A brief interlude to the Information Blocking series, which will return for its finale next week.

I’m a healthcare technology guy. It’s literally in the title of the newsletter. But if you follow my Twitter, you know a strangely high number of my tweets pertain to banking, fintech, and neobanks for someone who has never worked outside of healthcare and who has only come to know through the secondhand smoke of that industry’s collective exhaust of newsletters and other social media.

Brendan Keeler @healthbjk

Interesting parallel in fintech to USCDI here

John Pitts @PolicyPitts

@Plaid has 5,500 customers, many with multiple use cases. Is CFPB going to determine by reg data needs for each one? What if they change over time? What data/how often are good rights to establish, but using them as product specific data min tools leads to atrophy.

Brendan Keeler @healthbjk

Following along with @maiab 's fintech book club and reading "Payment Systems in the US" Probably some good takeaways for equivalent healthcare infrastructure

Brendan Keeler @healthbjk

In fintech, if i increase the GDP of the Internet, that's a really good thing, for my company and the world. In digital health, if i equivalently increase the healthcare spend of the Internet, that's quite the bad thing for the world.

Brendan Keeler @healthbjk

how can digital health possibly compete with fintech innovation?

I simply find it interesting. The world of fintech is oft compared with healthcare. Learning by exploring parallels, contrasts, and divergences in this way is a noble and just pursuit. However, unfortunately, the most common of these are pretty lazy and clumsy in nature - by many metrics and measures, healthcare doesn’t lag fintech and fintech certainly has its own dark underbelly of ancient, layered, and crumbling infrastructure.

In order to explore a bit deeper, Alex Johnson (the author of the excellent Fintech Takes newsletter) and I chatted for a while (which you’ll find in this unscripted, unfiltered, somewhat edited for comprehensibility format) to compare and contrast these two ascendant tech industries, to see what could be learned, and to test what the TAM for this unique Venn diagram of topics might be. I’ve added some commentary on various sections to help add context and clarity in a TLDR way, which was quite needed as I descended into moments of overly excited ramblings.

Who’s who?

We kicked things off here trying to map the actors and roles between the two industries. Are banks the equivalent of providers? Or is the parallel actually with payers? Both angles offer some similarities and differences - which actors are paying for services rendered? Which actors were closer to having a digital relationship with their customers by the nature of their services?
For more reading here, I’ve tweeted a few times before on the comparison (providers vs banks, payers vs banks).

Brendan (Health API Guy):

All right. So what I've been thinking about lately is the parallel between fintech and digital health. You have the banks as the big incumbent institutions. They're brick-and-mortar, they've used scale in terms of building more and more as a mechanism and being as far-reaching as possible. I think banks have done that better than hospitals. But insurance carriers might be the better parallel to banks. The thought being merchants are doctors and insurance carriers are the banks because they're the ones holding the bag. Does that resonate with you? Does that make sense?

Alex (Fintech Takes):

It absolutely does. I’m curious how healthcare has evolved over the last year because what I’ve noticed in banking is that a lot of the advantages that banks had built up in terms of distribution just kinda disappeared overnight due to COVID. It's like "boom!" something happens and suddenly everything that you spent decades optimizing for because you knew that was the competitive advantage, suddenly all of that changed.

Everyone knows that they need to update the way that they distribute their product or connect with their customers. That whole distribution model needs to change, but it's not as easy as that because you know what the end state needs to be but you need to retrain all of your muscles and all of your processes because you spend decades or, in the case of some of these banks, hundreds of years optimizing these processes that now are not based on the right assumptions.

Banks know that they need to be digital and that these things have changed, but there's no real intuitive understanding of how you retrain yourself to walk in a different way.

Brendan (Health API Guy):

Yeah. And there's a parallel there. For payers, for insurance carriers, they're ancient and lethargic and all the same stuff. But they are, more so than banks or even hospitals, sort of virtual. You very rarely where you're like, "Let me go walk into my health insurance, my local Cigna." You're always a phone call away. So I think they were geared more towards a digital revolution.

But the hospitals that are closer, I think, on that part of the analogy of, "Okay, what does it mean to do telehealth, the virtualization of the digital front door, all that stuff?" It’s somewhat close to embedded finance, taking each of those atomic functions and allowing others to utilize it externally or embed it into their software. That idea (embedded health) does play in health to some degree.

