497 Highlights From Finovate Spring Spotlight KakaoBank

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.

Welcome to Breaking Banks. I am your host of the world’s number one fintech podcast, 180 countries, 10 million downloads now. This is our 10th year and we are getting close to our anniversary show to celebrate our 10th anniversary.

But, you know, there are still major moves happening in fintech. And just last week, of course, we had Finnovate Spring. So I’ve brought on a team of distinguished fintech guests to talk about that.

This is a collaboration with our friends at the official Finnovate podcast. So of course, we have Greg Palmer, the host of the official Finnovate podcast. Greg, welcome back to the show.

Yeah, my pleasure, Brett. Thanks so much. And also joining us from all across the States, Dave Annamali, who is the payments consultant, key payments consultant, chief payments consultant for Rightframe Consulting, editor at large at Cornerstone Advisors, Mary Wisniewski, and Theo Lau from Unconventional Ventures and host of the One Vision podcast.

And welcome to the show, everyone. Thanks for having us. So that was my queen impression there, if you didn’t get that.

That was lovely, my friend. One of my favorite guitar riffs of all time is that opening lead of One Vision. But anyway, we’re getting off the track.

Finnovate Spring. Maybe, Greg, start with, you know, tell us a little bit about in terms of attendance. You know, we’re now sort of coming back from the pandemic.

So was that as you expected? Was it better than you expected? And what about in terms of participation from demoing companies and so forth? You know, what was the overall feel of the event? Yeah, well, I mean, it was a great show for us. We are in a new venue in San Francisco at the Marriott Marquis for the first time this year. So that was fun to get to try something else out.

You know, in terms of attendance, I think some of the recent happenings in our industry did put a little downward pressure on some of the companies from attending. But we had a really strong group of demos. And I think one of the things that I kept hearing, which I certainly thought myself was the companies that were up on our stage were demoing really cool technologies.

And so I think maybe there was a little bit fewer demoing companies than we’ve seen in years past. But the quality of the demos, at least from what I’ve been able to gather, has seemed to go up and up, which is really interesting and kind of follows what you might expect as there’s this hyper competitiveness now, you know, this sort of crunch on VC funding. It’s maybe a little bit harder now to get some capital.

And so the companies that are getting capital are having to rise to a little bit higher standard than what we’ve seen in previous years. So I think that was a really big, exciting thing for me was just the quality. And I was sitting back there at a couple of sessions thinking, man, any of these guys could potentially be a contender for best of show.

I don’t know how the audience was able to narrow down their votes because there are so many quality options up there. And the other piece I think was really fun was we’ve been able to try out a couple of new things in 2023. We started adding scholarships to bring in more companies focused on the ESG space, to bring in companies that are founded by either people of color or women.

And that was a really positive thing as well. That’s a direct result of some of the feedback that we’ve gotten from previous events. We’re going to continue that for a Finnovate fall, by the way.

So that was a really cool one. And then I think the other thing that we tried in a really subtle way this time was themed demo sessions. And that’s something that people have been asking from us for a little while.

Can you group them somehow into something that makes sense? And we did actually try that out this time. And I think that worked well as well. So what are you grouping by AI or wealth management or what are the type of categories? This was a real challenge for us because there’s so many different buckets in the FinTech space.

And one of the things that we’ve always found is whenever we’ve tried to put companies in a box, the vast majority of them raise their hand and say, wait a minute, I don’t belong in that box. And so what we did is we tried to group them by not necessarily where the technology is coming from, but who it serves. So we had a retail and kind of consumer banking category.

We had a business focus category. We had a back end and enabling technologies category. So that’s more of like APIs or core banking types of.

And then we had one that was kind of our outside of box category, which was sort of anybody who didn’t fit neatly into any of the others. So those were the original four that we tried. And I think we’re going to stick with those because it allowed people to really focus.

You know, if you’re a banker focusing on the retail space, you don’t necessarily need to see small business plays. And so that’s kind of how I was our first crack at it. And it seemed to go over well for the people who were paying close enough attention that they noticed that we’d actually done it.

And what about favorite demos from the from the crowd? Theo, you want to start us off? I have my favorite one, but I think that was a no brainer from those of you who have attended Finova Spring. Yes, Greg, I do agree. There are lots of cool stuff.

At one point, I thought I was sitting at Fendeavor, not Finovate, because I guess it must be how you’re grouping the startups. I didn’t even notice. And in a few sessions, I’m like, wait a minute, this felt more like developer stuff.

But my favorite is Flybits. Flybits have been around and I think they’ve won best of show before too, right, Greg? They have. It’s been a little while.

It’s and it’s something that, you know, that gap between coming to Finovate, they’ve obviously been quite busy in the time that they were away. Yeah, seems like they did Metaverse, Brett, and I told them, I said, of all of the talk about Metaverse and of all of the visual representation I’ve seen around that topic, this is by far the best. And it was amazing.

