511 Fintech Visionaries Reimagining The Future of Finance Hot Takes Fintech on Fire

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 back to Breaking Banks. I am your host, Brett King, of course, in our 10th year. This show today is sponsored by our friends at MasterCard.

We’re going to be doing a few segments with MasterCard over the next few months where I spend some time diving into how MasterCard has helped fintech visionaries imagine the future of finance. But tactically, as one of the challenges that fintechs look to in respect to building, launching, growing their own business, it’s important to have strategic partners like MasterCard. Even when I started moving, for example, MasterCard was a key partner for us.

It’s how we got our first bin. Obviously, a lot of the payment processing stuff we worked out, but MasterCard helps with a whole bunch of other areas. Obviously, they’ve got a very strong innovation team globally.

They’ve got tremendous analytics that bring insights, the loyalty and personalization engines and so forth. We can dive into some of those tools and how they are available to help fintechs. We’ve got a great fintech joining us to talk about that.

In a moment, I’m going to introduce them. But first of all, we’re joined by Bronwyn Francis. She’s the SVP, Advisors Business Development at MasterCard.

Bronwyn, welcome to Breaking Banks. Thank you very much, Brett. Great to be here.

I’m delighted to have the opportunity to talk about our partnership with Starling and how we’ve supported them through the various stages of their journey so far. Awesome. Well, you stole my thunder, but that’s fine.

We are bringing back Starling Bank. Of course, we’ve had Anne Bowden on the show a couple of times. Mariam Ogunbambi? Yes.

Ogunbambi, is that right? That’s right. Chief Client Officer at Enjin by Starling. This is the technology arm of Starling Bank.

We’re going to get into this, of course. And Starling Bank, of course, you guys know Starling Bank. It’s Britain’s first digital bank.

It’s profitable. A neo bank, which seems to be something that a lot of bankers get hung up on, the profitability of neos. Starling is doing well there.

It’s a real FinTech success story. They’ve got over three million accounts, four different account types. They service business and retail clients.

But Enjin is the platform that Starling built to power the digital bank. And they’re now offering that to banks globally as a software as a service model. Very similar to the evolution that my own startup, Muvvn, went through.

So it’s my pleasure to welcome you both to the show. Thank you. It’s great to be on the show, Brett.

And I was going to say, you stole my thunder through some of the stuff that I’ve been talking about. You mentioned, but always good to go back and re-emphasize on that. But yeah, great to be on the show and to talk about our partnership with MasterCard and how we’ve grown to launch Enjin.

So looking forward to it. Fantastic. Well, you know, I mean, common experiences.

It’s sort of a weird thing, building a neo bank, you know, building a challenging bank. You know, I have had spent time with Anne talking about the genesis of Starling. But ultimately, many bankers, when they wanted to, you know, many of us who went out to start digital banks, neo banks like Anne, myself, you know, and others, we were driven by this sort of intent that banking could be better.

The digitization was coming. It wasn’t just a fad, obviously, and it was going to change the way we could think about banking. But maybe let’s start with, Miriam, let’s start with a bit of history.

What can you tell us about, you know, the history of Starling and then eventually what led to the creation of Enjin as a separate business? Sure. Yes, I mean, you’ve talked about, you mentioned Anne already, but just to kind of talk through the history, it was founded by Anne Boden. She’s had a 30 year career in banking.

And as you said, you know, Starling was born out of frustration. So she was frustrated with the industry underserving customers. You know, banks were becoming scared of change, encumbered by legacy systems and using sort of regulations as an excuse, really, for failing to meet the changing customer expectations.

So she decided to quit her job and she founded Starling in 2014. And she saw this opportunity for technology to really transform the way people manage their money. She had a clear vision, a clear goal, which was to give people a fairer, smarter and more human alternative to the banks of the past.

And so to deliver on this vision, we sort of built a new generation of mobile first cloud native banking systems from scratch, which is where Enjin comes in. But I’ll talk about that a bit more later. But actually, ultimately, the focus of Starling was really giving our customers the ability to self-serve within the app, unlike traditional banks that provide services through multiple channels, including in-branch.

So fast forward to May 2017, we finally launched our personal current account in the app. And since then, we’ve grown significantly. We’re now scaling, I think you mentioned, we’re now scaling over, we’re now operating over 3.6 million personal accounts, which is about half of the personal current account market in the UK.

And now we have over 500,000 SME accounts. So that’s about a 9.4 percent share of the business market, business banking market in the UK. And so you can imagine in just five years, we’ve managed to achieve more than half of the share market share of Barclays in the UK.

So pretty significant growth for us. I’m sure Barclays is thrilled. You know, this is this is one of the really interesting pieces about the neobanks that have made it and some haven’t, you know, but those that have have broken through that sort of profitability and so forth.

One of the key elements is the ability to acquire customers at scale. And so clearly you guys are demonstrating that, being able to take market share from other big banks. And this has forced many of those big banks to respond, although some of the high street banks are still struggling to respond to this digitisation that’s happening.

And we can talk about why that is, whether it’s policy or legacy thinking or legacy architecture. But, you know, we’ll get into that. Bronwyn, you know, if I get into sort of these early stages of styling, you know, how does Mastercard start out relationships with players like this in respect to, you know, the suite of services or what FinTechs are normally looking for when they come to you? Yeah, sure.

