“Last year was a party. This year, it's a hangover.

Welcome to The Interchange! If you received it in your inbox, thank you for subscribing and for your vote of confidence. If you read this as a message on our site, subscribe here so that you can receive it directly in the future. Each week, I'll take a look at the hottest fintech news from the previous week. This will include everything from funding rounds and trends to analysis of a particular space and hot shots on a particular company or phenomenon. There's a lot of fintech news out there and it's my job to stay in the loop - and make sense - so you can stay in the know. — Marie Ann

Mark Goldberg has been a partner at Index Ventures since 2015, investing in and serving on the board of financial services companies such as Plaid, Persona, Lithic, Cocoon and Pilot. Currently head of the company's fintech, Goldberg has a lot of thoughts on what's on the horizon for startups operating in the space today.

I recently sat down (virtually) with Mark to discuss all things fintech, and luckily for me, he's not afraid to speak his mind! Here are the highlights of that conversation (edited for brevity and clarity).

TC: How would you say this year's fundraising environment is different from last year (aside from the obvious, of course)?

MG: The crude analogy I use internally is that last year was a party and this year it's a hangover. That's really how I feel about myself - that we're starting to come to terms with the excesses of the last year. We have now seen the period of retrenchment after the fact. At Index, we're probably investing more aggressively in what we think are the next generation of fintech companies right now.

Oh yeah? What do you see as the next generation of fintech companies?

It's funny because if you look at my portfolio, a lot of what I invest in is the infrastructure side of fintech... I probably have five or six investments in picks and shovels. I think there is resilience there, but it's also just a function of inherent volatility or lack of volatility on the infrastructure side of the market.

This year, and this is a bit more against the grain, I'm actually spending a huge amount of time studying early-stage consumer credit, which I think is probably the most — well , I dunno, maybe that or crypto - unloved category or subcategory of fintech today.

But I think that's exactly where the opportunity lies when we're on the other side of this hype cycle, especially when I think about how people are going to be banking in five or 10 years.

I think one of the lasting effects of the pandemic is that people want to bank from their phones, not walk down the street and go to a branch or get in the car and go to a agency. I think there's going to be this massive consumer credit transformation. Yeah a lot of things got overrated last year but I think we're going to see a big transformation from an old guard to a new guard in the next few years and that could be a really good entry point when you think about it.

What do you think is the biggest current trend in fintech?

One of the most enduring things from last year's excesses will be this fusion of fintech and culture, which I think is probably the most interesting trend in fintech that will survive the market bullish and bearish market. I think it just changed the market.

I think the best example of this is Cash App in the Block ecosystem, where they have a clothing store. In fact, as a joke, I sent a bunch of my hedge fund friends a bunch of their clothes. In the banking world of Wall Street, you would never wear a Morgan Stanley or Goldman Sachs shirt to a party. But Gen Z buys clothes from the Cash App clothing store and wears them.

And there's a really fun ad that Cash App just came out with Kendrick Lamar and Ray Dalio from Bridgewater, which I think is so emblematic of this fusion of pop culture, hip hop and fintech consumerization .

So whether we're in a bull market or a bear market, the advantage of a neobank over a traditional bank is that it doesn't struggle with 1,000 outlets. I think the biggest opportunity for the next generation of neobanks is...