They were able to show and help you visualize what it could be and what it would be. And it looks engaging. Dave, you also commented on Flybits.

What struck you about the demo? Going into Finovate, I was under the impression that Metaverse as a topic, I wasn’t sure how successful it was going to be. If Mark Zuckerberg couldn’t get it right, I wasn’t sure how Fintech and other payment companies would actually fare well. But I think Flybits really hit it out of the park.

You know, they showed a really well-built product. It was really impressive. You know, if I were to do a banking in Metaverse, that was a great proof of concept to show how it can be represented.

So I think they really caught everybody. I’m going to make a prediction right now. I’m going to make a prediction that there’s going to be quite a few AR-based demos next year at Finovate because of what’s happening on June 5th, right? Which, well, it was happened on June 5th by the time this show airs, which is, of course, the release of Apple’s new smart glasses.

So that’s going to be a game changer, I think, despite the fact that it, I think it’s inevitable we get to smart glasses and we get to Metaverse. You know, the timing is a question mark, but it’s not that, oh, Metaverse has failed, Zuckerberg didn’t get there, we’re done. It’s just a matter of time.

Mary, what was the highlights for you? Yeah, so I’ll go in a little different direction. I caught Greg behind the scenes and we were having a sidebar about Debbie, which demoed last fall in New York, if I’m remembering that right, Greg. Yeah.

And that’s a startup that helps, that rewards people for paying down their debt. And I just remember then people at the conference were talking about, although they’ll struggle to get a partner, but I was thrilled to see that MSU Federal Credit Union is partnering with them or piloting with them. And the credit union was speaking at the conference on a financial health session.

So I don’t know, I kind of got, I kind of got excited about that. Great. So Greg, tell us about the best of show winners.

Yeah. So a good group this time around, Flybits is one of the ones who won best of show, which again, I think we can all agree that was really impressive demo. The other ones were OneCosmos, NineSpokes, QuickFi, who has actually been a best of show winner before they do business lending and their team is getting really good at using the seven minutes on our Finnovate stage very productively.

And then Savvy AI is another winner. And then the last one, Wink, deserves a little bit of extra consideration. Their CEO, Deepak Jain, who actually demoed this time around, was a previous best of show winner with a different company.

That company that was called Switch, I believe. And it is really rare for people to come back and win best of show with multiple companies. So that’s something which deserves a little bit of extra recognition there.

He’s a bit of an OG of, of, you know. I’m not going to lie. He actually gave us quite a scare.

He didn’t rehearse anything on the Monday beforehand. He didn’t come in on Tuesday. On Wednesday morning before his demo, he gets up on stage and was like, no, no, I got this.

And I’m like, we’re going to trust you here. And then he comes out with the best of show winning demo. So obviously, he did have it well in hand all along.

But it’s one of those moments for us where like, we really want to try this out before there’s a couple hundred people in the room. But obviously, all’s well that ends well. Absolutely.

So, Deva, what about, what are your, what’s your feedback on Wink? Yeah, I really love Wink because you won’t believe how many times I reset passwords on all the different portals. I know, seriously. Any company that solves this password problem in a user friendly way wins my vote and they did, he did an amazing job in the seven minutes he had, and he was able to present all of what he wanted to show without getting stressed out.

And he paced it really well. And the solution seemed very, very well baked, you know, in my mind. So I think Wink is definitely somebody to look out for.

Great. What about the overall trends in respect to directionality? Because, you know, if we, if we go back, you know, there have been some fairly clear stages of development, you know, had everyone doing everything, you know, in the early days of FinTech, you know, giving a shot at everything. Last few years, we’ve seen more focus on bank, you know, BaaS type provisions.

We’ve also seen more specialization in FinTechs, you know, going for, you know, particular segmentations and so forth. Of course, we’ve seen some recent failures in that space in the US in particular. But directionally, you know, AI had to be a big part of it, you know, but what what else did you guys see as sort of clear trends for where the money is going right now? It’s definitely AI everywhere, and it wasn’t just a demo space and people what people talk about, it’s also on stage as well.

So I ran an AI track, which was fascinating. It was standing room only for a panel. And we have… That’s surprising.

Right. That’s because you’re in it, Theo. They’re all there to see you.

No, no, no. And it was end of the day, too, Greg. That was the surprising part.

It was the last day afternoon. I had never had a standing room session in that time slot. It’s awesome, right? It was awesome.

The energy of a standing room session, nothing can beat it as a facilitator. Yeah, but what I like about the conversations wasn’t it wasn’t just the froth, right? Because the last few years we always talk about, oh, you know, we could use AI for this. We could use AI for that.

But that particular session was actual concrete examples that people brought in and talked about what we used for AI for in our institution in the bank. Charles Schwab was there. Fremont Bank was there.

And they talk about, you know, what else they’re trying. And so I like when institutions bring in exactly what they’re doing rather than, oh, this is what we could be looking at. Right.

