CIRCA 1988: A scene with Johnny Five on set of the movie “Short Circuit 2”, circa 1988. (Photo by … [+]
The VC world is abuzz with the emergence of employee-free AI software tooling reaching tens of millions of dollars in recurring revenue just months after launch. As described across LinkedIn, Cursor, Bolt, Midjourney, 11Labs, Mercor and a number of other Generative AI services businesses, have achieved some of the fastest revenue growth by startups ever, and they’ve done so with exceptionally small teams. Companies built on AI infrastructure, which is a distinct and equally enticing value proposition from the product or service itself, offer a remarkable template for the foundation of 21st century financial institutions.
In recently leaked audio, JPMorgan CEO Jamie Dimon made waves, mostly excoriating work-from-home policies, but also pointing out corporate bloat at big banks, notably his own, saying,“We don’t need all those people. We were putting people in jobs because the people weren’t doing the job they were hired to do in the first place.” Read against the backdrop of increasing automation, it’s hard to imagine that the financial services sector isn’t poised for major FTE contraction.
Amidst a potentially painful transition for big banks, and as the promise of machines doing white-collar jobs spells doomsday for middle management, brand new financial services companies already do more with less. Fintech investment’s 2024 dip to a seven-year low is the propitious moment for this investment category, too, to modernize. In banking, lending, payments and insurance, new projects devoid of legacy infrastructure have the opportunity to reimagine core functionality like underwriting, asset management, data architecture and business intelligence. Net new operational functionality will allow the companies to develop and deliver products products to customers largely absent human intervention.
Moreover, innovative financial services products developed based on market gaps and white spaces are far stickier than chatbots and image generators. Payments rails and insurance coverage are themselves business prerequisites, core enablers of the market economy. And they require regulatory expertise, security expertise and finance prowess, differentiating them from generative AI-based content services. While we will certainly see AI usher in slightly more streamlined insurance brokerages or mortgage lending processes, linking these operational efficiencies to truly innovative products will produce enormous revenue opportunities with much healthier margin profiles, thanks to this secular reduction in unit costs.
Large financial institutions have numerous, considerable advantages over startups: low cost of capital, huge balance sheets and millions of customers. But startups founded in 2025 are painting with a whole new palette. Oil paints were invented as early as the 7th century, but their proliferation in the 15th century transformed painting forever. Generative AI’s fundamental transformational power will begin to reshape finance, presenting venture investors with some of the biggest opportunities fintech has yet to imagine.