585 Open Banking, Data Governance and the Future of Fintech Innovation with Aaron Swenson

Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King. And I’m Jason Henricks.

Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services. From incumbents to unicorns, and from cutting edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks.

In the last of our series from Fintech Exchange, powered by U.S. Bank, join Jason Henricks as he welcomes solutioner Aaron Swenson to share his story and visions for banking and financial technology. They discuss Aaron’s passion and knack for problem solving and the beneficial impact it has had on open banking and governance in the financial services industry. Their conversation highlights three areas where Aaron has made his mark.

Finicity, FDX, and the Stena Center for Financial Technology. Finicity empowers financial decision making, helping individuals, families, and organizations make smarter financial services by providing safe and secure access to fast, high-quality financial data through its open banking platform. Learn about Aaron’s driving role with FDX, the nonprofit standards body dedicated to unifying the financial services ecosystem around a common, interoperable standard for user permission financial data sharing.

A standard bearer for 1033 and open banking, the consortium’s membership includes financial institutions, financial data aggregators, fintechs, industry utilities, payment networks, consumer groups, financial industry groups, and other stakeholders in the financial sector. Finally, his involvement in the Stena Center for Financial Technology at the University of Utah, uniting education and industry to accelerate financial innovation, inclusion, and advances in fintech. Throughout his career, Aaron’s ability to understand specific problems, stay informed about the market, and maintain a clear vision has been key to his success.

His natural problem-solving ability has enabled him to make notable impacts in the financial industry. It’s an inspiring conversation you won’t want to miss. So Steve, when I think about what you’ve accomplished, I think about vision, not once, not twice, but now on the third roll.

First with Finicity, then being a driving force behind FDX, which we’re going to talk about later in some episodes around now being the standard bearer for 1033, and also founding of the Stena Center and what that means for the partnership with the University of Utah and the exchange as a program. I’m curious, like non-fintech related, where does your vision come from? What is the process as you begin to think about these and bring it to reality? Yeah, usually vision’s an interesting thing because I think everybody has a degree of vision, but how do you connect the dots meaningfully is always a question, and context is a really important part of, I think, vision. For me, I’m a bit of a natural solutioner, which means that you kind of start from a understanding of problems.

So if you can see problems and you’re like, well, the world needs to be a better place because of this, or if we could only address these things, then maybe the outcomes would be very different than what I see right now. So my brain just tends to be in very much steep in the place of how can we take what we have today and assemble that in a different way to make the world a better place. Well, I’m curious, when you set out on the Phonicity journey first, was the problem you ultimately ended up solving the one you thought you were going to, or did that evolve along the way? No, it evolved, of course, over time, but the problem was very much in the same space.

It was the democratization of financial data and the ability, and democratization is often overused, so I don’t want to overuse it. Well, as long as you don’t gamify it. No, I won’t gamify it, and I won’t throw AI at it today for us.

But it truly is the notion that if you could unlock data and you could put meaning around the data, then the average everyday person could actually interface with the economy in a more beneficial way. Those that aren’t a part of the financial system could perhaps get credit scores and get access to the financial system. Those that had a hard time managing within their monthly cash flow could do a better job of managing within their monthly cash flow, have less debt, spend much less of their cash flow, available cash flow on interest, and actually elevate their life in meaningful ways.

While I wasn’t able to say all the same things that I can say today going through that journey, very much in 2019, we set out to figure out how to put contextual information in the hands of someone when they’re spending. It was very much still the same thing that we think about today, just in a much broader context. So it was very dialed into financial data in the hands of someone where at that time it’s either sitting on a statement or it’s sitting on a hard drive in the family room or in the kitchen, or you just really don’t have context or access to the information.

And that’s kind of the problem set we started with. Others have gone after this problem though. If you think back to Yodlee and others, when you looked at it, didn’t you say, wait a second, this problem, others have tried to solve this.

How do we think we can solve it or why now? It’s funny. At that point, what I envisioned was on a Palm device, the ability to see, I’m really dating myself. I still draw my Ks if it was on a Palm device.

The ability to see in real time what the balance remaining is on a particular area of spending that I’ve allocated like an envelope based solution. If I know that information, then I have two pieces of information that nobody ever has in their hand. It’s like, how much do I have left to spend? And when will I put more money in that thing? And now I’m in a position where I can make practical decisions.