Yeah, I mean, the AI is not a hard thing to guess that people would be interested in it. But what was the core focus of the AI? Was it back office stuff? Was it CX? Where did, you know, where was the action? A lot of our discussion was based on how they can deliver extra value. So it’s a lot about self-service.

It’s a lot. Last year was more back office. You know what? This is interesting.

So this year is a lot of front office. It’s about how we can make things easier, how we can provide consumers more choice in what they do. And Deva, what do you think? Yeah, I believe, you know, customer service is probably one of the most easiest use cases to solve using AI.

And I think even today, this morning, I was on a call with my health insurer and IVR was miserable. It couldn’t understand what I was saying. Maybe my sexy accent.

I don’t know, but at some point I had to keep mashing zeros and stars to get to talk to someone. So if AI can solve that problem, I think that’d be a great first step win. I don’t think they can solve your sexy accent problem.

I mean, especially for that. But having said that, I mean, look, you know, there is a clear trend that has emerged in challenges and fintechs around the world where they see that the need to speak to a human is a design flaw. Right.

And when you do have those human edge cases, again, the use of AI is a mechanism to better operational efficiency. You know, players like WeBank have used that extraordinarily well. But yeah, Greg, what are your thoughts on this, you know, in terms of the trends that were coming out in terms of the.

I think a really interesting one that we’re starting to see unfold is who the companies on stage are aiming their technology at. And obviously, everybody wants to play with the kind of top 20 banks, these large banks, but they also recognize that in the US in particular, there’s this massive pool of smaller financial institutions. And in many cases, in most cases, those financial institutions don’t have the resources to be able to dedicate a tech staffer to an integration with a fintech company.

And so what these companies are having to do is create solutions which are incredibly easy to implement on the part of those smaller FIs. And we’re starting to see a lot of that over the course of our shows where companies are saying, you can integrate this without even having a tech person on your staff. We have put the layer in place to make it super simple.

And I think this kind of speaks to where fintech needs to go. I think the larger financial institutions with these with an incredible amount of resources obviously can build a lot of things that smaller FIs can’t. At the same time, these smaller FIs represent such a potentially lucrative customer segment for the fintechs who can support them.

So there’s a massive incentive for companies to get that right. And we saw a lot of companies, obviously, the technology could still be deployed at a larger financial institution, but a lot of them are really zeroing in on how can we get into credit unions, local banks, how can we make some of these banks competitive and make sure that they stay around? So that, I think, was one of the really positive things that I noticed this time. We’ve kind of been drifting that way for the last couple of years from my perspective.

But to really see so much focus on it from stage this time around, I thought was really heartening. So, you know, any credit unions or community bankers, make sure you come out to Finnovate Fall because this is a group of people who want to get in front of you. So they’re building things for you at this stage.

What’s interesting, Greg, is you used a term that I’ve identified as a key difference between fintechs and traditional players. You never hear fintechs talk about their core system. They talk about their tech stack, right? Yeah.

And so the ability to extend your tech stack as a traditional player is a really critical strategy. If you’re going to plug in AI, you’re going to plug in, you know, things like, you know, password improvement, identity verification systems, fraud prevention, all this sort of stuff. You know, if it’s not provided by your core systems provider, then you’ve got to have that agility in the tech stack, which is what the fintechs all have, right? Because they’ve got newer architectures.

But so, yeah, I think it’s a continuation of kind of just understanding where customers are. We spend a lot of time as an industry looking at retail consumers and thinking, how can we actually make a difference and reach them on the platforms that they’re on? Right. I understand that people want to be banked in whatever format, whether it’s on the phone, whether it’s on a tablet, what have you.

We’ve made a great effort to reach those customers where they are. We haven’t necessarily done that as an industry with some of our banking customers. And so I think this is really potentially a really overdue step, but it does speak to the fact that we need to focus on those end users.

And if those end users happen to be smaller financial institutions, they need a little bit of extra support. So and I think the increase on and the pressure on profitability for some of these fintechs, which they’re now under, is really driving them to say, where is my clearest path to profit? And a lot of them are obviously looking in that direction. Yes.

Yeah, clearly. Mary, what did you observe? Yeah, well, I’m tying it back now to two threads. And Greg, to your last point, it seems like that’s opening up the conversation about neobanks, generally path to profitability.

And also back to the comment about customer service. I agree with you. There’s it’s like an error if someone needs to talk to a human.

But I am finding or at least I’m hearing them as sides. I mean, especially in the wake of SBB, like the banks, some banks here in the U.S. were like proactively reaching out to their customers who, you know, had more deposits than two hundred fifty thousand dollars. And I just think that the ability to connect with a human when there is this moment of panic is like super important.