So I think I kind of reflect on the journey with styling and I think, you know, we think about FinTechs and neobanks and very much the focus is initially on gaining market share. But I think what’s really important is making sure that, you know, once there is a portfolio of customers that we’re optimising the performance of that portfolio. And so we’ve done a lot of work with styling around leveraging our portfolio optimiser platform to understand where there are opportunities, I guess, that are part of profitability.

So looking at the overall performance of the card portfolio, making sure that you’re engaging and retaining customers and that will lead to long term profitability and top of wallet behaviour. And so what we’re able to do through platforms like Portfolio Optimiser is look at the cards, you know, spending patterns and make sure that we’re feeding into a lifecycle marketing effort to drive engagement, retention, all of those good things. So and I think we’ve done work around trigger campaigns to identify priority behaviours that styling is looking to drive in particular.

And then, you know, other things which are more, I guess, operational and optimisation focused, so things like chargebacks. You know, this is a key pain point for all of our banking customers. But, you know, we’re able to make sure that we’ve got the best processes in place, understand risk assessment policies, practices, procedures, benchmark against the industry, you know, identify improvement areas.

And ultimately, we want to help styling to increase the win rate, reduce their operating costs, but also create a great customer experience. How does it differ, you know, working with a fintech like styling who are growing very quickly, you know, aggressively, you know, they’re obviously having to use their cash carefully. How does that differ from working from the bigger mainstream banks? So I think the main difference, Brett, is that fintechs move a lot quicker because they just don’t have, you know, the legacy platform.

And I would say that that is the number one difference between, you know, working with one of the bigger, more traditional banks versus working with a fintech. Absolutely. So, Miriam, you know, looking at the teething problems of styling and sort of working through to get to this point of high growth, are there any areas that sort of surprised you that that you guys had to tackle on the way? Or was it more just a matter of sort of trying to get the technology to work and function and dealing with issues that banks do every day, like chargebacks, as an example? Yes, I mean, I think growth growing at the pace that we’ve been growing, it does come with a number of challenges across the organization.

One of the key issues for us was just around how we maintain innovation. So at the point, you know, we’re at a point where banks, as you said, are starting to catch up with with the things that we are, the features that we’re launching. And I think because of that, you know, we need to make sure that we continue to stay innovative.

We believe that we are a disruptor in this industry and we’ve had plenty of firsts as a bank to prove that. And so I think ensuring that, you know, we maintain that innovation as we grow has been quite a key thing and quite interesting for us in terms of some of the issues that we’re trying to, you know, deal with as an organization. So to give you an example, so one of the features that we recently launched, it’s called a hide reference feature.

So this allows customers to hide unwelcome or abusive or offensive messages within a payment reference. Now, no other bank has done this before or even thought of doing this. And this feature came about from us having the ability to listen to our customers and what they need, especially our vulnerable customers, and address that in a timely fashion and timely manner.

And I think the key thing is really about how do we continue to do that, continue to listen to our customers and ensure we’re able to, I guess, address those needs and wants quick enough or quickly enough, should I say. Now, it does surprise me that, you know, more of the incumbents haven’t adopted more of the innovations that the digital pure play players have, you know, even just simple things like being able to turn your debit card off in the app if you misplace it, instead of having to get on the phone and say, I’ve lost it. And, you know, do you want to cancel it? You know, et cetera.

You know, the improvements in the receipt experience, you know, the transactional transactional views, categorization, all of those things, right? Yeah, yeah. But I do want to get into, Bronwyn, you know, you mentioned top of wallet at one point, but it’s really interesting that, you know, these digital banks and a lot of these features are driving more towards wallet experiences than they are traditional, you know, like traditional banking experiences, because there’s more emphasis on that that side of things. But of course, that’s a big part of MasterCard’s business as well, isn’t it now sort of understanding the fact that wallet dynamics are very important to the future of the business? Absolutely.

I mean, I think, you know, I think that the future and I think that’s why, you know, the, you know, the neobanks and many of them have been successful. And, you know, I think about myself, I’m in my own everyday banking, it’s it’s all about wallets. And I think, you know, the market will continue to evolve and absolutely move in that direction.

Here’s an interesting bit of trivia for you guys. The term neobank first appeared in media on Breaking Banks with Dave Birch as our guest. So there you go.

Oh, really? Yeah, a bit of history, a bit of history for you. There you go. Great bit of ocean to know.

Yeah, so jumping into sort of emerging opportunities. Obviously, Enjin is the platform by which, you know, Starling has built out this, you know, world first digital bank. But there’s also something interesting emerging here.

You know, you don’t hear Ann Boden talking about core system very much, you know, whereas you hear a lot of bankers talking about that. You know, FinTech founders generally talk about their tech stack as their platform that gives them the capabilities to do all these things, you know, to to do unconventional approaches to engage in customers, building really interesting experiences that aren’t strictly based on products that used to be distributed through the branch, as example. You know, but how would you describe sort of the core differences in Starling’s Enjin? And then what was the point at which Starling thought, you know what, this this needs to be a business on its own? Sure.

