Finance: Heartcore Consumer Technology Trends 2021

Heartcore is Europe's consumer technology VC. Our annual Consumer Technology Trends Report sums up what happened in the world of consumer technology - category by category.

The crowd is betting against Wall Street.

Groups of social traders are increasingly coordinating, creating a cluster of traders with potential to move the markets. The consequence of this is the creation of a new influential player in the capital markets as retail investors have transitioned away from a fragmented group of individuals without the capabilities to move asset prices.

Graham and Dodd are both dead. Long live the crowd!

Regulatory changes unlikely to be implemented with the SEC being hamstrung by no prejudicial cases against retail investors and the Biden administration entering the White House.

Famous last words: This time it’s different!

Valuations are soaring like it's '99 but the impact of the internet is real this time and has been further accelerated by the pandemic. Massive sector shifts are further fueling technology.

Forward P/E ratios are starting to close in on the dotcom era valuations for the winners through the pandemic.

2021 VS 200 "darlings" forward P/E Ratios (x)

2021, Twilio: 5,691x | 2000, Sycamore Networks: 7,021x

2021, Mercado Libre: 634x | 2000, NetApp: 410x

2021,Ponduoduo Inc: 567x | 2000, Veritas: 323x

Source: Reuters, Financial Times, data as of February 8 th 2021

Sector shifts and increased online penetrationa nd relative importance to company earnings on the S&P500 is different this time...

Everyone is now an equity trader!

A low interest rate environment and the pandemic induced a perfect storm for retail investors with more time on their hands and nowhere to spend their money has boosted interest. No commission and fractional share trading platforms have further democratized equity trading.

2020 was another big year for neobanks.

US 2020 was a boom year for neobanks with sizeable rounds for European adn American neobanking leaders. Early 2021 raises indicate that investors continue to show strong faith in the segment. Notably, Klarna raised US $1bn at a US$31bn valuation, making it the highest valued private fintech in Europe with its BNPL and Neobank.

On the back of strong user growth.

User growth of the main European players was driven by geo-expansion, deeper penetration in the population and expanded product offerings.

Revolut has reached critical lightning speed.

While many of Revolut customers don't use it as their primary bank, what they have accomplished in a short 6 years is astonishing. Revolut's number of customers don't pale in comparison to some of Europe's largest banks founded 150 years ago.

Neobanks have created financial supermarkets …but they are yet to “bank” their customers.

Neobanks have added a plethora of features in their offerings.

Neobanks are largely overlooking traditionally profitable banking products such as lending and wealth management. In 2019, JP Morgan Chase, the largest bank in the United States mad $119B in total revenue, generating more than 45% of the total from its consumer and community banking practice, which hosts its lending products (including home lending and auto) and wealth management divisions.

Going deep or going broad?

Neobanks are fighting a multiple front war. On the one end they are fighting against specialist providers in each of the categories within their product suite.

Also fighting against verticalized players.

By slicing the market based on values or demographics, startups can build a long term sustainable competivie advantage, not least in lowering customer acquisition costs.

The payment’s oligopoly champions finance.

The market capitalization of the payment champions, VISA and Mastercard supercedes that of America's largest banks, JP Morgan Chase and Bank of America. They have become the ultimate incumbents, and regulators are concerned about their position of dominance.

Every company can now become a fintech company.

Tink adn Plaid allow any startup to become a fintech company, offering account to account payments for any company in an integrated service offering that drives conversion and cuts costs.