Neobanks and Virtual First

In both banking and health care, the pre-digital era was dominated by consolidation, by offering a comprehensive set of services to ensure consumers stayed within your enterprise. In banking, you’d have checking, debit, insurance, etc. In healthcare, you’d create sprawling integrated delivery networks. In the digital world, that strategy of being everything to everyone no longer holds - a more specialized app or service is only a click or two away, with minimal friction. Specialization of service to be best-in-class is viable in banking and in health due to the power of digital technology. This basically equates the concept of a “neobank” in fintech to “virtual first care” (VFC) in healthcare. With both, we’ve seen utility-focused neobanks and VFC in one wave, but only now are seeing a new wave of identity-focused neobanks and VFC providers start to pop up.

For more on this topic - Alex has written about neobanks building to communities, such as Daylight (serving LGBTQ) and Greenwood, here before, and I’ve presented about virtual first care and how we see new waves of hyper focuseddisease-specific and community-specific startups. I also recommend Joe Connolly’s excellent primer on virtual first care.

Alex (Fintech Takes):

Another parallel that's interesting is this idea that if you're going to be all things to all people, then the important thing is to have a comprehensive set of things that you can offer.

In healthcare, a carrier wants to be able to cover every type of insurance or every type of customer, they want to be as comprehensive as possible. So scale and the fact that you're big and have the resources to do it, all of those things are really important. Same thing with providers — one-stop shop for all of my health needs much in the same way that banks they keep trying to get bigger in order to get that universal banking model.

But with this shift that we've seen, now the cost to me as the consumer of shopping around or going to different providers has basically dropped to zero. It's just more clicking on my phone; it's downloading an app; it's super easy.

So now the point competition has shifted from that distribution and convenience of getting everything in one place to finding the product or service that’s best in class, that's better in one area than anything I've ever been able to get.

And I think that's the parallel to neobanks. They're not out-competing banks on breadth. There's no way that they possibly could, but they find one area that's underserved relative to these other ones. Maybe one that's particularly well suited to digital as opposed to in-person. And then they just really nail that one experience and build from there.

Does that have any parallels with health?

Brendan (Health API Guy):

Yeah, for sure. The most visible example right now is on the provider side with virtual first care. Neobanks pioneered it. You could see there's a bank for people of color. There's a bank for youth, there's a bank for the elderly. And in virtual-first care, a parallel model is now getting super popular. That's what Zus, the company I work for, is aiming to help enable is the infrastructure for these companies — by specialty or disease (say for diabetes), but now increasingly identity-focused too.

Alex (Fintech Takes):

Right. That brings up a really interesting question for me, which is what is the intersection of utility and identity when it comes to delivering these services?

On the one hand, in banking the utility is I want to invest, I want to buy stocks, I want to save money, I want a loan for X, Y, Z. There's very specific utility product needs that I have. Maybe the parallel in health is different categories of care or different diseases or different areas of illness, but at the same time, we're starting to look at how that intersect with the unique needs of specific groups that have challenges that are a little bit different, right?

So if we're talking about African-American consumers, or we're talking about a specific vocation like musicians or whatever, they're going to have different financial service challenges, even around those very specific utility needs.

As an example, an LGBTQ+ consumer’s need for a savings or wealth management product might be a little different because they want to save more money earlier in their life in order to cover the expenses of adopting a child. The core need might not be vastly different from the utility standpoint, but it’s different enough that generic savings and wealth management products are painful to deal with. Whereas when the product is really tailored to them, all of that friction disappears.

So I think that's the value trade off that we're starting to see in the neobank space — getting closer to the intersection of the utility and the identity for a specific problem area.

Brendan (Health API Guy):

Yeah. I think you're spot on. In healthcare, we had generic telehealth first. Then we had telehealth focused on specific diseases. Now we are seeing the intersection of identity. That can be all-encompassing — say I'm going to provide everything for transgender care. Or there's now even more nuanced virtual-first care, that posits that to provide behavioral health to Asian Americans, I need to understand their norms and their culture. There’s a friction or a pain to somebody in healthcare when you don't have that empathy and when you don't have that understanding of identity in the right way. So I totally dig that.

Alex (Fintech Takes):

Can I ask you a question on that front?

Brendan (Health API Guy):

Mm-Hmm.

Alex (Fintech Takes):

It’s difficult for someone who’s not a member of a specific group to build these really tailored banking products and experiences for that group. They just don’t understand the problem well enough. This is why you see a neobank like Daylight describe itself as “built by LGBTQ+ people for LGBTQ+ people”. That “built by, for” part is really important because the people building the products understand the problems really intimately.

This approach to building a bank is enabled by infrastructure that doesn't require them to have a licensed bank charter or to be a part of a bank already. The neobank has a toolbox and a set of tools that they can build with to do that.

What's the equivalent infrastructure in healthcare?