And something that struck me is just a separate affinity, but Charlie is a new neobank in the U.S. that is targeting over 62. And I noticed one thing it launched with was the ability to contact a human in the U.S., which I think is actually a competitive distinction, although, of course, the math will be confusing at best. But I’d be I’d be generally curious about people’s attitudes on neobanks, because around the same time, also, Daylight announced it’s closing, yeah.

Yeah, no, I think that’s an interesting trend, although, you know, the second half of this show today, we’re going to hear from Kakao Bank in South Korea. And of course, they’ve done integration with Kakao Talk, and that’s a key part of differentiation. And obviously, when we look at Tencent and WhatsApp with their integration on a fintech side, those platforms are showing some real promise there.

So there is something to that in terms of the conversational element, for sure. But let’s let’s take a quick word here or get a quick input from Alex Jimenez, who wasn’t able to join the show today. But we had him chime in remotely on what he thought were some of the trends and the best demo that he enjoyed at the show.

While the Finnovate format has continued to evolve, the demos are still the center of the experience. For me, I was excited to see my friends at Finalytics AI continue to expand their personalization platform that goes between the website into the authenticated experience. I was really excited to see San Francisco Fire Credit Union talk about real results, which is always something that I look for in demos.

Also, as a former head of digital for a bank, I really love the FinTech Insights platform. It’s really difficult for a bank to compare their own digital banking experiences to those of their closest competitors. And this platform allows that to happen.

I really wish I had had that many years ago. And finally, the third demo I liked the most was the Hyperswitch open source payment switch. It’s a really great idea.

I have many questions about how it works and how it can scale, but it was very impressive to see something like that. As far as trends, there was lots of talk about generative AI, as you’d expect. I was really disappointed that I heard a lot of FinTech people are making some of the same claims that the general population are making about Chad GPT and the so-called understanding of whatever topic.

You know, that’s not what large language models do. Having said that, the trend really is the excitement about the possibilities of AI applications and financial services. So we’ll see what that means in the coming months.

The other trend that I saw was a lot of discussion about Gen Z and how we can meet their needs and wants and how they’re different from all the other age cohorts. It really reminds me about the discussions we had about millennials back in 2010 or so. One last thing about Finnovate, I was really impressed about the non-demo sessions, not just because I had a speaking session myself, but the keynotes and the panel discussions were better than most of what I’ve seen in the past few years.

So coming back in respect to this, tell me guys about how people were feeling coming back to the conference and what do you think, given the disruptions that we had during the pandemic and then coming back to events like this, are people buoyed by this? Are they excited about coming back to conferences? Do you think that we certainly are still doing a ton of virtual stuff, but what are your feelings like, Greg, in particular for the future of the Finnovate event series? And do you feel like it’s coming back? Yeah, I think absolutely it is. And one of the things that we have as far as metrics, we can see how many people are creating meetings with each other through the event app. And the number of meetings that the average attendee is taking keeps going up and up.

And I think when you walk through that networking space, you see a lot of the scheduled meetings and you also see a lot of the kind of impromptu, you know, I just happened to find you and shake your hand type of meeting as well. But there’s clearly a lot of interest going on in making this type of connection, this face-to-face connection. And I think the other piece that we’ve always really prided ourselves on, the format of the show makes it very easy for attendees to find new companies and then go and connect with them.

And I think when we were virtual, we saw people were interested in the demos. They wanted to see what the technology could do. But kind of closing the loop and making sure you actually connect with somebody from that company was a line that was difficult for a lot of attendees to cross.

And I think in a virtual environment, sometimes you just don’t want to turn on the camera. You don’t want to turn on the microphone, you know, all those types of things. But the buzz and the energy of the event and the networking space was was excellent.

So I think that’s that’s the piece that really gives me a lot of optimism. And I think we’re seeing, again, more and more people really engaging and proactively going out there to find the people that they want to talk to. Obviously, our job then is to facilitate that and to make sure that we’re making it possible for people to find the right people.

And I think our app keeps getting better and better as well as we keep refining it. So those two pieces combined make for a really exciting show for us. And I love seeing that meeting stat tick up.

It’s really satisfying because, you know, it’s nothing, nothing, nothing. And then, you know, boom, when when the green flag drops, they really start getting into it. That’s great.

Well, you know, of course, Jason Hendricks calls it the fintech petting zoo. But but it seems like there’s real deals getting done now, because as it’s as there’s maturation happening here, you know, the banks that sort of waited, obviously the pandemic showed them that, you know, that was a serious error in calculations, those that hadn’t digitized enough. And certainly with what’s happening in terms of deposits and, you know, the stability of the US institutions now, everyone’s looking for that edge.

Everyone’s looking at these new technologies to to leverage. But Deva, Mary, Theo, maybe we’ll start with you, Deva. What about the networking side of it? What did you see? Any patterns there? What were the type of meetings that were going on on the ground? The folks who are meeting seemed serious about what they were going to do.