So I think over the years, banks have been coming to Starling to just understand how they could partner with us to replicate some of our magic, or some people say secret sauce in their own countries. And there are remarkable similarities when you start to talk to these different banks in demand across those markets, especially in transaction account banking. So, you know, as I mentioned, and we talked about this before, when Starling when when Starling was founded, you know, Ann wanted to change banking for good.

And Starling has really done that by forcing traditional banks to focus on their customer service, deliver better digital banking experiences and create features that customers actually want. But we can change even more banks and banking experiences if we share our platform. So ultimately, we’re innovating for the customer.

That’s who we’re doing this for, at the end of the day. And that’s why Starling was founded. And a lot of this crosses over into, I guess, why we created Enjin.

So we made the strategic decision to move into the software as a service space. Bearing in mind, we do have a banking as a service at ARM, if you’d like, which still exists within Starling today. But selling our technology, we decided to do this about a year ago, we felt would be a more impactful way to grow in for us to grow internationally.

And, you know, because banks are our focus, whether that’s launching a new product, or migrating to a new system, or a completely new greenfield bank project, you know, we wanted to be able to allow our customers to experience the same thing that Starling has experienced, for example, but in their, you know, respective markets. So our ambition is ultimately, you know, to run a large technology company, which is independent of the bank itself. But I guess coming back to what you were talking about, you know, what is what is different, I guess, about the Enjin technology.

So unlike most established core banking packages, Enjin is modern, it’s cloud native, and it’s a set of sort of independent containerized services. So it’s modular. And it is designed for resilience.

So it’s not just looking to prevent failure, but actively testing the response to faults. So it’s designed to maintain service for customers as far as possible. And we’ve also designed what we call we’ve designed it with the with common sense.

So what we are providing is a single view of the customer, a single interface or single servicing interface, which allow and everything is working in real time. So, you know, for most of our, I guess, traditional counterparts, you have multiple interfaces that you’re having to log into this is one interface, one single view, everything you need to know about the customer. And we found that this is one of the one of the things banks really, really get into is when we when we show them the operational or operational servicing tool, and it should we show them that it’s covers everything that you need to know about the customer.

And there’s no need for you to log into multiple systems that excites them. And it really excites our employees as well. They love that because we’re making their lives easier.

But also, you know, it’s a it’s a fully integrated and fully future proofed platform. So compared to, you know, rival cloud native offerings, Enjin is already the most complete. So we’re supporting retail and business current accounts, we’re supporting multiple currencies, savings, products, loan products, credit cards, and card processing, call center functionality, fraud, and you know, some of the features of Starlink has like, like spaces, for example.

And in addition to that, you know, we are providing, you know, speed to market at lower risk. So with Enjin, you don’t have to, you know, purchase multiple products and spend time kind of stitching them together. You know, you can just launch with a breadth of available features that we have.

And, you know, we can set up a new, I guess, software as a service environment in a matter of weeks, right, or even days, depending on, you know, what you’re looking to do. So it just, the platform enables significantly lower risk for core banking implementations and replacement programs. So you can, and we also offer a reference app that, you know, with prebuilt journeys, so customers can choose to build and manage their own mobile apps, or they can, they can, you know, use our reference apps as an accelerator, again, you know, providing quicker time to market.

So I think that’s kind of what gives Enjin the platform the advantage over others. I get that. Bronwyn, in respect to working with, you know, a player like Enjin, you know, obviously, there’s a lot of technology Mastercard is trialling in these areas.

So, you know, clearly, you’re able to roll out new stuff on platforms like Enjin more frequently than they are with traditional banks who have many years of planning before they can implement changes to their technology stack. So how does that push Mastercard to be a better technical partner? So I think, I guess, firstly, just to kind of echo some of what Mariam said, what we’re starting to see is some of the more traditional banks are also, you know, trying to play in this space as well. And I think it’s extremely difficult for them, right, because they’ve got very fragmented platforms.

Mariam talked about having that kind of single view. And that, you know, in many of the big banks, it’s virtually impossible, because there’s so many different platforms. They, you know, they don’t speak to each other.

And it’s very old architecture, and so very costly to, you know, to provide that kind of service. So I think it definitely puts, you know, the neobanks in a significant advantage to be able to provide that type of service and to do it very well. And, you know, we support our customers in terms of, in many different ways, if we look at, I guess, you know, banking as a service, it’s, I get, you know, from kind of helping them build the architecture, feeding in data from Mastercard that may be required.

But finding partners, because sometimes, you know, a bank can’t do it all themselves. And actually, they need to partner with somebody else that, you know, invest or acquire another organisation to provide a complete service. So we’re playing, you know, many different roles in that journey.

But it’s definitely a space that we’re doing more and more work in. I understand. Now, Miriam, you know, you’ve not built this, you’ve built Enjin, but, you know, one of the hallmarks of Starlink’s success is that you guys were quite open to different types of technologies, you partner with other fintechs, you partner with other, you know, parts of the banking ecosystem.

And so how do you go through that process of, you know, in the past, how have you gone through selecting those different components that you put into the Enjin platform? Yeah, that’s a good question. I think, at the start, I mean, our strategy was always that we would build in house. But, you know, practically and pragmatically, that is impossible, especially when you’re, you’re working to tight timescales, and you’re trying to launch something in a constrained set of times.