Embedded Banking and Health

Continuing on the theme of comparing neobanks and virtual first care providers, we talk a little about how the differing regulatory environments cause embedded health to look a little different than embedded finance. Digital health startups can form covered entities much more quickly than fintechs can become banks, so we see groups like Wheel, Axle Health, and Truepill offering embedded health functions, rather than traditional providers. In banking, where a banking license is hundreds of millions of dollars and many years, Banking as a Service exists generally via an established bank until you really get big. Both paradigms still enable this new class of virtual first care and neobank to get up and running and thrive, though.

Brendan (Health API Guy):

What's so interesting is there is a certification to be a provider organization — a covered entity — but it's pretty easy compared to a banking license, which is (to my understanding) difficult and expensive. To be a covered entity there are some hoops you have to jump through, but it’s pretty clear you can just go and do it.

So rather than banks exposing specific functions that these neobanks can use, in healthcare we see companies spinning up like Wheel. Wheel has hired a bunch of telehealth providers and then they say, “here's an API to utilize that function and you can go and create whatever you need.” And we're seeing that for health coaches and we're seeing that for other core clinical functions. So rather than incumbents benefiting from their regulatory capture and protection, like you see in banking, there's more of chance for somebody new to come in.

Is there a fintech that is going in like "I'm going to be a bank so I can offer embedded banking or embedded finance"?

Alex (Fintech Takes):

Yeah. There definitely is. It's a little bit different in banking in that as a fintech company you have to get to a certain scale before you can take on that regulatory piece, but we are seeing bigger ones get to that point.

SoFi spent $22 million to acquire a small bank in order to get a charter. And once they have a charter, there's a set of advantages that they will get from that. And actually it's interesting that you mentioned the API thing because SoFi also bought Galileo, which is one of the newer processors behind the scenes for cards and accounts and stuff. So in a way they're buying all the different levels of the stack now that they've reached a certain scale. And I think they have that same intention which was now we're going to be a direct provider of these services, but we're also going to be able to enable this activity across other providers and help foster more of a marketplace around this set of capabilities.

So I think the blurring of those lines is really interesting because once you have the technology to be able to do it, there's lots of different ways that you can leverage that technology.

Digital’s Ceiling

There are very few functions that can only be done in brick and mortar bank branches. But barring incredible leaps forward in-home care, delivery diagnostics, and remote patient monitoring, there’s a significantly higher percentage of activities that are physical in health. But as Alex points out, the ceiling of virtual care and fintech is not a pure function of “what’s possible”. Person-to-person interactions and support matter, as does the feeling of a relationship. Banks and healthcare organizations crafted that via the inherent connection of in-person interactions. How is that replicated or replaced in the digital age?

Brendan (Health API Guy):

Another question I have for you is that as I look at banks versus, let's say providers, there's an inherent physicality to health. There are things you need to do in person. Maybe we get to a point where there's robots and Alexas and all that stuff. But, right now, there's a physicality, that means that certain functions can't be virtual.

Alex (Fintech Takes):

I have to have my blood drawn, right? So assuming that there is no Theranos that's going to come in and actually make that viable at home. I have to go in for certain things.

Brendan (Health API Guy):

Right. But for banks, that's much lower. Maybe there's a few functions that are in person, but is there a future where everything can be virtualized and therefore then extended via an API?

Alex (Fintech Takes):

It’s really interesting because in my head I'm picturing this continuum. On the one end it's like we can do everything virtually, and on the other end it's we have to do everything in person. And banking and healthcare incumbents have a view as to where that point on the continuum is. And disruptors have a view of where that point on the continuum is. And each of them has valid points for why they think it needs to be where it is. But, to your point, there's also an upper limit as to where it can be for each industry.

In financial services, there's a lot of disruptors that believe we don't need to do anything in-person. We can start an all-digital bank that has a completely remote workforce. We don't have an office, we don't have a central headquarters. We certainly don't have branches or in-person locations and everything can be delivered digitally.

And I think in financial services the five stages of grief that banks have gone through as they adapted to that idea, is that at first you have to have in-person for really any type of financial service activity. And then they got to the point where they said, “okay, maybe the simpler stuff like a checking account or a credit card or some of those things can be just all digital, but there's always going to be other activities that are needing some level of in-person interaction.” And that's like mortgages or investing, that kind of stuff. And now we're seeing that belief being challenged by Rocket Mortgage and Blend and those guys digitizing the mortgage process and obviously Robinhood and many, many others that are digitizing the investing process.

That said — and this maybe ties back into healthcare — I think that there's actually two dimensions to this question.

The first dimension is purely tactical — are there activities that can't be done remotely or electronically? In the case of healthcare, yes, absolutely. In the case of finance services, maybe not. There might not actually be anything that has to be done in person. It's all just ones and zeros.

