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In this episode, I had the chance to sit down with Kelly A. Brown, Chairman and CEO at deposit management startup Ampersand. Previously, she spent 13 years at the American Deposit Management Company. Kelly and I had a chance to talk about:
* What inspired Kelly to get into banking
* The sudden attention paid to deposit insurance in the wake of SVB’s collapse
* How FBO and deposit insurance pass through models should be structured
* Consumers’ misapprehensions about what deposit insurance does and doesn’t cover
* And more!
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Frank Rotman of QED, Jason Henrichs of Alloy Labs, and I discussed “Balancing Growth With Risk In The Post-ZIRP Era,” including touching on:
* How the extended low-interest rate environment impacted venture capital and fintech
* How the evolving regulatory climate is shaping fintechs’ and banks’ risk appetite and strategies
* What the next 12 months will look like
* And more!
Regular programming will resume next Sunday, August 4th.
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Eksik bölüm mü var?
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In this episode, I had the chance to sit down with Wade Arnold, cofounder and CEO of Moov, a fintech infrastructure company that enables and simplifies push and pull card payments. Moov also puts on the Fintech Devcon conference, which is August 7th-9th in Austin — more info and tickets here. We had a chance to talk about:
* What to expect at (and what I should wear to) Fintech Devcon
* Payment and core banking infrastructure in the US
* Implications of and lessons from the Synapse bankruptcy
* Reasons to be optimistic about the future of fintech
* and more!
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In this episode, I had the chance to sit down with Rhett Roberts, cofounder and CEO of API-first lending and credit platform LoanPro. Rhett and I had the chance to talk about:
* LoanPro’s recent announcement of integrating with Visa DPS (and some background for folks who might not know why that’s important!)
* LoanPro’s journey from homegrown software to powering some of the biggest lenders in fintech
* How LoanPro helps its customers stay ahead of evolving legal and regulatory issues
* How LoanPro structures its organization to ship code quickly
* and more!
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In this episode, I had the chance to sit down with Stuart Sopp, CEO and cofounder of Current. Stuart and I had the chance to talk about:
* What’s change in fintech and banking since the last time we talked in 2023 (hint: a lot)
* Current’s new products and features, including its credit builder card and an EWA-style offering
* The challenges of state-by-state licensing and importance of compliance
* Balancing the need for growth with profitable unit economics
* What’s on the road map for Current
* and more!
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In this episode, I had the chance to sit down with Nicolas Benady, the CEO of French embedded finance platform Swan, live at Money2020 Europe earlier this month. Nicolas and I had the chance to talk about:
* embedded finance and banking-as-a-service in Europe vs. the US
* what being licensed as an emoney institution enables Swan to do and how it’s different than being or partnering with a bank
* why Swan is confident in its ability to effectively oversee its third-party partners
* how Swan’s clients leverage its capabilities
* and more!
Special thanks to the entire Money2020 crew for hosting us in the MoneyPot podcast booth and putting on another great event!
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In this episode, I had the chance to sit down with John Stuart, the general manager of fintech and international at Apex Fintech Solutions, an investing and wealth management infrastructure platform. John and I had the chance to talk about:
* What the capabilities Apex provides, including custody, clearing, and execution, enable its customers to build
* How Apex scaled its platform across 150 countries
* What Apex has learned and how its refined its offering over 10+ years in market
* Some novel use cases for the infrastructure Apex has built
* And more
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Alex Johnson, creator of the Fintech Takes newsletter, and I are happy to bring you the latest episode of our monthly podcast, Fintech Recap, where we unpack some of the biggest stories in fintech, banking, and crypto.
This month we had the chance to talk about:
* Latest on Synapse bankruptcy and what it may mean for banking-as-a-service & fintech (this episode was recorded May 29th)
* Visa’s new “crebit” credential
* The CFPB’s interpretative guidance on buy now, pay later
* And, as always, what Alex and I just can’t let go of
If you enjoy listening to this podcast and find value in it, please consider supporting me (and finhealth non-profits!) by signing up for a paid subscription. It wouldn’t be possible to do what I do without the support of listeners like you!
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In this episode, I had the chance to sit down with Neepa Patel, cofounder and CEO of Themis, a compliance collaboration tool for banks and fintechs, on stage at last month’s Empire Fintech Conference in New York. Neepa and I had the chance to talk about:
* What “fintech people” misunderstand about regulators
* What fintechs should think about when selecting a bank partner
* Whether or not tech is (and should be) a competitive differentiator in banking-as-a-service platforms
“Many banks are still utilizing manual controls, processes and even spreadsheets to manage compliance and governance. We've been impressed with Themis’ collaborative and centralized modules to increase efficiency, and reduce complexities and internal costs while helping to streamline compliance controls.”