But to go solve for that thing, which was the, how do we make people better spenders? And how do we create a world where they can have better outcomes? You got to get access to the data. And I had absolutely no idea how we were going to get access to the data. The one thing I knew is that nobody was going to spend time inputting transactions.

There’s a 1% of the population that’s willing to do that. And they’re doing it in an Excel spreadsheet. Yeah.

Yeah. So, I mean, we go back in 2019 goes back to when aggregation was first coming on the scene. So I didn’t know anything about it at that time.

Yeah. Know anything about it. So one of the interesting things I’ve observed with entrepreneurs, right? There’s this spectrum and attention between those who listen to the market too closely and they end up chasing their tail.

Right. And then those who have got a belief in their own idea, like religion, and they think the market’s frankly too stupid. Like they’re like, if only those customers listened, I could help their spending.

And the best entrepreneurs know how to modulate between that. And given the success you’ve had, you clearly figured out how do you modulate between when do you listen to the market and when do you follow the vision? Do you have any practical advice? And like, how do you manage that? Well, practical advice is hard to give when it’s very much steeped in the way your brain works and the way you see the world. But I will tell you, I agree 100% that often what I see is first-time entrepreneurs that are very passionate but way too focused on the data of the market and haven’t yet kind of understood the problems that they’re trying to solve and the North Star that they’re pointing at to get there.

So I guess my feedback is vision requires a North Star. And if you don’t have a North Star, you’re just going to be in the churn of all the noise that takes place every single day. So I try to maintain an absolute North Star on what it is we’re trying to accomplish and then be informed by the market on where it is today.

And then not worry so much about, you know, what’s behind me or around me, but what is available and how we might change that so we can get to the North Star. So change the course along the way, right? What you’re learning from the market that might be different than what you thought. Yeah, there are pivots that you’d make, little pivots you’d make every day based on what the information you get from the market.

Sometimes it’s a hard pivot. Sometimes it’s like, you know what, I thought this ladder was leaning up against the right building, but the building I need to have the ladder on is right over there. Okay.

And, you know, those are always hard adjustments. We have to have the courage to make them when it’s the right time to make them. And I don’t think you’ll ever know unless you maintain an openness to the market around you.

So you can’t just be blind to the facts, but you can very much be in this place where you’re just chasing your tail. Yeah. Well, as if going and solving that problem wasn’t enough, you also then found another Siffian challenge around this idea of FDX and standards.

And what was the problem that you saw? Because getting an industry group to agree on standards, let alone some of the major players to come to the table for this, what was the problem? Well, you know, we could spend several sessions on the story of FDX, and we probably should, because I think there’s a lot of lessons in all of that that are good lessons. But at the end of the day, the industry was using technology that, frankly, was, A, not as safe as it could or should be, B, it’s certainly not standardized, and C, frankly, just too expensive. I mean, it’s just too expensive to do one-off connections at every level and not have some kind of a standard around that connectivity level, interconnectivity level.

So really, we’re trying to solve for two things. Number one, interoperability and connectivity that was standardized in a safe and secure way, right? And number two, trust and confidence with the financial institutions that we’re interfacing with. So better partnership relationships with financial institutions that I always saw as very much part of the ecosystem.

It’s not like I was going to somehow eliminate the banks tomorrow, and it’s not like somehow I was going to become the regulated account holder, right? But I needed to interface with them, and I needed to do it in a trusted environment. And the only path forward, you know, I believed was doing what technology, the technology ecosystem has done in so many different, you know, in so many different sectors of technology. Competitors come together.

They create a standard. The standard eliminates the friction. It creates great interconnectivity.

And then everybody can level up their innovation on top of that. And that’s where you spend your time, because that’s where you’re solving the problems. It’s when you create the standards at the base level, then we don’t have to go spend a bunch of money on that or time focused on that.

We can actually talk about what kinds of things can we bring to the market with access to free-flowing, properly consented, and safe data. So I can’t think of any of the other industries I’ve worked in where incumbents are so intent on building moats around what they believe is their competitive advantage. And particularly in financial services, you’ve got some very large players building very high walls and very big moats.

Was there ever a point in the early days that you just said, this was a bad idea? Like, this is just not going to work. Never believed for a minute it was a bad idea, but wondered multiple days if it was ever going to work. Like, absolute north star, we must make this work.