But the second dimension is more strategic — to what level do you have to provide human interaction in order for this to be a satisfying experience to customers and have them get what they want out of it?

I think that's where fintech companies underestimate the importance of not necessarily in-person branches, but at least person-to-person interactions. Robinhood, as an example, just spun up a call center for customer service. But that's very recent. Before that, if you had a problem with your Robinhood account, which a lot of people had very big problems with their account, there's literally no one you could call, and go like, "Hey, it's going to be fine. You don't actually owe $300,000 on those options bets. Just wait a day and you'll be fine." There was no one you could call to talk about that with. And I think that fintech companies and their belief that everything can be ones and zeros undersell the importance of that.

What's the healthcare perspective on that?

Brendan (Health API Guy):

Yeah. I think the two dimensions you're saying. Is what is the max? If you actually just go through and say what's paperwork or what is intrinsically tied to being in-person? It sounds like, in banking, you can almost go to 100. Then there’s the question of how much of an appetite is there for that and in that appetite, as you're saying, a large factor is relationship.

I think we see some interesting stuff in healthcare. Smart companies that are building in virtual first care, they think about, "Okay, let's build a care team and a care plan and have dedicated people who know and can care constantly and are all thinking about this patient." Let's think about really from first principles about how we're communicating with our populations. So yeah, I think they try to overcome it when they are doing virtual-first care to say, "How do we have a lot of touch points?” And those are texts if the population is young or it’s "let's call the person because it's a Medicare population." But the companies that I see that are successful, the verbiage they use almost always in the first two or three sentences when you talk to them about their business is relationship. They're talking about the relationship they have with the patient.

So yeah, I hear you, there's different dynamics. And I don't think in either industry there's probably appetite for fully virtual, unless we're all in the Matrix or something.

Extremely high LTV for virtual care in this niche

Relationships and Personalization

Relationship building may be the new challenge inherent to virtualization of these industries, but personalization is one of the biggest opportunities. The way that banking and healthcare are being broken into atomic units (see Alex’s “New Centers of Financial Gravity”) mean that new neobanks and virtual first care are easier than ever to found. The growing liquidity and aggregation of data means that we can know more about customers and patients than ever before. The untethering from geographic constraints means healthcare (and banking) isn’t local (as Nikhil wrote in one of his best pieces), so small niches can be scaled nationally or even internally. All this combines to smaller and smaller target audiences with superlative services tailored to exactly who they are. How personalized can banking and healthcare be?

Alex (Fintech Takes):

Right. I totally agree with that. I guess another thing that I'm curious about is advice.

Everyone has different goals and a set of constraints personally that make what they're looking for very, very different than the generic thing. So, you can give generic advice that like, “yeah, it's usually always best to have X amount of money in an emergency fund”, but that's not really tailored to the individual.

One of the concepts we talk a lot about in banking is this idea that, over time, we get to the idea of a bank of one person — Alex's bank. And it is going to tell me very specific things based on my situation, my goals and the parameters that I set.

I'm sure they talk about individualized or personalized healthcare, but where are the bounds of that conversation?

Brendan (Health API Guy):

Yeah. Personalized healthcare is the dream with the growth of genetics and bioinformatics. More and more testing and a lot of that testing actually shifting from, “I do this once a year” or “I do this once a decade in a in a clinic” to “I do this regularly at home”. And the provider ships you something to do that test. As you get older, Medicare now might pay for Fitbits and more continuous measurement devices.

The holy grail is aggregating that data and having a truly personalized care plan that's not just, "you have diabetes, follow these steps", but continuously feeding in data and updating the plan.

The problem with health is that, no offense to banking and fintech, but the data is a little bit more complex. It's not just debits and credits or something. But

I'm not trying to talk shit.

Alex (Fintech Takes):

How dare you! It is so complex in banking. The human genome can take a seat behind Plaid open banking data, thank you very much!

Brendan (Health API Guy):

So that's a tricky part because even if you're a big, big hospital in the U.S., you're tiny compared to a bank. There's far more care institutions in the US than there are banks. There's what, 5,000 banks in the US?

Alex (Fintech Takes):

Yeah. It's like 4,000 and change now.

Brendan (Health API Guy):

Right. And there's hundreds of thousands of provider organizations of all scales. So all those silos mean that it's more like merchants. Even if you're a big merchant, you don't have a complete picture of all the buying habits and you can't form the perfect personalized ads or tailor what they need immediately, because it's so scattered and that's closer I think. It's still scattered in banking, but...