So in the early days, or the former days, a lot of the things that we went live with, we had to do to go live with partners. So, for example, just taking card processing as an example, we had to go with a partner for card processing, that’s now in house. But we started off with a partner for that, in order to be able to launch cards.

And I think the key thing, you know, when you’re looking for partners is just about being open to, you know, having a transparent, open relationship discussion about our needs, your, you know, how we can work together, you know, what’s, what’s important, what we’re what we as a business are trying to achieve, and how that partner can help us achieve that, as well. That’s quite, it’s quite key to have a mutual understanding. Yeah, what it is, you know, we’re trying to achieve.

No, I think that I think that cultural element is very important. You know, I mean, you guys are obviously working with other FinTechs, you’re working with, you know, infrastructure players like MasterCard. But you’re also working with many banks now, as you’ve said, these banks come and approach you, and so forth.

And, you know, how does the culture fit in respect to being able to, you know, basically come together in these partnerships and be effective? Now, what do you look for in a banking part, you know, a bank client, you know, for example, that wants to work with InGen? Well, I mean, one of the key things is that real ambition and motivation for change, right? So, you know, there needs to be a real driver to want to change. A lot of banks talk about it, a lot of banks say they want to do, you know, they want to do that. But we already know that they’re, they’re constrained by legacy systems.

And so it makes it really difficult for them to do this. And in some cases, they sort of leave that for their successor. But I think for us, a really important thing is making sure that they are, you know, they have that they are ready to embrace change and willing to learn from, from us, and learn from, you know, their mistakes.

I think it’s important that that agility also comes into play. So I think a lot of banks want everything at once. And our view is that actually you launch in an iterative way, right? So that you can learn and improve as you go along, which is what we’ve what Starling and I guess, But again, that that’s, that’s part of what you can teach as a FinTech, right? Because that’s how you have to build the business, you know, you can’t do everything at once, you don’t have the budget or the people for it.

So, but it’s also a way for you to get stuff out very quickly. So when you start operationalising with these banks and engine, you know, you are now deploying, what are the sort of things that people are looking to launch on on the engine platform that they haven’t been able to do with their traditional stack? So I mean, I think the, the key thing is how quickly they can launch. We have, as I’ve talked about the accelerators, we have, you know, a fully integrated module that, you know, bank in a box that they can just choose from it and go live with cloud native very quickly.

But it can be anything, to be honest, you know, anything from wanting to just launch a fully digital transaction account, for example, you know, I think it’s quite hard for a lot of banks to to really go digital only, you know, there’s the they, I think there’s this element that you need to have a branch to service customers, it’s important to have a branch, but actually, we’ve proven that you can launch a digital banking app and be successful. So, so it can be anything from that, from launching just, you know, that product, to specific features that they’ve seen in the styling app that, you know, they know that our customers love, and they want to replicate that in their market. So things like spaces, for example, you know, we’ve got, it’s kind of a savings pot, as you, you could call it, where you can put money in ring fenced from your main account, for example.

And you can also pay bills from that ring fenced pot of money. You can, you know, there’s just so many different things that, you know, our banks look for. It’s literally about we tell them, it’s really about adopting and not adapting.

So adopt what styling has today, but through the engine platform, and a lot of banks want that. So so that’s what they’re looking for from us. Yeah, I mean, I think that’s a very important part of this understanding is, is that the neobanks and the fintechs that have sort of pioneered these things, like smarty pig, who pioneered something very similar to spaces back in 2011, 2012 timeframe, as an example, you know, these, you know, even look at buy now pay later, innovations and things like that, a lot of a lot of that has come out of, you know, when we talk about the app patterns, of course, mobile app design that that’s strongly been influenced by by fintechs.

And so that says a lot about the innovative culture in respect to, you know, the need for a platform like engine. But are you are you finding banks coming to you with things that they’d like to do that push styling and engine further as well? Well, yes. So I mean, the banks that we when we’re talking to these banks, they want a lot of things.

And because they, you know, we have a platform that is really flexible, a technology that can allow them to do things that they might not necessarily do with their existing platform. So they they ask for the world. And I think, you know, it’s really, it’s really about having that initial conversation about what we can launch first.

And then we build on that. So yes, we’ve had some some feedback on things that they would like that maybe the platform does not yet support, which then goes on our roadmap. And that is a discussion that we have about it being on the roadmap.

And yes, we will make that available. And and the key thing is that whatever we are building or, or adding to the platform should benefit styling as well as all other clients. Yeah, it’s really important that that is the case.

Because it is this is a, you know, software as a service platform that we’re offering. Not a platform that is highly customisable, which again, can cause all our all other complexities. And that’s something that banks deal with, with their legacy systems, it’s highly customised.

So it’s very difficult to change. That’s not what we’re offering, we’re offering a SaaS platform that, you know, is pre integrated with all the components that you need. And yes, there might be a few things that some banks need that we may need to add on to the roadmap, which which we have a conversation about, we will do.

Mariam, you talked about kind of, you know, talking to banks about which service they they launch first, is there a is there a favourite or a kind of theme of services that you’re seeing? Or is it quite mixed? To be honest, it’s actually, if you’re asking if we have a favourite as an engine, I can tell you that. But it has been from from the clients that we’ve been speaking to, there has been a mix, you know, kind of sort of half and half between greenfield versus a replatform or migration. But but for us, the the easiest in terms of engine launching is a greenfield proposition, because that’s a new proposition.