We can’t stop. So there were so many days when I said, what in the world are we trying to do here? Because this is, it feels impossible at this minute. Was there a moment that you can look at and say the watershed where you say, so you’re saying we’ve got a chance, like that something began to break open that you knew that there was the multiple moments.

But the early going was just getting the banks and the fintechs together in the same room equally yoked. Yeah. Which is one of the fascinating things about FDX, right, is unlike some of the other large bank consortiums, small players have an equal vote and equal standing.

And did that pose a problem? It was a moment of compromise, but a calculated compromise. So the calculated compromise was I’m never going to get this done unless the financial institutions feel like they have some degree of higher input. Okay.

So point number one was we need you to be housed under the FSI SAC. Yep. We were an independent organization at the time.

There was no reason for us to become a legal organization sitting under the FSI SAC. We have fintechs, they’re not banks, you can’t membership, whatever. I said, okay, let’s put a pin in that, we’ll talk about governance under FSI SAC.

And then it was, we need to have a single vote controlling an ability to say no at FSI SAC for a certain thing. I said, let’s put a pin in that. And then it was, this is the way we need to look at board membership and industry associations.

And by the way, TCH needs to be one of those associations with a vote. And I said, okay, so basically what you’re saying is you’re okay being equal on this side and equal on this side, as long as you’ve got control under the legal organization. And as long as you’re placing the two industry associations with votes.

I said, okay, I mapped that structure. All of these things require two thirds vote of the board. I knew, okay, this is the structure.

As long as it was always two thirds, I had a significant chance of leading in a balanced way, because these people, irregardless of this and this would still require at least four or five of these to get it done. And I was confident that we would act relatively consistently. And there was a way to manage this in what ultimately played out as a very balanced organization, but in the moment allowed for compromise.

And were it not for that compromise, we would never have gotten to Park City in March of 2018 with 18 people around the table saying yes. What’s fascinating is it wasn’t a technological issue being solved. It wasn’t a standards-based issue.

It was a governance issue. And how do you get the corporate self-interest and balances of power to hang into a check? It’s like understanding that moment where the people that you’re working with have to have a conversation with somebody that they’re reporting to, and they have to be accountable for, well, this is what we did. We put it under here.

We did this. We added this. Okay, great.

Okay, great. But here’s the devils in the details for governance. It’s absolutely both.

But I call it kind of Constitution Hall moments, right? And there were many of those, and that was absolutely one of them. I remember maybe it was last 2020, maybe the one before that, after an FDX board meeting and several of the board members I’m friends with talking about just the Constitution Hall moment is the perfect analogy, right, where it’s like the things are hanging in the balance. It can break this way.

It can break that way. Do you feel now with FDX being the standard as it comes to open banking in 1033, that’s behind you as an organization? I think the organization has matured significantly. We have new governance.

We have eminence, and it’s very balanced governance, and we’re out from under FSISAC, and we’ve done a number of things. But I think that we got to a place where FDX had grown in its level of both maturity and respect as an organization. And so there will still be, because, listen, I’m not sure I know of any other standards body in the world where you have such opposing organizations coming to the table.

Different self-interests. Yeah, for sure. And they are truly, like, I think about Bluetooth, right? I had the cell phone providers, I had the chip makers, I had the, you know, they all had this interest in creating a massive ecosystem, but these guys weren’t really competing with these guys, and those guys weren’t they were just doing a different part of it.

But you have, I mean, in the world of financial services and some of the people coming together, it’s like, wow, you know, you have a lot of self-interest in there that you have to try to manage through, and these people need to respect each other enough to understand that, you know, rising tides lift all boats, and let’s figure out how to do that. You know, it’s in our best interest. Yeah.

Well, speaking of interest, as if FDX was not enough of a contribution to the industry, you now with the Stena Group are helping to further the industry. What’s the vision, right? Because you made a major commitment, not just financially from your success, but of your energy, right? Which does appear bound, let’s assume there are some constraints attached to it. What’s the vision? What do you hope to accomplish with Stena? I mean, ultimately, it was a very selfish thing to start out.

It was we needed to hire and fill 150 positions, and I was in conversations with the University of Utah, and I just said, I’m not getting the kind of graduates I need here, and I need to try to solve for that, and it was, I need the right kind of curriculum for these students to become, you know, instantly helpful in what we’re trying to do. We hire engineers that hadn’t been in financial services, and they didn’t really understand. If you don’t understand mortgages work, rails work, I mean, on and on and on and on, then there’s this massive learning curve.