The Infrastructure Plays

All roads lead to infrastructure (at least when Alex and I talk), so at this point we start to do some compare / contrast between a few of the major infrastructural players in fintech and digital health. If that’s your jam, Ramps and Rails is probably up your alley, as well as some Twitter threads (Stripe comparison, payers as the real “Plaid for healthcare” data source, discussion of Plaid Exchange, more Plaid Exchange, and a straight analogy thread of API vendors, among others).

Alex (Fintech Takes):

No, that makes sense.

And for banks there are these common infrastructure points that the vast majority stuff gets forced through. At the end of the day, everyone makes payments with ACH or on the card rails. So there are these choke points where most of the data goes through. It's all the same format. Most of it is digital, even though it's 1970s-style digital, but card transactions are digital. There's a bunch of advantages I think that financial services have when it comes to applying analytics to data and trying to get down to a better understanding of the customer. Whereas, as you're saying, in healthcare, it's like there's a million different providers, all scattered in a really geographically dispersed way. There really isn't a whole lot of centralized infrastructure that anything runs through.

And in financial services, I can basically get access to anyone's bank and financial information. Maybe I have to do it in a not-so-nice way and scrape it. Maybe there are some parts that I'm not totally seeing, but I can get a pretty comprehensive picture with the customer's help. And there's not a huge amount of regulatory red tape in the way.

What's the equivalent in health? Like if I'm a consumer and I want to provide some care provider with a complete and total picture of my health, how do I do that? What can I do? What stands in my way?

Brendan (Health API Guy):

There are equivalents to Plaid in healthcare. They do some screen scraping, but also use standard APIs. But what's interesting is that for healthcare we have regulation that requires, like open banking in Europe, open APIs.

Alex (Fintech Takes):

That's good!

Brendan (Health API Guy):

So that means to pull the data, all the providers and all the payers have to open up the same Plaid-like flow: type in my username and password. The challenge with it is that while you, as a customer, might know your bank account username and password, you probably don’t know the equivalent logins for healthcare accounts. You might not even have accounts! Healthcare organizations don't issue you an account automatically because it might cost some money. If you try to create an account, then you have to identity proof in a really old fashioned, knowledge-based question way. So you have this broad network for pulling the data, but then you go to the average person and they're like, "Well, I have nothing to type in."

Alex (Fintech Takes):

That's really interesting because I think an equivalent in banking that we're starting to run into is the difference between your bank and your payroll system.

In payroll world, you can get an interesting, different, and (in some cases) more useful set of information on what's going into your customer's paycheck. And the payroll systems have all of that, so the payroll API companies are like, "type in your payroll account password!"

I don't know what that is!

So in healthcare, it's almost like, take that payroll problem, but then multiply it by the number of different healthcare providers that you see on a somewhat infrequent basis. Like, if someone asked me, “hey, we can pull in information about blah, blah, blah. Just plug in your account information for your dermatologist.” I'd be like, "I don't know what that is. I think I went there seven years ago? I have no idea."

So that makes a lot of sense as a challenge.

Brendan (Health API Guy):

Yeah, in healthcare we have infrastructure to facilitate specific functions — like sending a message — which is kinda the equivalent in banking to the payment rails. But we also have infrastructure that doesn’t really have a good parallel in banking.

For example, we have Carequality and Commonwell, which are actually for healthcare providers. This is hard to envision in bank world, but imagine if one bank could go "you know what? I have the information here for Brendan, let me pull the full account of information to see what they have in another bank." That’s not really available in banking, but that's what we have in healthcare, which makes sense. Any healthcare provider is going to want to see the full picture. Coverage for these services is only 70% of providers, but that's still pretty good.

Alex (Fintech Takes):

I'm just so fascinated by the deep similarities and yet interesting differences between healthcare and financial services.

One of them is that in healthcare there's this baseline understanding that we should all share data and do all these things because at the end of the day we all want the most comprehensive picture because we're all trying to solve the same basic problem, which is we wanna help this person get better.

In financial services, that should be the way that they think about it, but it's not. There was a quote that I saw from a story where they were having this debate about open banking, and one of the bank CEOs said something to the effect of "it's my data, it's not the customer's data and I'm under no obligation to share it."

In healthcare world, that's a malpractice-y type of thing to say. It’s just clearly, diametrically opposed to the best health outcomes for consumers. But in financial services, that's still a very prevalent way of thinking if you’re a bank — it’s my relationship with this customer and the financial services I provide to them have nothing to do with their overall financial health so I am under no obligation to share it or try to consume a broader picture. It's just about me and this customer, and I want to try to lock that down as much as I can.

It seems like there's almost a deep philosophical difference there.

Brendan (Health API Guy):

There's a philosophical difference. Many providers I think would be like, "we have to care for the patient. Let's do this."