It’s easier to go to market really quickly. And so like a digital, pure, pure digital. Yeah, exactly.

And so there are, you know, when you think when you think about migration, for example, that comes with its own sets of complexities. Yeah. And, you know, when you’re dealing with data, you’re dealing with customer accounts, there’s a there’s a lot around that, that can make, you know, the project, you know, a little bit challenging, not that it can be successful, but it’s also challenging.

Whereas with the greenfield project, you know, it’s sort of a bit easier, if you’d like to launch. Thanks. And Bronwyn, I do want to come back to to something in terms of these, these partnerships and so forth.

Obviously, you know, you are dealing with lots of different types of partnerships at MasterCard. But one of the things that is clear to me as a, you know, as a as a fintech founder, you know, as well as a commentator on the industry, is that the engagement, when banks are engaging with fintech, as an example, and I want to know the same from MasterCard, there’s been an incredible change in terms of the way partnerships with fintechs develop from a business and legal perspective with a bank. You know, if you look back at the early days, when we started fintech, you know, as a fintech partnering with banks, we get these 80 page supplier contracts that were templates from their deal they’d done with IBM or Oracle or something like this.

And the procurement team was the gatekeeper of the relationship. And, you know, the business and technical issues sort of came secondarily, you know, I don’t want to get into specific clients, but I’ll give you one of our first banks that we partnered with at Movin. It took us three months to build the tech that was, you know, contracted as part of this relationship that we were going down.

But it took us nine months to get the contracts and the legal aspects sorted out. So how has that changed having to absorb these fintech partners? ships more effectively? I think, um, I guess, from a MasterCard perspective, we, I’d like to think that we’ve become a lot more agile when it when it comes to, you know, onboarding new members. And in fact, we’ve, we’ve launched a program, originally in the US, but it’s also gone live in the UK now, which is which is called fintech success.

And it’s very much about, you know, making sure that we’re that we, we onboard fintech partners in a, in a quick, agile way, and very much help them in those early days around, you know, what do they need to think about? So, you know, what should their go to market look like? What should their retention planning look like? How do they manage fraud and risk? And then, you know, from those kind of early stages to, to looking at future growth, and how do we help them to increase profitability? So, I mean, we’ve got, as you would be aware of a fairly significant market share of the neobanks and fintechs in in the UK. And I think we’ve learned a lot, you know, over the last kind of eight years in particular, around how we onboard quickly, you know, get get partners up and running quickly, and then continue to help them to to build strong, profitable businesses. I’d like to just add to that, just in terms of from from Starling’s perspective, and when we started out, you know, MasterCard, from the get go, had always believed in us, you know, even when others in the industry were doubtful about our prospects of success.

And I think that was one of the reasons why our partnership with MasterCard has worked so well, because we’ve established a successful and collaborative partnership based on mutual trust throughout, you know, I guess, the time we spent with with MasterCard. So, and it was getting onboarded by MasterCard, even in those early days, you know, was quite a smooth process, I would say, for us. And the the how the relationship has been managed over time, as well has also been really good to see, you know, they’re always putting things in front of us that are aligned with us as a brand, you know, strategic from a strategic perspective, we’re also aligned, just in terms of sustainability.

So one of the things that we launched, was we were the first UK bank actually to launch the recycled PVC cards, again, the supported MasterCard. We were the first bank to launch what we call connected cards during the pandemic, which allowed vulnerable customers to give their cards to a neighbor or family or someone, you know, because they couldn’t go out and do shopping for themselves. And a lot of banks copied us after that.

And again, with the support of MasterCard. So a lot of the products that we’ve launched at Starling, you know, card products, you know, has been through the support of MasterCard and how quickly and agile they are, which again, just helps us as a bank and has helped us grow. So now we’re looking at 16 billion pounds in terms of card transactions.

And that was and that’s growing. So it’s been really great to see and work with them. Great.

Well, just to wrap up, Miriam, you know, what’s what’s next for Enjin? And, you know, what’s, what’s it look like for the next 12 months or so? I mean, I think now we are just in just really engaged in launching with clients across multiple jurisdictions. So that’s, that’s what that’s our focus right now. We’re working with a number of clients at the moment.

And I think the key thing is, is just going live and being able to, to talk about these clients that are being powered by Enjin. That’s our focus. Well, we hope that when you do have some, some things to announce in terms of launches, that you’ll be able to tell us a bit more about those clients.

But thank you for joining us on Breaking Banks today. Where can people find out more about Enjin by Starling? We’ve got a website. So find us on the website.

Thank you. They can find us on LinkedIn. I think that’s the only social we have actually is LinkedIn.

And yes, the website. So hopefully. And Bronwyn, what about from the Mastercard side? You know, if I’m a fintech looking to partner with Mastercard, where should I start looking? Again, there’s lots of information on the website.

Very good. Well, thank you. Thank you both for joining us.

Miriam, please pass on my regards to Anne. I know she’s in the process of relinquishing the CEO role or the chairman role rather. But, you know, I wish her all the best and the team at Starling.

And this sounds like an excellent innovation. Thanks for joining us. Thank you for having me.

Thank you. Thank you, Bronwyn, for joining us as well. Thank you very much.