Right. I mean, you definitely saw some high quality interactions in the expo hall as well as, you know, after expo meetings and stuff like that. You definitely saw that the builders who were there were serious about what they were building.

That’s the one thing which really stood out for me, Brad, that, you know, pre pandemic, you know, conferences used to have a lot of participants and not everyone had great quality products. Right. So you had so many folks with similar kind of products which can really tell, you know, you can differentiate between one versus the other from a value proposition.

But I think what we saw here in this phenomenon where, you know, people who weathered the storm, you know, people who are really serious about getting this product, you know, scaled up. So you definitely saw some good quality presentations out there as well as companies which really wanted to climb up, you know, to a good spot. So overall, in my experience, I felt that this was definitely a great conference from a value perspective.

I think I left after meeting quite a few good folks, you know, who had interesting things to offer. And Mary, who are you networking with? And what was, what was. Well, this crew, I’m networking.

Yeah, of course. It’s like just hanging out with your friends when you go to these events, right? Yeah. Or like, oh, no, let me duck and cover, you know, as much way it goes.

I think we all know I’m an excitable person, but, you know, I’m. Yeah, I know. Talking revelation of today’s episode.

But yeah, for me, it’s still a thrill to be back in person, see faces I haven’t seen. And I like, I feel like, you know, you can get not this again. I’m doing this.

I’m hopping on a flight to do this. But right now it’s still like fun, you know. It’s energizing, but it is exhausting, right, Thea? Oh, my gosh.

I’m like, oh, no. Hide away for a couple of days. But the other thing I’ll say, Greg, I don’t know if this was a design thing or not.

But like in at Finnovate, the food, you know, there weren’t so many tables. So it’s sort of like forced you into these standing tables, which made you have chitter chat with whoever’s nearby. And I find myself having a lot of striking conversations early in the morning with them.

I wish I remembered her name. She said she’s a controversial figure. So after we find her name, but I thought that was cool.

Sort of like a forced connection. What was it, Tiffany Montes? No, I know. Well, one thing I want to congratulate you guys, Greg, I don’t know if you did that by design was the layout, because you cannot not walk past that hallway.

And literally, that’s why I ended up for most of the time, if I’m not in session, I just stood there and I end up catching everyone that I need to and people end up seeing me. So that was exhausting. But it’s like it’s like what you said, Brad, it’s like family reunion, being able to see people again, something that I think, you know, many of us took for granted.

But I did like the format. I like the layout. And Deva, to your point, I think there were a lot of people who were serious about building something.

You know what else I see, which was surprising? I see more people in suits. Than I normally would in Finnova Spring. I don’t know if it’s because we see more banks being there now than the previous ones.

This is a very concerning trend. Or did we change dress code? Right, exactly. But it’s a lot of formal wear.

I mean, you know, Zuckerberg still turns up in sweatpants and black T-shirts, right? Go to Aoba’s event in January, Theo. You’ll see full suits, 8 a.m. I am surprised people still fit into the suits. I don’t know about you guys, but, you know, I’m still trying to lose my COVID weight.

So I don’t know. Well, you know, one of the things I think when we look at these trends, what’s interesting is I think we’re going to see a whole layer of new startups coming over the next few years that are AI-powered, obviously. And, you know, if you listen to people like Chamath from Social Capital and others, they talk about the fact that, you know, for a lot of these conventional companies, you know, going from minimal viable product to a launch, they were looking for $20 to $30 million to build that minimal viable product with the 30 or 40 staff to be able to actually get it out the door and get that traction.

But today, you could do the same job for, you know, with five people and an AI, you know, and then the funding requirements are less as well. So that could lower the barrier of entry for a lot of these startups to really do some interesting things, you know, potentially. But before we finish up, what didn’t you see at this year’s event that you thought you might see or, you know, what do you think is the telescoping or the messaging coming out of events like this in terms of where the fintech sector is going? So the one thing which I did not see was all of these fintech ideas were more focused on selling to the banks and other institutions.

But I, you know, Bill Gates had said a few weeks ago that the age of personal AI or the agent AI has dawned, you know. We would start seeing personalized AIs, which will be running within the realm of a user’s space would be emerging pretty soon. And that would be a killer use case, right? What I didn’t see was companies specifically building out directly to consumers.

Like imagine a personalized AI, you know, which can actually look at all of your financial history and transactions and gives you guidance on how to run your everyday life from a financial point of view. You know, that would be a killer use case. I’m not sure how many companies out there are building for a use case like that.

But that was one of the big misses, which I noticed there. And the second biggest miss for me was not seeing Matt West Sands because MX did not have a demo. You know, we really missed that.

There you go. Yeah, we missed Matt West Sands. Oh, that’s right.

That is a striking absence. So plus one on that. And, you know, I wasn’t at the whole Finnovate, so this may have happened, but buy now, pay later.