There's also regulation like HIPAA (which was passed in 1996). It says that the patient has the right to their data and it also says that these covered entities, these hospitals, they need to be able to exchange data. There's still pushback, because it's still businesses and if you're the rural hospital, you might be like, "Oh shoot, I don't want to give away my client list." Not everyone thinks of them as patients, it might be thinking of them more as customers. However, there still is a higher standard I think because of the Hippocratic Oath and the idea of caring for people, versus just a lot of banks are a lot closer to the money.

Alex (Fintech Takes):

Yeah. I think we need a Hippocratic Oath in financial services. We have it a little bit if you're a fiduciary and acting in that capacity, what are your responsibilities? But it's not treated or looked at in any way close to the same way that that is in healthcare. And when it comes to the regulations around privacy and consumer being able to share their data, we’re still not close. Maybe we're getting closer with what the CFPB is doing right now around open banking, but we need to get a point where our baseline is, "it's the customer's data, they can take it wherever they want and everyone has an obligation to share this data and make it available."

Brendan (Health API Guy):

Yeah. It's interesting. I think you can scale this thought across not just banking or healthcare, but also with merchants: anytime that I'm going to a service and typing in my username, password, giving my data, shouldn't I be able to grab a copy of that? The appetite is growing. It's just starting in healthcare and banking where it's arguably the most important data sets to enable patients and customers to get their data.

Question for you — you have Plaid, you have Stripe, you have Modern Treasury, these connector companies. And it seems to me Stripe is quickly turning into the mega connector. They're doing the on-ramps onto the networks and starting to get their toes into banking-as-a-service, which may compete with other smaller providers.

Any thoughts on that whole area of connector-type companies and how they will evolve?

Alex (Fintech Takes):

For sure. They're enormously complex companies and there's a bunch of different things they do, but the basic model is that they’re going to do one thing that is relatively simple, but they’re going to do it way better and easier than anyone else.

So, in Stripe's case, it's helping people accept payments online. They basically said “we're just going to be 10x easier than anyone else at enabling that and we're always doing to be and that's our core competency.” And then what they do with spinning into banking-as-a-service or into fraud or into any of these other areas that they’re getting into is basically saying “once we reach a certain scale at doing our one thing, that then gives us a data advantage in doing all these other things.”

So, using banking-as-a-service as an example, they have this product that just blows me away, that's called Stripe Capital for platforms. And they will, for any platform business like Airbnb that operates on Stripe and that processes transactions through Stripe, make working capital loans to the platform’s customers through that platform and Stripe takes 100% of the credit risk for all of those loans, and all the they do is then just split the profits or split the revenue with the platform. So, from platform company’s perspective it's literally just flipping a switch and suddenly you’re making loans that you don't have to underwrite or think about or do anything on. And Stripe's ability to do that in a guaranteed way is entirely powered by their confidence from all the data that runs through their pipes and what they know about those customers that are operating on that platform.

So it's this weird compounding superpower where you make one thing really easy and then you just build layers and layers of value on top of that one thing.

You would know more than me, but in health, it almost seems like the equivalent is going back to Apple as an example where it's like we're just going to build a watch that's a great sensor for collecting health data. But then once you have enough people using it and you have enough data going through there, there should be all kinds of value added services you can layer on top of that. And I don't know that that's Apple's core strength in the same way that it is Stripe's, but it seems like it's the same type of opportunity.

Brendan (Health API Guy):

Yeah. I think there are two parallels to Stripe.

There are a number of companies that are sitting on the full clinical data networks I mentioned (Carequality and Commonwell) as an on-ramp, like Health Gorilla or Particle Health or Redox. Stripe got enough data that it could say, "Hey, we're really good at fraud detection because of the massive data". Gorilla or Particle Health or Redox could make the same play of "we're pulling so much data that we are able to cleanse it and de-duplicate it and make it usable.”

There's also another company called Truepill, which is a layer on top of the national e-prescribing network (Surescripts), the network that is why you don't have a printed prescription. They layer and provide value there and have been super popular. They are now breaking into other services, like an API to send a nurse to your home. So they're starting to go horizontal and try and meet a lot of the needs of a company.

So some parallels, but nobody that's the Stripe-size success yet, I would say.

Alex (Fintech Takes):

I guess that gets to another difference between the two industries is that Stripe got to the point it got to so fast because they rode a wave that everyone was really incentivized to ride on. They couldn't have picked a better simple thing to enable over the last 15 years than e-commerce payments. That's the best possible vehicle to hitch your wagon to. But I think that the playbook is still very interesting because it might take you a little while longer to get to scale, but it does seem like in a lot of these areas from an infrastructure standpoint, the advantage is (and the moat is) the data that you have.