Great discussion. And we’re very excited about our ongoing partnership and supporting you in the next phase of your journey. It’s interesting.

I remember, I think it was 2014 back when Starling launched and Anne Boden said, you know, that everyone was saying to her that no one ever starts a bank, no one ever wins market share and you’ll definitely never make a profit. And I think, you know, Starling has absolutely proved everybody wrong and you’ve succeeded in disrupting an entire industry. So, yeah, as Brett said at the beginning, it’s been a real success story.

Well, now there are a bunch of them. So, banks can no longer say that, right? So, but thank you for joining us. So, thank you to the team at Starling and Mastercard for joining us today.

We’re just going to take a quick break and we’ll be back with some more breaking banks after these words from our sponsors. Alloylabs.com. Alloylabs. Banking Unbound.

Well, welcome to the spiciest session that is going to take place here. It also features the hottest sauce and the hottest participants. They paid me to say that, just in case you’re wondering.

If you’ve seen the series Hot Ones, you know exactly where this is going. Now, I want to be perfectly clear, they’re not faking it on what’s going on up here. And they also had to sign medical waivers, so I am in the clear.

It is also not a panel. We’re going to workshop some ideas. We’re going to throw some stuff out.

We’re going to discuss, but it might not have a clean ending. So, hopefully, we evoke some emotions, maybe some sweat, maybe bleeding from the nose. We’ll see where it goes.

These are custom hot sauces. Some will be available later. We’re going to save time for Q&A.

Just be warned, if you want to partake in a hot conversation, there’s a price to pay. All right, with that, our first eater, Mary Winooski, longtime friend, editor-at-large at Cornerstone Advisors, longtime journalist in the space. Now, Mary and I are both from the Upper Midwest, which means we are at a severe disadvantage here.

For many reasons. And I asked Mary, I’m like, tell me your engagement with spice. She goes, my family didn’t use salt.

I’m like, what? She’s like, yeah, I ate cookies. That was what I thought, the flavor profile. When I went to college, my world was changed when I discovered salt.

Mary’s a natural here. It’ll be great. Now, contrast that with Nef Hudson, joining us, recently retired from USAA.

You’ve seen him on this stage before. Now has started a consulting firm, Castle Hill Partners. Now, Nef, being with USAA, has resided in San Antonio for over 20 years, which then surprised me.

He goes, I’m doing this with some trepidation. He goes, because what I’ve learned in my time in Texas, there are three stages of spice. The first one really hits the mouth, the nose, and the eyes, right? Then the stage two hits the stomach, and well, stage three doesn’t develop for a day or two, depending on the digestive system.

So I’m a little bit nervous about this. It’ll be fine. You’ll be on a plane before it happens.

All right. And last, but not least, the iron stomach himself, Wes Tubble. Now, this is a little bit unfair.

Not only is Wes the CTO of MX, prior to that was it PayPal. When Jessica and Tom said, we have the perfect participant, because it turns out, by the way, Jim Baggett hates wings and hates hot sauce. They’re like, Wes will do it.

Wes is from New Mexico. Not fair. And so as he describes it, he goes, they start you on spice at an early age, including the rumor they put green chili in your baby bottle.

So look for this guy not to sweat at all. All right. With that, let’s get this party started.

And if you all want to look on the far left here. Hold on. Hold on.

Hold on. This does not look hot enough. I’m sorry, guys.

I’m really sorry. So I’m pleased to introduce you. I had a gin yesterday.

Gin McGats. I’m building out my marketing presence. I know my own hot sauce.

McGats. That’s spicy. Is that stage one, stage two or stage three spicy? We’ll find out.

All right. Good luck. Thank you.

Good luck to you all who are in the audience afterwards. So thank you. I kind of feel like that moment in like, you know, wrestling when suddenly out of the audience, someone runs down to take you by surprise.

I’m like, oh, wasn’t expecting that. Everyone drinks and reaches for beverages. Well, why don’t we start with the insights on fire hot sauce, which is on the lower caliber here.

So we’re using these bibs or not? Well, they’re going to cover your mic. So maybe the dabbing. I just want to make sure.

It was the tension between over ear. How do you eat a wing with? How do you protect your nice white shirt? Got it. OK.

All right. White shirts going down. So, I mean, maybe this is a little bit spicy on the A.I. side, but I’ll start us off and then take a bite of this.

Generative A.I. burst onto the scene and suddenly all of the deals we were seeing were like, we’re A.I. for this, we’re A.I. for that. We’re the A.I. of Uber and the Uber of A.I. What? I don’t understand. But then it like suddenly everyone went from generative A.I. is used for everything to like kind of disappeared.

Not disappeared entirely. There’s still good stuff happening. But is this a flash in the pan? Call it like the hot burst that goes away.

Or is it just going to take longer to mature? Wes? So it’s not a flash in the pan. I mean, it is here to stay. But we have to get it from being basically a parlor trick today, which is what I was using before, like chat GPT, check this out what I had chat GPT do, to something that’s super powerful.

But the way we get there is by solving a lot of the challenges and problems we have today around the data that goes into it. Indirect and direct prompt injection. There’s a lot of things that have to be fixed and solved for this to be incredibly useful.