— Candice Antinori, VP Compliance Management & CRA Officer at FinWise Bank
Themis is a user friendly, collaborative compliance platform to help financial institutions manage complex relationships across internal control groups and to help fintechs’ level up their own governance, risk, and compliance cultures.
The platform provides a centralized compliance collaboration suite of purpose-built workflows and tools that seamlessly integrate risk, communications, documents and so much for internal teams and external partnerships between banks and fintechs.
With Synapse entering into bankruptcy proceedings in the last few weeks, with knock-on impacts to Evolve Bank and Trust, Lineage, and multiple fintech programs, one could easily be forgiven for thinking fintech categorically is facing a regulatory reckoning. But, current turmoil notwithstanding, the bank-fintech partnership model will endure, with the players that prioritize compliance best suited to navigate the fallout.
Learn more about how Themis banks are Elevating Governance, Risk and Compliance Cultures here.
If you enjoy listening to this podcast and find value in it, please consider supporting me (and finhealth non-profits!) by signing up for a paid subscription. It wouldn’t be possible to do what I do without the support of listeners like you!
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This month we had the chance to talk about:
* BaaS drama continues, with Piermont and Sutton receiving consent orders
* Chime has HOW MANY customers?
* Trade groups vs. Colorado on DIDMCA, or, where is an online loan “made”?
* Quick takes on the Visa/Mastercard settlement
* And, as always, what we just can’t let go of
If you enjoy listening to this podcast and find value in it, please consider supporting me (and finhealth non-profits!) by signing up for a paid subscription. It wouldn’t be possible to do what I do without the support of listeners like you!
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In this episode, I had the chance to sit down with Tommy Nicholas, CEO of identity risk solutions platform Alloy, a global, end-to-end identity risk solution for banks and fintechs. Tommy and I had the chance to talk about:
* factors impacting fraud risk today, including the growth of real-time payments and the dawn of the genAI age
* key take aways from Alloy’s 2024 State of Fraud Benchmark Report
* the difference between “frictionless” and “seamless” in financial services UX
* public and private efforts to create digital identity solutions
* what’s on Tommy’s radar in the fraud space in 2024
* and more!
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In this episode, I spoke with Michal Cieplinski, founder and CEO at CapStack.
CapStack is the first integrated operating system for banks enabling cooperation across banks and other financial services institutions in order to drive profitability and asset diversification. Michal and I had a chance to talk about:
* The importance and challenges of asset/liability management for banks
* The risks that come from asset, geographic, and sectoral concentration, especially with current concerns around commercial real estate
* How CapStack can help banks mitigate these risks
* Moving from manual, Excel-and-email-based processes to technology-powered, automated exchanges for buying and selling loan participation stakes
* and more!
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In this episode, I spoke with Jon Lear, President and cofounder of Fintech Meetup, taking place in Las Vegas March 3-6, 2024 (learn more and get your tickets here.) We had the chance to discuss:
* the crazy year in fintech and banking that was 2023
* looking for silver linings in a challenging operating and fundraising environment
* what’s in store for 2024
* key themes and topics for next year’s Fintech Meetup event
* and more!
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In this episode, I spoke with Neal Desai, CEO of lease-to-own startup Kafene. We had the chance to discuss:
* Kafene’s recently announced Series B extension
* The impact of an uncertain economic environment on Kafene’s business
* Regulatory activity in the lease-to-own space
* Where Kafene is heading in 2024
* and much, much more!
Existing subscriber? Please consider supporting this newsletter by upgrading to a paid subscription. New here? Subscribe to get Fintech Business Weekly each Sunday:
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Hey all, Jason here.
In this episode, I spoke with David Brear, CEO of challenger banking and fintech consultancy 11FS. We had the chance to discuss:
* The origin story of 11FS, including its “Pulse” and “Foundry” offerings
* Some of the most interesting client projects David has worked on
* How David and 11FS think about creating stand-out content in an extremely crowded information space
* Where David thinks banking and fintech are headed in 2024
* and much, much more!
Existing subscriber? Please consider supporting this newsletter by upgrading to a paid subscription. New here? Subscribe to get Fintech Business Weekly each Sunday:
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In this episode, I spoke with one-stop money management platform for small businesses Wave’s CEO, Zahir Khoja. We had the chance to discuss:
* Zahir’s fascinating background, including working in Afghanistan and for Grameen Foundation
* Wave’s capabilities and target segments
* How the company thinks about buy vs. build vs. partner & its pricing and cross-sell strategy
* The importance of human advice for important decisions
* and more!
If you’re interested in learning more about or entering the contest that Zahir mentioned in our conversation, you can do so here.