I didn’t hear enough against it, I would say. But I’m curious what everyone, but Klarna announced a pause on like if consumers want to pause, like the ability to take it out. I think it’s Klarna, but had to call out to others and buy now, pay later to do the same thing.

And I’m just curious if others will follow suit. But I always want to hear more of the risk of certain technologies at any conference. I mean, that’s a subject for an entire show, really.

I mean, a lot of people miss the fact that when you hear criticisms of buy now, pay later, you are missing the forest for the trees, right? Where this is a change in experience of access to credit, right? It’s a part of that progression. And we’re moving away from things like personal loans and credit cards to much more contextualized experience of credit. And buy now, pay later is just the start of that.

And a lot of people don’t get that. So when they’re like, oh, BNPL’s done, it’s like, yeah, we’re not even started on this stuff. But anyway, as I said, we could do a whole show of that and I could go down the rabbit hole on that.

But Theo, what about yourself? Any feedback there? Yeah, I agree with the payments. And the one thing I did not hear too much about was the Apple. Which was surprising because the news of Apple savings and all of that came out a couple of weeks ago.

And you would have thought everyone would be all over it and say, this is what we’re planning to do. Oh, my God, what are we going to change? But apart from a little bit here and there, there wasn’t much as if, OK, so what? That was surprising because I went through trying to open the account. And if anything that was fascinating, that was it.

And the ease of use. I mean, it wasn’t bad, but compared with Yui Bao on Alipay, it was still pretty clumsy. But here’s the thing is any bank could have done that at any time in the last 10 years.

I mean, we had Impulse Savings for moving back in 20. We demoed it for the first time at Finnovate in 2015, which we won best of show for. We’re going to slide that in, Brett.

But I mean, it’s not like, you know, these sort of things couldn’t have been done. And yet, you know, again, this is where I think the maturity of the US and European markets a little bit behind, you know, like what we’re seeing still some pretty aggressive innovation in some of this stuff in markets like China and LATAM and so forth. But well, listen, guys, we’ve run out of time.

We could obviously talk about this for another, you know, hour, but, you know, we got to wrap it up. Just to wrap it up, what is coming up in terms of the Finnovate schedule over the next couple of months, Greg? Yeah, so we’ve got Finnovate Fall as well. Yeah, yeah, the podcast, I will be interviewing all the best of show winners from Finnovate Spring.

So stay tuned for that over the next month and a half. Finnovate Fall back in New York in September, and then the Finnovate Awards are still going on. There will be a little bit of time for people to submit nominations after this episode airs.

So do check that out, finnovateawards.com. And of course, you know, we’ll be quite active in the virtual arena as well. Check us out at finnovate.com for all of the pieces which will be running over the next fall for the remainder of 2023. Check it out at finnovate.com. Yes, exactly.

And Theo, you’re going to be at Finnovate Fall. In fact, you’re going to be doing a book signing for your new book. Tell us about your new book.

Yes, thank you, Greg and Katie. And there is a new book coming out at Finnovate Fall. We will be unveiling it.

It’s called The Metaverse Economy. So stop by Finnovate Fall. Awesome.

And Mary, how’s FinTech Uncut going? Hey, it’s going pretty well. I’d say we’re a bunch of oddballs mocking the news of the week in FinTech land. So that’s still going strong.

Drops on Fridays. Fantastic. If you haven’t checked it out, check that out as well.

Another one of our OGs of FinTech, Chris Skinner, of course, frequents that. So that’s great. And Deva, anything from your side to look forward to? Or how do people stay in touch with what you’re working on? He’s back to Twitter.

Yeah, I’m a Twitter. I’m active at Twitter, LinkedIn. You could find me.

On July 4, right? Is that the Twitter handle? There you go. Great. Glad I remembered that.

All right. Well, thanks, guys, for joining us today on our combined Breaking Banks and official Finnovate podcast session today, segment. And stay well.

And don’t be a stranger, as they say. Don’t wait for the next conference to say hello. Thanks for having us.

Thank you. Thank you. All right, guys, we’re going to take a quick break.

And after the break, you’re going to hear from Daniel Yuen, the CEO of one of the most successful challenger banks in the Asia region, Cacao Bank. We’ll be right back after these words from our sponsors. This show is brought to you by Alloy Labs.

As much as we love talking on the show, we believe that action is more valuable than talk. Alloy Labs is the industry leader in helping fearless bankers drive exponential growth through collaboration, exclusive partnerships, and powerful network effects that give them an unfair advantage. Learn more at AlloyLabs.com. Alloy Labs, banking unbound.

So I’m on the ground in South Korea in Seoul today. We had an interesting morning starting with North Korea and sending a satellite up. Ending missile warnings.

But I’m here with Daniel Yuen as the CEO and founder of Cacao Bank, which, of course, is the most successful challenger bank in South Korea and one of the most successful globally in terms of growth. But in the West, we don’t hear a lot about Cacao and Cacao Bank in general. But you had a very successful launch back in 2017.