And this could be a long journey before you get there. So I think it’s here to stay. But the reason it kind of blew up is because it was like nobody knew what to do with it except for punch a bunch of cool stuff in there and read it out to somebody.

Or use it for their essays for school, which they should not be doing. So don’t let your kids do that. Or their emails.

Or their emails to clients. Or their emails to clients. Mary, build on that because you’ve been covering this extensively for Cornerstone.

Well, I guess I wouldn’t. I don’t think it’s disappeared at all. Like in terms of like companies marketing it.

It’s definitely like, yes, we want to talk about this. We want to push this out. But to your point, yeah, definitely.

I mean, the speaker earlier, the academic person was talking about how like, you know, we’re only in baby stages. So I think that’s where we are. But I only expect to see ever more of it.

I think ever more. But I’m still, the flash I’m struggling with, the really cool AI stuff we’re seeing, like the power of some of the chat bots and what people were doing before the flash, still seems to have the most actual business impact. As opposed to the GPT for everything, right? Maybe it’s because you ended up with a bunch of posers where everyone got in.

Now, USA, you guys have been playing around with AI and chat and AI intersecting chat forever. Yeah, my former employer is still busily working on that. But, you know, we deployed our first chat bot probably 10 years back.

And the problem was it’s a dumb chat bot and it’s physically scripted, right? Everything has to be entered in by some poor analyst who went through reams of data to get there. But there was actually, I would disagree sort of on the premise that there’s been a lull because there was a sneak attack, a signal of fire that went out about two weeks ago that I don’t think anyone’s talked about. I don’t usually name names at a conference, but Intuit announced GenOS and announced that they have built an intelligent assistant that works across all their products.

And that should scare the absolute crap out of everybody in this room because those guys are a really well-run, well-funded technology scale that runs with 100 million or so customers, I think, across the landscape. And imagine never having to do your taxes again because you’ve got this TurboTax assistant running underneath compiling everything that you need as the year goes on. Imagine the same power being on Mint.

Imagine the same power being on Credit Karma. And you’ll see the predicament that we’re in. And that was a real act of will by Intuit.

They fired 1,000 people two years ago and hired nothing but data engineers and people that literally rewrote the code base. So they were working on their own operating system that is now a smart operating system. And I don’t know that there’s anyone in this audience that has it.

My former employer was in the stages of building that, but it’s going to take a while, I think, for the industry to catch up with that. These guys have laid down a marker that we should be paying attention to. So just… I don’t know who’s going to want to jump in.

I’m going to throw out the question, then I’m trying the Magatz that’s spicy, and you can all gauge whether I fall on the floor, whether you want to open yours or not. This is really good, by the way. Not spicy at all.

Yeah, the first one’s kind of entry-level. We want to make sure Mary doesn’t flee the stitch. It’d be a shame if we were down to… I skipped lunch, so if I pig out, I’m sorry, guys.

Tastes really good. So we talk about AI really in the front end and the back office. So the things we were seeing being pitched to us, it’s like that ability to interface and see cash flows or to chat and do things.

Or on the back end, if you have an LOS for using AI to reach under-reached consumers, don’t send me your deal, I’m done. But where I’m curious, from each of your perspectives, I think AI fundamentally changes how banks need to think. Banks and all FIs need to think about their strategy.

Not just the interface, but the strategy. So from the tactical level to the strategic level. And to let Nav finish his bite, Mary, we start with you.

How does it impact strategy? Well, I mean, everyone’s just learning how to use it and what to use it for. So I know a handful of months ago, I was talking to a credit union that was using a chatbot tool, presumably not to replace people, but saying they wouldn’t have been able to hire people. So it was like stepping in for that function.

And will that be the case going forward? I would say no, probably not. I would think that it would be replacing people. So I don’t know.

Jason, I don’t know how I feel about this all. The McGats has a nice spice, by the way. A little bit of glisten here, but well done.

Now, build again for a second on what you were describing, because I think the idea of an OS that crosses everything you do really is a strategic decision. Because FIs have not historically done a great job of saying, let’s break down the silos. Yeah, I’m reflecting on something that Microsoft CTO said maybe three, four months ago.

And the challenge that’s facing the software industry is that they’ve built all these dumb applications. They don’t learn, right? The applications don’t learn from the user inputs or whatever. And so the work of the work for the tech industry over the course of the next 10 years is to actually rewrite all these apps and make them smart.

And what’s really crazy is that’s where generative AI is going to have a huge impact, because it’ll code for you. And I urge you all, try it if you haven’t, because it is incredibly powerful when you can instruct a machine to produce code as opposed to have to do the code yourself. It saves a ton of time.

And so when you think about the advantages that you have or the disadvantages that we have in all our legacy architecture and the problems we’ve already had migrating to the cloud, I think less than 20% of the industry at this point is over 50% in the cloud. So the pace of innovation in the banking industry is glacial compared to the pace of innovation among our competitors. And I don’t worry about the big four so much.

I worry a lot about the big four tech companies, because they have trust, which is the number one thing that you sell as a bank. And they’re going to develop safety, which is the second thing that you sell as a bank. And convenience, forget it.

Convenience is already out there. So the main competitive advantages we had in the consumer market have already dissipated. And they’re going to actually dissipate even more quickly because of what’s going on.