This is why the notion of Stripe and Plaid as competitors to me is really interesting. Stripe and Plaid deal with a lot of the same stuff and they're in the same business, but they almost seem go out of their way to not compete with each other. I think it's because there is competitive overlap, but the types of insights they have into the data that they collect are just really different. Plaid is very focused on individual customers and enabling data sharing. And, to a certain extent, trying to stay out of the business of building stuff on top of that data. They just want to be the connector that ties everything together and their goal is to connect more types of institutions and keep adding nodes to their network. I think Stripe's vision is to get 90% of the really big e-commerce volume flowing through their pipes and then deepen that and build a huge amount of value on top.

They're such similar businesses, yet they're taking very divergent paths to monetizing on top of it. It's pretty interesting.

Brendan (Health API Guy):

When Plaid was getting picked up by Visa (and then not picked up by Visa), I was thinking, “well, how interesting would it be (and how threatening to Visa, Mastercard, and the banks) if Plaid and Stripe had merged?” But yeah, it does seem like they stay cautiously out of each other's domains. That's not necessarily the case here (in healthcare) because, for both the Plaid world and the overlay-on-the-network Stripe world, there are bit players that try and do both. Without merging or acquiring, you start to stray from core competencies, you start to build a massive new product in that space against big competitors ... that is not an easy undertaking.

Alex (Fintech Takes):

I think the interesting thing will be trying to see if there's a wave of companies that you can enable. So much of what happens in fintech that's interesting to me too is just good luck and good timing. I talk to companies in the space and they're just like, "Yeah, we'd be dead right now except everyone was locked in their house for a year. And so that just provided this huge artificial boost to our business.”

The trick is being the infrastructure partner that enables categories that just see a surge in growth that maybe no one saw coming. A lot of times that's the boost that a business needs to go from not viable to viable. I don't know if there's a particularly category within healthcare that's poised to grow a lot more than others, but hitching your wagon to the right one of those areas can be a huge boost towards driving an adoption.

Brendan (Health API Guy):

Yeah. You can never predict when regulation or a global pandemic will strike to enable your business model.

Alex (Fintech Takes):

Exactly. That's the problem.

The Spectre of Big Tech

Traditional media loves to cover big tech’s forays into both healthcare and financial services, often taking a binary lens of “they will disrupt” or “they will fail” perspective (see here). The truth is far more nuanced (props to Chrissy for covering it correctly). Big tech companies have had and will continue to have successes where the products and services align with their core competencies and strategic moats - Apple Health Records as a consumer facing touchpoint, Microsoft extending their enterprise footprint in hospitals with their Cloud for Healthcare and the Nuance acquisition, etc. They will more often fail or have difficulties where they swerve outside those competencies and moats, such as Apple’s brief foray into primary care.

Alex (Fintech Takes):

Here’s another topic I wanted to ask you about — one group of companies that both healthcare and financial services are nervous about and don't like in a lot of ways is big tech.

We have our run-ins and financial services with Google and with Amazon and with Apple and others. And it bumps into a similar issue which is there's this expectation that like, oh, of course, banks should have to participate in these ecosystems and should have to share all of their data with these companies and consumers are using Amazon or they're using the iPhone or they're using whatever to navigate their day-to-day decisions and those decisions should be populated with all of their financial services data.

However, those companies are not always the best partners in that exchange. There's no way Apple or Amazon or Google wants to reciprocate and share the data they have on customers with those companies. And a lot of times there's this coopetition model where Apple is like, "we have Apple Pay and we're going to enable any card issuer to put their card in that wallet. But oh, by the way, we're going to charge an extra percentage to the card issuers anytime the cardholder uses the card inside Apple Pay." So there are these weird coopetition things that end up happening with big tech.

I would imagine health is exactly the same way.

Brendan (Health API Guy):

Yeah, there are definitely similarities.

I was just reading an article and the author was talking about the history of Apple and how they hoodwinked banks by getting in and then saying actually “we're going to launch a card with Goldman Sachs”.

In healthcare, the angles of attack for Apple versus Google versus Amazon are quite different. You have Amazon launching Amazoncare. That's a direct competitor to healthcare organizations. Google, Amazon, and Microsoft all have cloud offerings specific to health.

That said, I think the rhetoric around big tech in healthcare is a bit unfair. These companies are trying to make a difference in healthcare, which certainly needs all the help it can get. And they’re not going to come in and just flip the whole table over — they can’t do that. There’s HIPAA and other regulations that they have to adhere to like everyone else. All these companies can do is use their unique strengths to build cool products. Who knows if they’ll work. Maybe Amazoncare will be successful as a telehealth care provider. Maybe it won’t. But we don’t criticize startups when they miss on something and we shouldn’t automatically critize Apple or Google as complete failures when these big ambitious swings don’t work.