2017, end of July. We launched our business in that time. Yes.

And you had a phenomenal response. You had over a million people sign up for Cacao Bank accounts in the first few days of operation. And now you have over 26 million customers to date.

But tell me a bit about how Cacao Bank got started. Obviously, we know of Cacao as a platform, as a super app here in Korea. But when did the idea for the bank get started? Yeah.

In 2014, there were new license issues in Korea over banks. So at that time, our government was planning to give some new license of a bank to the market because for the last 26 years, there have not been new bank licenses in Korea. So that means there have not been fierce competition on the bank industry.

So they wanted to release a new one. So I got that issue from the government people. Then I initialized this agenda to Cacao.

But at that time, most of the Cacao people were against my opinion because they owned a fintech company under the Cacao pay. Right. It’s a fintech company.

But they thought, what if we have bank license? That means we have to keep the regulations. Right. How can we disruptive approach to the financial market with the license? I can understand that.

Very interesting. But IT guys perspective, I can understand their opinion. But I persuade them, in the world, always if we want to run the bank business, that means we have to get the license.

Yes. No license, no business in the world. So you guys, Cacao, we want to do some different things with innovations under the financial sector.

That means we need a license. Yes. I persuaded them at that time.

But at that time, I have to persuade them. But I didn’t have many resources from Cacao. So I was one team leader under the mobile bank taskforce teams.

And then I hired only four people from the market of Cacao Bank. Then I got the license with only four people. Wow.

That’s lean startup. Yeah, lean startup. But I have a lot of good partners, the company partners, such as the KIH, Korea Investment Holding Company.

Yes. They were our good partners when we set up the Cacao Bank. So Cacao Bank was a joint venture with Cacao and KIH.

I see. Yeah. This is one of the biggest success factor to do the business.

Because the banking industry is based on the license. So we have to understand the protocol of the banking people with the regulation and regulatory. And what’s your background? My background is that half of IT guys, half of the finance guy, I started my… Similar to me, actually.

Really? Yes, you’re right. And then I started my business with insurance. I see.

And then after that, I moved to the Daum Communications, which is the number one IT company in Korea at that time. So like WeBank in Shenzhen, which we were talking about, WeBank was able to use the Tencent relationship to accelerate their growth. Cacao has been very important for your growth.

But having said that, why was this the right time for a new type of bank in Korea, do you think? Because as you said, 26 years without a new bank. And what inspired you? Was it seeing other challenger banks around the world? Or what gave you that first idea for the bank? Okay. Very good questions to me.

You know, in Korea, the Korean people are very savvy people. Yes. Okay.

Their standard is very high compared to the other countries. Yeah. So like Korea is always led on the internet, for example.

Yes. But in 2014, 2015, I saw this banking industry and the financial industries are a little bit not fancy to the people who are digital savvy. You know, at that time, Korean people, you know, Korean people enjoying the high level of application, such as a neighbor, Takata, or some other game, mobile game, right? But compared to that… Like Daum and so forth.

Yeah, like Daum now. And compared to that, when our users experience the bank application or other the financial business, it’s a little bit not fancy. Sometimes some say it’s idiot.

Even though they are selling the product through the mobile. So there are big differentiation and huge gap between the high-end application and the banking application. So this was a big chance to me.

Yes. If we launched the bank application with high technology, then we can be successful. Now you’re one of the biggest lenders in South Korea today for Kakao Bank.

In fact, I think the largest by market size. But deposits and these sort of things are a focus of attention on the world today. How has that engagement layer, you know, the design elements of the app that you’ve created, made it easier for people to manage their money through the app? Yeah, two things.

The one thing is that we are native app. Right. That means we have high technology to make our own application with some high-end engineers.

Yes. So that means convenience is very convenient in terms of UX and UI. The second thing is that we have high-caliber people who have ability to redesign the financial product from the scratch.

Yes. Then that means other competitors are selling the product. But from the scratch, we only focus to solve the problem.

Right. When our users experience some other banking application. So it’s fair to say that the design of the app and the effort you’ve put into UX has been significant.

Like that must represent a large portion of your team. Yes, right. And so in those early days, when you were starting, how did you envisage the bank working and what was your vision for the app? You know, we always think about user-centric way of thinking.

So we only consider this service and this product will be attractive to our users. Only we think about the only users. Every employees think about always users.

So that means we want to give some differentiated product. We call redesign the banking product. So we have a signature of the Kakao Bank product, such as 26 instruments product and group account.

Those are very unique and one and only product among all Korea banks. So the group account is not just family members you can have? Not only family members, but also the friends. Right, right.

Friends and or some certain the community and some or… Yeah, and the couple. Right. Yes.

When they just started to become the couple, then they saved equal money to do the one deposit. You know, this was for MUVEN, this was one of the things that we most got requested was a joint account. Joint account, yes.

