1/ ‘Fintech Infrastructure’ seems to be on the radar for every venture fund these days. Consensus seems to be that it’s a major opportunity. I thought so too.

2/ But after we @slow pulled together (along with @inspiredcap) some much smarter friends (thx Audrey Kim @HansMorrisSF @gil_akos Eric Byunn @CentanaGrowth @wadearnold @zbruhnke) to talk it through, I am not so sure..

3/ I think the opportunity is much narrower than it appears at first blush – and that where there is serious opportunity, the trains are quickly leaving the station (or may already be gone).

4/ It’s true that there is nearly $200b in market cap shared amongst the ‘legacy’ players – Jack Heny ($JKHY), Fiserv ($FISV), $FIS, amongst others. These are the products that banks and other core financial institutions are run on.

5/ And it’s true that these solutions were originally built 30-40 years ago. Obviously there is room for improvement. But that’s not sufficient.

6/ The reality is that these products still serve the primary functions, there is no major pain at the customers they cause, and, importantly, the switching costs is astronomical.

7/ Maybe most importantly to the founder / venture world – it is not clear that they are holding back any innovation when it comes to serving the customer.

8/ The consensus seems to be that while slightly inefficient at times, people building for the customer by and large have what they need to get the job done. The digital wrappers being built around the core infrastructure is working.

9/ The emergence of data aggregators and APIs in the space has made it possible to innovate despite the legacy rails underpinning the entire system. But the thing about aggregators and APIs platforms – you don’t need that many.

10/ There are compounding advantages to scale, to centralizing the problem that needs to be solved. So while these companies are critical, logic would say that there won’t be a ton of them at scale.

11/ That is not to say there is no opportunity. There are still core functions that people need easier / better access to. There is still lots of fractionalized solutions when aggregation may make more sense.

12/ At a certain point, new financial institutions will get stood up – and they will not run on legacy infrastructure. But the timing of that remains unclear, as existing institutions are moving quickly cement themselves as utilities for innovators to build on.

13/ TLDR, the core functions well enough and there is a real opportunity to make the core more functional and interoperable for customer facing innovation- but I left unconvinced there will be a long tail of winners with scale.

14/ Please @ me. The only thing I am sure of is that I got something wrong or am missing an angle. ;-)