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The last several years have seen quite the rollercoaster of investment-related trends: meme stonks, SPACs, crypto, and now… Treasuries? Another emerging trend: generative AI. In this episode, I had the chance to sit down with investing app Public’s co-CEO Leif Abraham to talk about all of that and more, including:
* How AI for investing is and isn’t different than previous trends like PFMs and roboadvisors
* How Public got comfortable deploying user-facing AI capabilities
* Why Public ended payment for order flow (PFOF) and decided to accept “tips”
* How Public stands out in a crowded investing market
* and more!
Also, a big congrats to the Public team on today’s announcement of their expansion to the UK market!
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Hey all, Jason here.
This Sunday’s note is coming to you from Hilvarenbeek, in the south of the Netherlands, where I’m camping and attending a music festival.
During last week’s Money2020, I had the chance to sit down with compliance tech startup Cable’s cofounder and CEO Natasha Vernier. If the company sounds familiar, that’s probably because her cofounder and I recently gave a “Masterclass” together during New York Fintech Week.
Natasha and I had the chance to chat about:
* Natasha’s journey building and scaling the financial crime function at UK neobank Monzo
* How those experiences and challenges led Natasha to co-founding Cable
* The process of raising Cable’s recently announced $11 million Series A
* What Natsha is keeping an eye on from a regulatory standpoint
* Her biggest surprise about moving from the UK to the United States
* and more!
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I know it’s hard to remember now, but there was a time when BNPL — buy now, pay later — felt like the bleeding edge of consumer fintech (even if point-of-sale financing has been around for literally generations!)
It has been a wild ride for market leader Klarna, which is rather unique in the space: it was founded in 2005, it is a bank in Europe, and it has historically been profitable.
Klarna’s Chief Commercial Officer and former head of the US business David Sykes joined to discuss all that and more, including:
* If Klarna thinks of itself as a “BNPL company”
* That $46 billion valuation
* How Klarna succeed in the US, when other foreign imports haven’t
* The threat from Apple’s BNPL offering, Apple Pay Later
* and more!
Existing subscriber? Please consider supporting this newsletter by upgrading to a paid subscription. New here? Subscribe to get Fintech Business Weekly each Sunday: https://fintechbusinessweekly.substack.com/subscribe
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Hey all, Jason here.
I recently partnered with Cable’s Chief Product Officer Katie Savitz to present a Masterclass at the Empire Fintech Conference during NY Fintech Week. We profiled six recent developments impacting Banking-as-a-Service and how stakeholders can use technology to respond.
If you weren’t able to attend (or just need a refresher!), this podcast/post combo is for you!
(And extra great timing, as Cable today announced it raised an $11M Series A to automate effectiveness testing of financial crime controls!)
Six Key Developments in Banking-as-a-Service
The U.S. banking system is experiencing its greatest stress since the 2008 Great Financial Crisis and regulators are seeking to address risks being revealed. BaaS may make the banking system more resilient, but it also introduces new risks. Six recent developments shed light on how BaaS may evolve going forward.
* OCC Office of Financial Technology. One explicit mandate of the OCC’s Office of Financial Technology – recently formally established and led by Prashant Bhardwaj – is to support “high-quality supervision of bank-fintech partnerships,” which portends continued regulatory scrutiny, but also opportunity for industry engagement with regulators.
* OCC 2023 Bank Supervision Operating Plan. Further signaling the OCC’s increased focus on BaaS, the agency’s 2023 supervision operating plan calls for specific focus on third-party risk management and highlights BSA/AML risk.
* Acting Comptroller Hsu 2022 TCH+BPI Conference Remarks. Acting Comptroller Hsu’s speech specifically addressed the growth of BaaS operating models. Hsu expressed concern about the growing complexity associated with BaaS and reiterated the primacy of “safety and soundness” concerns, while acknowledging opportunities from technological innovation.
* November 2022 U.S. Treasury Department Report on Non-Bank Firms in Consumer Finance Markets. The Treasury Department report specifically flagged “new risks to consumer protection and marketing integrity” from fintechs and called for enhanced supervision of bank-fintech partnerships.
* CFPB Invokes Dormant Authority to Examine Non-Bank Companies. While the CFPB is focused first and foremost on consumer protection, it has shown a willingness to use its authority to supervise non-bank entities that may pose a risk to consumers, potentially including non-bank fintechs and platforms.
* OCC-Blue Ridge Bank Agreement. The OCC’s formal agreement with Blue Ridge – arguably the first major BaaS enforcement action – provided a wealth of detail about regulatory scrutiny of risks in bank-fintech partnerships, and areas of financial crime compliance tech stacks that may need uplifting.
Increasingly, growth and innovation in the banking industry is happening outside the banking regulatory perimeter and, for BaaS-focused banks, asset size is no longer a good reflection of risk.