Particularly because we had the financial wellness and budgeting, you know, financial behavior tools. And people wanted to manage the household budget through the app. It gave them more visibility, you know.

So obviously, Korea has had some, you know, they’ve been advanced in many of the web-based technologies. We have, of course, Samsung and, you know, other players here that have really, you know, been leaders in smartphone technology. But two things are happening right now.

Apple is about to launch their smart glasses developer kit on June 5th. And we see more use of artificial intelligence in, you know, for voice interactions and so forth. And obviously the large language models.

And how do you think this is going to change banking? And, you know, what are your plans for Kakao Bank? Yes, very good question to ask, you know. Especially on transition period now, the tech drag the industry now. So we always think about when we face this issue, accessibility.

Who’s going to hold accessibility? And this is a very critical issue to every company. Yes. Who are dealing with the customer, retail, special retail customer.

So we’re always ready to give our accessibility to new players, such as Apple. You mentioned in this glasses, you know. And or some other artificial intelligence devices.

So that means we prepared technology to access our own technology to some other big tech companies, you know. I understand. We just accept them.

Yes. Technology agnostic. You’ll use whatever works for you.

Yeah. I’m interested. You know, how is it? How has the success of the bank changed your relationship with Kakao? What does it mean for Kakao more broadly in terms of KakaoTalk and the taxi business and so forth? Okay.

Yeah. We have a different story compared to the WeChat and WeBank you mentioned, because WeChat, they are a software. Yes.

To contain every service on one app. Yes. But KakaoBank, we are independent, different app.

We don’t have any links to KakaoTalk. Okay. Just the brand.

It’s just brand. I see. Some of the KakaoFriends characters, this is a Kakao IP.

That means we have to survive by themselves. Yes. This is a critical issue in the beginning.

But that means we think about context, you know. Our users, if our users have some contact with KakaoTalk through context of communication, not a bank, not money. So we want to separate these contexts from the KakaoTalk communication.

So as you know, 99% of Korean people are using the KakaoTalk. Right, right. But that means they every day use KakaoTalk for communication.

Yes. Not a money, not a bank. Right.

So we just set up the independent application to give some different experience to our users. Only with Kakao brand. I understand.

So give us an update on the progress. Your bank has been profitable since early on, which as a challenger bank, you’re one of the first challenger banks that were profitable globally. We now hear of NewBank and Starling and of course, WeBank is profitable.

But you were probably, you and WeBank, I’m not sure which was first, but you’ve done very well with that. Because a lot of the traditional bankers have been saying, oh, these challenger banks can’t be profitable. But you’re an example of extreme profitability.

You’re very profitable. So give us a little bit of an update on where is Kakao Bank now and what is your plans over the next few years? Yes, yes. You know, we have two different type of monetization model.

The one is a license. That means we can sell loan product. Right.

That means we can leverage a name business. Yes. So you should be profitable.

When we are selling the loan product. So the one is… So lending is very important. Yeah, lending is a pipeline to be profitable now.

The second thing is a platform business. Even though we have our own lending product, we’re selling the other company’s product on Kakao Bank application. Because, you know, we only consider user interfaces.

Whenever our users invite Kakao Bank app, they like to see other 20 or 30 companies’ product or lending on one page. So that’s why we’re selling the other companies, other banks, other credit card loan product on a Kakao Bank application. Interesting.

So you’ve become a bit of an aggregator also. Yes, right. Or marketplace.

Oh, yeah, marketplace. Then we call platform business. Right, exactly.

We want to be platform. It’s in the near future. We want to become number one retail bank and platform to sell every financial product on Kakao Bank application, even though we don’t have any that kind of the product and license.

Even though we have a credit card, we don’t have a credit card license. We are selling the credit card with some other credit card company partners. Right.

Yes. And so the lending business that you have, what’s the average loan size? Is it quite small? No. We have two categories of lending products.

One is a secure loan product. Right. And then we call the credit loan.

Yes. For new one, our market share is over 10%. Right.

Then we just launched the mortgage loan last year. Ah, yes. And since that, now we have secured around 5% of market share now there.

Congratulations on your fantastic performance. Well, Daniel, thank you for sharing us an update of Kakao Bank. As a Neo Bank founder myself, I know how hard it is to do what you’ve done.

And on behalf of all of the fintech people around the world who are struggling to make success, to see the success that you’ve had is fantastic for us. And we can celebrate the fact that you showed the world how a Korean startup can succeed in this space. So congratulations and thank you for your time today.

And thank you for inviting me. And then I want to say hello to your big fan on the podcast. Yeah, really fantastic.

And how can people find out more about Kakao Bank if they’re offshore, outside of Korea? It’s a different type of work. Many people are there enjoying that one. Very good.

Thank you very much, Daniel. Okay, thank you. That’s it for another week of the world’s number one fintech podcast and radio show, Breaking Banks.

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