And by the way, you’re developing on a system that’s completely locked down because it’s bank grade info security, and you know, we’ve got five bank audits in the next four or five weeks. So, you know, that learning curve and how to get people there, and then product people that didn’t understand the same thing or didn’t understand that, you know, the only way that you’re going to interface with large financial institutions and banks that are still running on cobalt-based cores and different things is we’re not going in with a monolithic system and replacing something wholesale. The only way we can do this is with microservices that we can bundle in different ways and work through interfaces to deliver services into systems that are already secure, running at scale, you know, they’re not changing them out tomorrow.

And if we can’t figure out how to do that with the technology piece, then we don’t have a solution. How we deliver is very important, and product people needed to understand that. I shouldn’t be thinking in, while I’m thinking in terms of the solution I’m providing, I should be thinking in how I package that up in microservices and how I meet, you know, financial services organizations where they are with systems that they have.

And so, getting product people to come in that have been, you know, I built, you know, the SaaS system and it does all this stuff, you know, to come in and start thinking about breaking everything down into microservices, and I’m just pulling things out of the quiver and bundling them together and putting them, interfacing them into somebody’s existing solution. It’s tough. And then you wrap the regulatory environment around it, and it’s like, well, you have to understand that’s a regulated, you know, that’s a, you know, credit is a regulated industry, and how we think about data and how we deliver what could be considered a consumer report, and how we might be viewed as a participant in a major lending process like a mortgage, or how we might be, you know, participating in something like a payment stream or something like that, and you’d say to a new college grad, name the five provincial regulators in the financial services space and what they do.

I don’t know, right? So, my point was simply, President Randall, at the time, Dean Randall, I need better graduates. Like, can you please send me somebody who understands technology, understands the business world of finance and financial services, and can talk about regulation, why it’s important. And we got into this discussion, open discussion, with a lot of fintech leaders around the state.

Which can be game-changing, right? When you think about how that changes an ecosystem, I guess, as we wrap up, you’ve accomplished so much in, you know, discrete buckets, but whether it’s something you’ve done already or something yet to be done, how do you want to be remembered? I think at the end of the day, the thing that has been my guiding north star more than anything else is that economic mobility is really a component of access to better education and access to the financial system. And everyone, if they are on an economic mobility path, is in a much better position to solve their own problems. The world tries to solve a lot of problems with money over the top.

If we come in at the foundational level and we give everybody access, free and open access to the financial system, and we provide better tools and solutions for the small and medium-sized businesses that run 70% of the world’s economy, right? Everybody’s got an identity, everybody’s got an ability to be known, and everybody gets access to efficiently distributed low-cost capital, okay? That’s meaningful participation in the financial system. If all businesses, small and medium-sized businesses, had, like, advantage, and if there’s opportunity for me to improve my level of education so I can move from this level of knowledge to this level of understanding, I’m going to be in a much better position to innovate because I truly believe the best of the human experience is meaningful human connection and creation, innovation. I think we’re born innate with those things.

There’s a problem, I can go solve it. Here’s the thing, you travel around the world, you’ll see it everywhere. So if we can do things from the Center for Financial Technology to expand financial inclusion, to help with economic mobility, if we can do things to spawn companies around the world that are going to innovate and help solve those base things, then ultimately that scratches the itch for me, which is, how do I want to be remembered? I truly want to be a part of the process of creating much greater, much more expanded economic mobility, because then people will be in a position where not only they solve their own problems, they grow in their capability to help others solve their problems.

And ultimately, I think that’s what helps the world. Well, and that flywheel just keeps going then. Well, thank you for sharing your story and your vision.

It’s fascinating. Thanks for all you’ve accomplished. Thank you.

That’s it for another week of the world’s number one fintech podcast and radio show, Breaking Banks. This episode was produced by our U.S.-based production team, including producer Lisbeth Severins, audio engineer Kevin Hirsham, with social media support from Sylvie Johnson. If you like this episode, don’t forget to tweet it out or post it on your favorite social media, or leave us a five-star review on iTunes, Google Podcasts, Facebook, or wherever it is that you listen to our show.

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