX, companies that fall under the umbrella of Fintech 2.0 include:

Change Financial (ASX:CCA)

Change’s technology offers Banking as a Service (BaaS) solutions to businesses and financial institutions,  providing infrastructure and tools for building customisable payment solutions.

Last year, the company signed an exclusive six-year direct issuing partnership deal with Mastercard in Australia and New Zealand, enabling Change to issue prepaid and debit cards under the Mastercard logo.

Earlier, Change had launched its payments platform, Vertexon.

Vertexon is a Payments as a Service (PaaS) offering, which provides quick-to-market card and payments solutions to banks and fintechs around the world.

Douugh (ASX:DOU)

Douugh is a Fintech 2.0 player via its US-based financial super-app that has multiple features including Cashback Rewards, Early Pay, and Roundup.

Cashback Reward provides cashback and coupons to over 30,000 merchants, and helps customers to spend smarter and save more.

The Early Pay feature gives customers access to their paycheck up to two days earlier than offered by traditional banks.

Meanwhile, the Roundup feature was  launched to help customers save by rounding up Douugh card transactions to the nearest dollar, and sweeping them to a nominated Stash Jar on the platform.

Douugh is also offering traditional core-banking services in Australia through a partnership with Railsbank.