Patricia Kemp, Co-Founder and Managing Partner of Oak HC/FT, spoke with Samee Zafar (Director, London).
1. Where do you see key investment opportunities in relation to Fintech over the next few years?
B2B Payments: COVID provides a unique tipping point for B2B payments to shift to digital, an area that we see as having been long underpenetrated and under-addressed by fintech startups. As of 2019, reports still indicate that over half of all B2B payments were made via paper check. Without the ability to go into the office to retrieve paper bills, cut paper checks, and gain approvals in-person due to lockdowns, businesses are going to have to adapt and shift this process towards digital in a way they have never been forced to historically.
Gig Economy & Supporting Infrastructure: The gig economy is one of the fastest-growing markets within online payments, projected to grow 20% each year over the next 10 years. The supporting infrastructure that allows these companies to scale globally ranges from localized payment methods to universal identification, or to flexible fraud solutions. There is a significant opportunity to create the second layer of enablement for this market. Our portfolio companies such as Au10tix (providing global identity verification for both the supply and demand side of these marketplaces) and Rapyd (providing a global payment network to allow transactions between providers, suppliers, consumers, and the underlying platform) are helping to tackle this problem. Taking that a step further, the employees that support these companies need financial services that they are not provided today. The percentage of the US workforce participating in the sharing economy labor force is growing each day and providing them with the financial services they need is going to be key.
2. How will the current situation impact digital commerce going forward?
Increased Demand for Ecommerce Infrastructure: According to the US Census Bureau, as of Q4 2019, Ecommerce sales represented 11.4% of total retail sales in the U.S. E-commerce has been increasing its share of total U.S. retail sales by ~1% for the past few years. We expect this adoption will significantly accelerate as a result of the current situation and remain to a certain extent even after social distancing wanes. As a result, there will be increased demand for e-commerce infrastructure for managing the entire lifecycle from browse (site analytics, attribution, security) to purchase / conversion (journey mgmt., cart UI/UX, promotions) to payment (gateway, security, POS lending) to post-purchase experience (insurance / warranty, returns) to delivery (last-mile delivery, local warehousing, supply chain payments) and more.
Contactless payments use will increase: According to research conducted in March 2020 by RTi Research Group, “30% of consumers have started using contactless payment methods (think NFC cards, smartphones, and wearables) since COVID-19 started. Furthermore, 70% of those who are new to contactless payments report that they will continue to use this payment method after the pandemic has died down.” Realistically, not all of these consumers will continue to use contactless payments, a certain percentage will revert to cash or physical cards for at least some transactions, but it’s not unrealistic to believe that this trend will have staying power in a post-COVID world. This dynamic could provide a unique opportunity for brands to capitalize on consumer adoption of app-based payment methods, an area where most brands (except for Starbucks) have struggled to gain traction historically.
3. What are your hobbies, how do you spend your free time?
Hiking, tennis, kids
4. What are you reading these days?
I had a terrific behind the scenes tour of the Leonardo exhibit at the Louvre right before the lockdown, and I am now making my way through Walter Isaacson’s Leonardo Da Vinci, which is a great read
5. What is your one overriding personal goal?
Optimal fitness and health!
The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).