TL;DR
The cloud is ripe for disruption in its second act. PaaS companies are poised to do to AWS what Stripe did to banking – simplify, innovate, and explode. Welcome to cloud computing's fintech moment.
The Evolution of Banks and Fintech
Historical Context of Banking
Banks have indeed existed for millennia, with early forms of banking traced back to ancient civilizations. The first known bank-like institution dates back to 2000 BC in Assyria and Babylonia. Throughout history, banks have served essential functions in society:
Facilitating payments
Providing investment opportunities
Offering loans
Providing insurance services
The Smartphone Revolution and Financial Access
The advent of smartphones in the 21st century dramatically changed the landscape of financial services:
By 2021, there were 6.378 billion smartphone users worldwide, accounting for 80.63% of the global population.
Mobile payment transaction value is expected to grow from $1.97 trillion in 2021 to $11.83 trillion in 2028.
Friction in Traditional Banking
Despite their long history, traditional banks have faced challenges in adapting to the digital age:
In 2019, 25% of U.S. households were unbanked or underbanked.
66% of millennials consider their conventional bank's digital offering to be average or below average.
The Rise of Fintech
This gap in service created opportunities for fintech companies to disrupt various banking niches while using banks as their platform:
Point of Sale (POS) Devices:
Square, founded in 2009, reached a market cap of $97.92 billion by 2021[6].
Peer-to-Peer Payments:
Venmo, acquired by PayPal in 2013, processed $230 billion in total payment volume in 2021[7].
Buy Now, Pay Later (BNPL):
The BNPL market is expected to grow from $141.8 billion in 2021 to $995.1 billion by 2026[8].
Fintech Giants and Their Impact
Several fintech companies have become major players in the financial services industry:
PayPal: Founded in 1998, had 426 million active accounts by Q4 2021.
Stripe: Valued at $95 billion in 2021, making it the most valuable private fintech company in the U.S.
Chime: Reached 12 million users by 2021, becoming the largest neo-bank in the U.S.
And there are many more here disrupting different niches
Changing Financial Landscape for Younger Generations
The fintech revolution has particularly impacted younger generations, since GenZ phones are more accessible than banks:
88% of GenZ use mobile banking apps, with 75% of them using digital banking as their primary banking channel.
Cash App, developed by Square, had over 70 million annual transacting active customers in 2021.
Case Study: Peer-to-Peer Payments
Let’s take a look at the P2P payments example:
The Old Way: Banks and Traditional Methods
Before the fintech revolution, transferring money between individuals was a cumbersome process:
1. Cash: Required physical presence, risky for large amounts.
2. Checks: Slow to clear, could bounce, needed physical delivery.
3. Bank wires: Expensive, required a trip to the bank, complex for international transfers.
4. Money orders: Fees for purchase, limited availability.
These methods were particularly problematic for:
People without easy access to bank branches
Those needing to send money quickly
Individuals making frequent, small transfers
Anyone trying to send money internationally
The system was slow, expensive, and often excluded those without traditional bank accounts.
The PayPal Disruption
PayPal, founded in the late '90s, was one of the first to challenge this status quo:
Introduced email-based money transfers
Created a digital wallet concept
Integrated with e-commerce platforms
Offered lower fees than traditional methods
PayPal made it possible to send money instantly, without the need for a bank account. This was a game-changer for many, especially in the burgeoning world of online commerce.
The Modern P2P Ecosystem
Following PayPal's lead, a wave of fintech companies further revolutionized P2P payments:
1. Venmo: Made splitting bills and sharing expenses social and fun.
2. Cash App: Expanded beyond payments to include investments and cryptocurrency.
3. Zelle: Brought rapid, fee-free transfers directly to bank accounts.
These platforms addressed key pain points:
Speed: Transfers often completed in minutes, not days.
Accessibility: Available to anyone with a smartphone, often without needing a bank account.
Cost: Many transfers became free or very low cost.
Convenience: No need to visit a bank or even know someone's bank details.
The Impact
This fintech disruption in P2P payments had far-reaching effects:
1. Financial Inclusion: Provided banking-like services to the underbanked.
2. E-commerce Growth: Enabled easy payments for small businesses and individuals online.
3. Gig Economy: Facilitated quick payments for freelancers and gig workers.
4. International Remittances: Made cross-border transfers faster and cheaper.
5. Reduced Cash Usage: Accelerated the shift towards a cashless society.
By addressing the shortcomings of the traditional banking system, fintech companies transformed P2P payments from a slow, expensive process into a quick, easy, and often free service accessible to almost anyone with a smartphone. This democratization of financial services exemplifies how fintech has disrupted and improved upon the traditional banking model.
Now that we have established this lets take a look at where the public cloud services are today.
The Disruption of Traditional Cloud Services
The Current State of Public Cloud Services
Just as traditional banks dominated the financial landscape, companies like Amazon Web Services (AWS), Google Cloud Platform (GCP) and others have become the giants of cloud computing. While they offer powerful and scalable solutions, they also present challenges:
1. Complexity:
Vast array of services and options
Steep learning curve for configuration and management
Requires specialized knowledge and certifications
Hard to operate securely
2. Cost:
Complex pricing models
Easy to incur unexpected costs
Often requires dedicated teams for cost management
Often you end up paying for something you don’t need
3. Inequity:
Favors large enterprises with resources to manage complexity
Challenging for small startups and individual developers
High upfront knowledge investment required
The Rise of PaaS and Simplified Cloud Services
Similar to how fintech companies disrupted traditional banking, a new wave of Platform as a Service (PaaS) and simplified cloud services providers are challenging the status quo:
1. Replit:
Offers a browser-based coding environment
Simplifies deployment and hosting
Makes collaboration easier, especially for beginners
2. Vercel:
Specializes in frontend deployment and hosting
Streamlines the process of deploying web applications
Offers easy integration with popular frameworks
Simplifies serverless application development
Provides a unified experience for building full-stack applications
Reduces the complexity of working with AWS services
4. Heroku:
Pioneered easy application deployment
Abstracts away much of the infrastructure management
Offers a straightforward pricing model
Provides a simpler, more user-friendly interface
Offers predictable pricing
Caters to developers and small to medium-sized businesses
And so many more providing vertical focus (neon, val.town, supabase etc.) or horizontal abstractions (Civo, Scaleway, Linode etc.)
