Wholesale markets are a common sort of fintech startup that involve creating a multi-sided marketplace or “platform.”
The platform claims it will centralize a fragmented market in one place and do for derivatives, forex, or bond trading what Uber did for car services, or Airbnb did for vacation rentals — disrupt intermediaries by making the market appear closer to a stock exchange.
The problem is, these startups — before they reach scale — have no real comparative advantage in being middlemen.
If parties don’t want to talk to each other because they’re scared the other side will take advantage of them, it is not clear why they want to speak to a fintech startup.
Of course, if such a trading facility succeeds, it enjoys the network effects of any multi-sided platform.
But there is an enormous amount of effort involved in getting to that stage. It mostly means political, rather than technical work — hand-holding and supervising and making sure people trust the platform and the premise that the security you provide is genuine.
And that doesn’t scale easily.