You tell me, why did Google Plex fail?

Alex (Fintech Takes):

Yeah, Plex was going to be Google’s checking account. They shut it down and there's a lot of connecting-string-on-a-corkboard theories as to why they did. But I think the reality is, to your point, it took them a long time to launch it, it wasn't going super well, there was a lot of turnover with the team and eventually they were just like, “why are we doing this? We can just sell cloud services and other things to banks that do this for a living. What extra value are we offering by being in this space?”

I don't know too much about the Amazoncare stuff, but that's a really interesting one to me. Amazon fascinates me in that they have no problem diving into a new area and really competing very aggressively in it, but it does seem like they pick their spots carefully because they do recognize that sometimes there's not a big enough margin or there's regulation or other things that would make it impractical for them to get into it. And I would think that healthcare wouldn’t be super appealing to them if I was evaluating all the potential new markets they could get into.

What seems to be their thinking and jumping into healthcare?

Brendan (Health API Guy):

Yeah I think they're going to do healthcare stemming from other core competencies. They're going to make Alexa HIPAA-compliant. They're going to add some new services to AWS.

The Amazoncare one is so interesting. There's a Ben Thompson theory that Amazon's strategy is to have a margin off on top of everything across all industries. And in this case, they want to go in and be this virtual care provider that can be like Amazon Prime. They want to be the home health service provider that comes to you. They want to ship these things to your door. I think that's so in line with Amazon Prime, which is a core competency of theirs — delivering most services virtually, but being able to get the needed products or equipment delivered to your front door fast.

The challenge of delivering premium care is definitely tricky. Can they pick it up? I think they're sharp people, but it's a different muscle in some ways.

Alex (Fintech Takes):

That helps me construct a bit of a unified theory in my head, which is when you look at companies that are trying to get into these markets, you have to look not at what they do, but at a core competency that is structurally similar to what they are good at.

Amazon is a really good example because one of the challenges we were talking about with healthcare is it’s always at least partially physical; something needs to be shipped to your door. You need to do a test and send it back in. Or there's some other physical interface component. So the reason that Google can't compete with Amazon is because Google doesn't know anything about warehouses and shipping and logistics and all the things that Amazon is really good at in the in-person world, even though they are obviously a digital-first company.

In healthcare, you're never going to get rid of those in-person logistics. Part of it just can't be ones and zeros. So Amazon is probably a much more natural competitor/supplier in the healthcare space. And I could see them even doing something where they spin up Amazoncare in Ben Thompson terms, they use it to aggregate demand and then they force other providers to come on as third-party sellers within their little ecosystem and force them to live within their marketplace. That all makes perfect sense for healthcare.

But then when you look at Amazon and banking, you have to ask how much does Amazon’s core competencies overlap with banking? We don't tend to ship a lot of stuff. Amazon’s logistics advantages doesn't mean a whole lot.

Every big tech company is probably going to try, at some point, to get into every one of these industries because they can't help themselves. But which ones are they naturally suited to doing well? And which ones should we say, "Yeah, I'll believe it when I see it, but that doesn't seem like a natural fit."

Brendan (Health API Guy):

Yeah. I think that's a good way to put it and I think there are going to be successes and failures and again going back to Apple — Apple is super successful with their Apple Watch and Apple Health. And Apple Health Records is the leading personal health record, the equivalent of Mint for PFM.

Why is that?

It's because they are a consumer brand. So, of course, for this consumer-facing product, they have all the people on their platform. So that works. But if they tried to spin up a healthcare clinic — where does that map to anything that Apple already does well? It just doesn't. They can't even do services. They can't even do virtual services.

So yeah, it's funny to see people point at this type of stuff and say, "Oh, look, it's really hard for big tech to get into healthcare or banking." It's like, “no, no, no, it's hard for them to do something that's not the right thing for them to do.”

Cutting off the rest as it just devolved into me chanting Stripe over and over and him inching away from the microphone. Anyway, hope you enjoyed and big thanks to Alex.

Alex Johnson is a Director of Fintech Research at Cornerstone Advisors, where he publishes commissioned research reports on fintech trends and advises both established and startup financial technology companies.

Twitter: @AlexH_Johnson

LinkedIn: Linkedin.com/in/alexhjohnson/

Newsletter: Fintech Takes

As always, this content is created of my own free will and brain and does not represent the views of my employer, although a heck of a lot of the content is the sort of stuff we talk about and are solving for at Zus. If you liked this, I encourage you to check out our careers page or contact us to see if we’re a fit for what you’re building (talking to you, virtual first care companies).