As fintech moves beyond digitizing legacy systems to a focus on intuitive, customer-driven experiences, the field of startups competing for market share is getting crowded. According to CB Insights, venture-backed fintech companies raised $6.3 billion across 445 deals globally in the first three months of this year.

Nyca Partners, based in New York and San Francisco, is one of the most active financial services-focused venture firms. It’s focused on payments, alternative credit, risk and infrastructure. Founded by Hans Morris, former president of Visa and longtime Citigroup banker, the firm so far has raised $284 million in funding. Portfolio companies include investment platform Acorns, insurance tech companies Embroker and Ladder, point-of-sale loan company Affirm and AI firm Personetics.

Bank Innovation spoke to David Sica, a partner at Nyca, about the path to sustainability for financial startups and the ongoing evolution of the consumer experience. Below are key portions of what he had to say:

What are your thoughts on the state of the industry?
Fintech has sort of gone in waves. When we first started [Nyca], we looked at it very much as an opportunity to create a digital, tech-enabled version of existing financial services offerings. A really good example of this fintech 1.0 success story would be marketplace lending firms, like Lending Club and Prosper. It was ripe for a fintech to come in and say, ‘Why don’t we create a transparent digital-first experience where we can create a better product at a lower cost’.

If you think of fintech 1.0 as horizontal, the fintech 2.0 is very vertical. It’s about creating a fully integrated experience with all the financial services needs you’re going to have in one place, whatever that activity may be, and it’s going to be seamless and integrated throughout.

For example, Blend Labs provides software to financial institutions that enables them to offer a digital mortgage experience. [Banks] live in a pretty complicated environment where, either through various forms of debt or through acquisitions, they’re maintaining different systems. [With Blend], they’re going to map all that together and give you a complete, integrated snapshot on a customer as quickly as possible with one click.

Are you talking about an Amazon-style, one-click experience for financial services?
I think that’s a little simple, but it’s the idea of let’s make [technology] the backbone. If you have all the information, you’re able, through design thinking, to build software that creates the experience.

You’ve made a number of different bets. Some of them are direct-to-consumer companies and others are B2B. Some consumer-based startups are going enterprise to maximize revenue and customer acquisition. Does this mean the consumer-facing model is dead?
No, I don’t think so. You have this interesting dynamic in fintech where a startup will be a first mover and either find a fit or not. The banks will watch the startup market, observe which new products are changing behavior and respond accordingly.

I operate under the premise that there will be some large consumer brands that continue to grow from here. I think there’s three ways incumbents can respond: some will choose to build, others will choose to buy and others will choose to partner. When you’re a direct-to-consumer business, it takes a lot of brand awareness to establish trust with the customer.

Speaking about direct-to-consumer models, what are your thoughts about challenger banks? Do you feel they have a good chance of stealing market share from incumbents?
I think the companies that started with a point solution and demonstrated they could acquire customers, then further acquired customers at scale, are more interesting than the ones that haven’t quite cracked the customer acquisition code yet. As long as investor support remains, I think that over time they will start taking share.