The vast majority of startups fail — but Paypal (PYPL) Co-founder Max Levchin, who helped revolutionize online payments, says he’s “always very bullish” about ventures in the financial services sector because he sees the massive industry dominated by companies with aging infrastructure.
“There's always room in every niche,” he says. “Where you kind of go, oh, wow, that little thing is broken, and it could really use some fixing, it is inevitably measured in hundreds of millions of dollars.”
“The bigger ideas to revolutionize things, they quickly become trillions,” he adds.
The finance and insurance sectors in the U.S. totaled $1.5 trillion last year, accounting for 7.4% of GDP, a Commerce Department program called SelectUSA says. The scale of the industry is similar in the United Kingdom, where last year financial services made up 6.9% of GDP, according to the House of Commons Library.
Over the past decade, the sector has been rocked by the emergence of mobile payment apps like PayPal-owned Venmo, as well as the rise of cryptocurrency, a space that giants like JPMorgan Chase (JPM) and Facebook (FB) are set to enter.
Another tech giant, Apple (AAPL), recently confirmed that it’s eyeing crypto, as well. Jennifer Bailey, vice president of Apple Pay, told CNN that cryptocurrency has “interesting long-term potential.”
Levchin would know about how to capitalize on the market opportunities in the sector, having co-founded PayPal and sold it to eBay (EBAY) for about $100 million. (eBay subsequently spun off PayPal.) In 2004, soon after he left PayPal, Levchin founded an online media-sharing company called Slide, which he sold to Google (GOOG, GOOGL) for $182 million six years later. Now Levchin helms Affirm, a web platform that gives small loans with clear terms.
“I'm personally always very bullish on any payments, financial services idea because the market is so massive, because the infrastructure is so old,” Levchin says.
Levchin, who was also an early investor in Yelp (YELP), made the comments during a conversation that airs in an episode of Yahoo Finance’s “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.
‘They’re all growing at some ridiculous pace’
For their part, the big banks have sought to mimic their smaller fintech counterparts, as reported by Yahoo Finance’s Ethan Wolff-Mann. “We spend a lot of time looking at the other major apps customers are using and how they're evolving,” Bill Wallace, head of digital at JPMorgan Chase, told Yahoo Finance.
“What was the early adopter advantage now became the shackles that hold some of the largest infrastructure players that we have down, because they really don't have the ability to say away with it all, let's build it from scratch with modern technology with better systems,” he adds.
He credited upstart competitors like Venmo.
“There's plenty of other entrants and they're all growing at some ridiculous pace,” he says.
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.