How These Companies Are Disrupting Cloud Services
These new players are transforming cloud computing in several ways:
1. Simplification:
Abstract away complex infrastructure details
Provide intuitive interfaces and workflows
Reduce the learning curve for cloud deployment
2. Cost Transparency:
Offer clearer, more predictable pricing models
Provide free tiers for small projects and learning
Reduce the need for dedicated cloud management teams
3. Democratization:
Make cloud services accessible to individual developers and small teams
Enable rapid prototyping and deployment
Lower the barrier to entry for cloud computing
4. Focus on Developer Experience:
Streamline the development-to-deployment pipeline
Offer integrated development environments
Provide better tools for collaboration and version control
5. Specialization:
Cater to specific use cases (e.g., frontend deployment, serverless applications)
Optimize for particular development workflows or frameworks
This is very similar to newer fintechs going VERP
Case Study: Building and Deploying a Web App on GCP vs Replit
Scenario
Let's consider a scenario where a developer wants to build and deploy a simple web application. The app is a basic todo list application built with Node.js, using Postgres for data storage.
The Old Way: Google Cloud Platform (GCP)
Step 1: Setting Up the Environment
Create a GCP Account and set up billing
Install Google Cloud SDK
Authenticate with GCP using
gcloud auth loginCreate a new project using GCP Console or
gcloudCLI
Step 2: Developing the Application
Set up a local development environment with Node.js and Postgres
Develop the application locally on an IDE like VSCode
Test the application thoroughly
Step 3: Preparing for Deployment
Create a Dockerfile for containerization
Set up Cloud Build for CI/CD
Configure Cloud Run or Kubernetes Engine for hosting
Set up Cloud SQL or use a third-party service
Step 4: Deployment
Push code to a Git repository
Trigger Cloud Build to create a container image
Deploy the container to Cloud Run or Kubernetes Engine
Configure networking and security settings
Set up custom domain (if needed)
Step 5: Monitoring and Maintenance
Set up Cloud Monitoring
Configure logging with Cloud Logging
Set up alerts for potential issues
Challenges
Prototyping and going from 0-1 takes too long
Steep learning curve for GCP services
Complex configuration process
Potential for unexpected costs
Requires understanding of containerization and cloud architecture
Security is an after thought
The New Way: Replit
Step 1: Setting Up the Environment
Create a Replit account (can use GitHub or Google for quick signup)
Choose "Node.js" as the template for a new repl
Step 2: Developing the Application
Write code directly in the Replit IDE while pairing with your team
Use the built-in package manager to add Express.js and serverless Postgres
Develop and test the application in real-time
AI chat and code fix are built in no external signups necessary
Step 3: Database Setup
Use Replit's built-in Postgres database (available with just a few clicks)
Configure the connection string in the application
Step 4: Deployment
Click the "Run" button to deploy test the application
Replits built in deployment function to deploy to standard .replit domain or a custom domain
Replit automatically provides a public URL for the application
Step 5: Monitoring and Maintenance
Use Replit's built-in console for logs
Leverage Replit's always-on functionality to keep the app running
Advantages
No need for local setup or installation
Integrated development and deployment environment
Built-in database solution
Instant deployment with a few clicks
Collaboration features for team development
Free tier available for learning and small projects
Security is built in and managed beyond shared responsibility
The Impact
This disruption in cloud services is having far-reaching effects:
1. Accelerated Innovation: Easier access to cloud resources is enabling faster development and deployment of new ideas.
2. Empowering Small Teams: Startups and individual developers can now leverage powerful cloud infrastructure without significant upfront investment.
3. Education and Skill Development: Simplified platforms are making it easier for newcomers to learn cloud computing concepts.
4. New Business Models: The accessibility of cloud services is enabling new types of businesses and applications.
Just as fintech companies abstracted away the complexities of financial services, these new cloud platforms are simplifying access to on-demand compute resources. They're enabling the next generation of creators to build and scale applications more easily than ever before, potentially leading to a new wave of innovation in the tech industry.
The rise of AI empowers these companies to not only simplify cloud services but also to create intelligent platforms that actively assist developers throughout the entire development lifecycle. This AI-powered approach further democratizes access to advanced cloud capabilities, enabling a broader range of creators to build sophisticated, scalable applications with ease. As AI continues to evolve, we can expect these platforms to become even more intuitive, efficient, and powerful, potentially reshaping the landscape of cloud services across the SDLC.
Conclusion
Cloud computing is hitting its "fintech moment" ripe for disruption and innovation. Unlike the limited opportunities in traditional banking, the cloud's potential is vast and ever-expanding. For aspiring founders, this is the golden era to innovate and add real value. The PaaS space isn't mature yet—there's ample room for groundbreaking companies to redefine the future. Come let’s turn Cloud into Banks!