With the sector’s growth now attracting more regulatory attention, to survive, all stakeholders need to adapt.
The era of banks onboarding fintechs with little to no insights is finished.
For bank-fintech partnerships to be sustainable, they must be done in compliance with regulatory requirements. While the knee-jerk response is to throw bodies at the problem, this not only is an expense, but also has scalability limitations. Instead, a new approach enabled by new technology is needed to make these partnerships not only possible, but profitable.
The Compliance Problem for BaaS
Rapid customer growth and disaggregated responsibilities are primary drivers of compliance breakdowns. Both factors are especially prevalent in BaaS.
In BaaS, compliance teams used to managing one institution and their own direct customer pool now have to deal with multiple fintechs, each with their own controls and indirect customer pools.
This demands a whole new level of compliance capabilities. Many banking providers still rely on legacy systems and manual processes, but those are no longer fit for purpose.
As a result, regulators are already focused on this question for bank-fintech relationships: Who is responsible for what when things break?
The Fincrime Tech Stack & Why Effectiveness Matters
Over the last decade in BSA/AML compliance, banks and fintechs have added more controls, with little idea about how effective they are. Over $270 billion is spent worldwide each year on financial crime compliance, with the majority of that spent on people.
Despite this spending, less than 5% of accounts are tested to understand effectiveness. If banks can't even be sure how effective their own controls are, how can they do that for their fintechs?
But this same exact approach is being used in BaaS – partner banks are adding more fintechs with little idea how effective their controls are, even as the compliance challenges multiply.
Increasingly, regulatory pressure is demanding that you be able to “show, not tell” that your program is effective. Compliance teams need to ask: What part of your tech stack helps you answer questions about effectiveness?
In BaaS, technology solutions for oversight, monitoring, and assurance are essential. For banks, how do you know everything is working at all levels across their fintechs? And for fintechs, how do you reassure bank partners everything is fine?
How can you understand risk better?
The first key compliance task in BaaS is understanding risk better: banks’ own risk, fintechs’ risk, and how fintech risk impacts banks’ risk. Below are practical tips and steps to achieve this:
Bank risk
* Review your own risk assessment more than annually, as circumstances can change quickly in BaaS.
* Update your risk assessment when control failures are discovered, so that you can discuss priorities with senior management.
* Leverage available risk assessment technology solutions to get out of spreadsheets and onto a smarter platform with better workflows.
Fintech risk
* Banks should require fintechs to perform a risk assessment using the same methodology and should collect standard information and documents from each fintech, in order to compare and understand risk across the bank’s fintech portfolio.
* Fintech risk assessments should also be easily updated for changes in circumstances at the fintech level.
* Consultants can provide templates and methodologies, and technology platforms can help with document collaboration. Cable also offers the ability to collect company information and documents, and conduct the same risk assessment for each fintech.
Bank and fintech risk
* Banks should incorporate their fintechs’ risk into the bank’s own risk.
* Banks also need to understand how each new fintech affects their current risk profile and any impacts to their risk appetite.
* Some compliance teams have built out complicated spreadsheets with the help of consultants to do this. Cable also offers the ability to roll up fintechs’ risk assessments into a bank’s risk assessment.
How can you improve oversight and monitoring?
The second main compliance task in BaaS is oversight and monitoring of controls. Below are practical tips and steps to improve these processes:
Identify controls
* Banks and fintechs should have a shared understanding of the controls in place at each fintech.
* Banks should request a controls register as part of standard onboarding documentation collection from fintechs.
Assess control effectiveness
* To the effectiveness point, partner banks must sufficiently monitor and test accounts to understand how all the controls are working at the fintech level.
* Key questions to address include: What data is needed by the bank to conduct oversight? How will data be sent or received timely, and in what format? If supplemental data or information is needed, how will the bank get that promptly? What do each of the bank and fintech need to do to facilitate data sharing?
* Both banks and fintechs need to have a team and technology to handle this monitoring, especially as the bank's fintech program scales.
* Technology like Cable offers automated oversight and assurance processes to identify regulatory breaches and control failures in real-time across each fintech.
Fix and report issues
* Banks and fintechs need to quickly remediate and report any issues, promptly after they happen instead of finding issues months later in periodic audits.
* Banks and fintechs should ensure they have shared issue management tools that give visibility to both sides, as fintechs will most often remediate issues.
* Banks and fintechs should define roles and responsibilities, and have shared understandings of issue prioritization, so the right issues receive proper attention.
BaaS is here to stay, but operational work will overwhelm banks and fintechs unless automated effectiveness testing becomes commonplace. Partner banks need to deeply understand their requirements and deploy technology solutions to enjoy the trifecta of full compliance, resource efficiency, and fast onboarding to grow their fintech programs.
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