You bring up a really interesting point that I find personally interesting. If you look at the pace with which AI came onto the scene, particularly generative AI and LLMs, each successive wave of these technologies we’re adopting seems to be going faster and faster. And to your point, F, about the glacial pace, it doesn’t feel like our glacier is moving any faster.

Five-year backlog. How many people have a five-year backlog? I know I left a five-year backlog. So I think I heard it on another speech.

That’s the problem. Mr. West, how do you address it? By the way, while you’re doing that, I’m going to open the AP I can’t even podcast. So is it bad that I got a head start? Nope.

I think you’re going to see a lot of disruption because there are companies that are moving at a glacial pace. And there are companies that will come out of nowhere and disrupt those companies. But I think we can’t ignore the fact that the data is going to be very challenging.

This morning I woke up early and I decided to get on ChatGPT with a specific purpose in mind. So there’s a myth out there, the movie Singing in the Rain, that they use milk for the rain. And it’s a myth.

It’s been debunked that they didn’t actually use milk. But I decided to ask ChatGPT about that. And so I said, how do they make the rain show up in the film, in the movie Singing in the Rain? And the reason they say there’s milk in it is so you can actually see it.

So ChatGPT says, in the movie Singing in the Rain, the rain was created on film using a mixture of water and milk to make the raindrops more visible on camera. Yes, we have a ranch boy. Ranch.

Matt, I’m in the middle of reading something. Do you mind? Just keep reading. These sales guys, they always, anytime an engineer talks, a sales guy comes in.

I have something to add. I don’t want any ranch. Okay, so ChatGPT, so here’s ChatGPT saying, and this is a benign thing.

I mean, they didn’t use milk. ChatGPT is saying they use milk. And what’s important about that is ChatGPT is just basically taking inputs in the data and the prompts that it gets.

If that data isn’t correct, and ChatGPT is telling me they use milk, but they didn’t, imagine making lending decisions. Imagine making, like, any kind of decision you’re going to make in an automated way, that data better be good. And so there will be disruptors in this space, but the challenge is going to be, what do you do about data validation? What do you do about user validation? How do you ensure that the data is secure? And how do you ensure that the answers you’re getting back are accurate? Well, Mary and I talked about this as it relates to content, right? The idea of an LLM kind of gives you this reversion to the mean.

So if you want to churn out mediocre blog posts, but it’s the next most expected phrase to come out, ChatGPT and LLMs are great to use. But if you actually want insightful things, it still requires people like us, at least for the foreseeable future. Yeah, but to that point, Theo Lau told me that she had searched one of my old articles that I wrote, and ChatGPT was claiming it wrote it, and then it hadn’t.

So I find that really, really alarming. She took that personally. I took it personally, but yeah, right now, there needs to be creative content people, because everyone’s ending up with the same generic answers.

False answers. One of the spicier pieces you’ve written lately is one of my favorites. Well, not about your dating life, that was also spicy in the LA Times, which I highly recommend.

Thank you. Is it a bank? Yes. Give us the too-long, couldn’t-chat-GPT-it-later version of what does it mean? What was your thesis around is it a bank? You mean the NPR? Yeah.

Okay, so I was on an NPR podcast where the premise was like, is it a bank? And so, you know, it’s throwing out Starbucks, throwing out like, I don’t think, was Apple mentioned? I can’t even remember. But like the names you would think of, you know, everyday consumer-like thinking, is this a bank? But like, my premise is, people don’t think about it that way, especially like younger people. Like you have, your money is put in something like Venmo, and like you’re not thinking, is this a bank? You’re just like, oh, thank goodness, I put something somewhere.

Well, I’m curious in the audience, how many of you care if it’s actually a bank? As every bank raises its hand. I mean, Wes, do you care? Like, walk us through kind of your stack. You know, I don’t, but I’m also, I tend to be less risk-averse.

I mean, I won’t put like, well, you know, a bunch of money in something that isn’t a bank. And so, but I’m willing to take a chance on things that aren’t necessarily a bank. But I don’t think that’s necessarily the case.

I mean, our data shows that it was like something 64% of individuals believe more in just the trust. They care more about the trust of the institution that they’re banking with than any of the features and functionality that they get. So they really do care that it’s a bank or an institution at this point, because that’s essentially the core of where people have their finances.

I guess personally, who banks at Amazon a lot, because the number of returns we do, we probably have an average higher balance in Amazon than we do in our checking account. I do trust Amazon, right? It’s not just about the startup. The heat is working up for now.

I got a little bit ahead. By the way, the API, I can’t, the API can’t even. I definitely over-sauced it.

If anyone in the front row can see, I’m steaming up my glasses at the moment. It’s quite nice. My sinuses are clear.

I’ll hold off on the fourth, though. When we think about what is the value proposition of a bank, and we need to become fast and easy. Well, guess who’s fast and easy at things is Amazon, right? Go to the UPS store, go return something, shows up in my balance.

I go re-spend the money a little bit later. I think one of the biggest challenges I have is, as FIs, we think of the world in this lens of what it’s meant to be an incumbent. In the future, especially as we lean towards embeddedness, fast and easy means the transaction is part of a bigger story.

Yeah, it is. And then Cornerstone had research from Ron earlier this year that it was showing that a lot of the new checking accounts were being opened up on time, PayPal, that sort of thing. And not at traditional banks.

Like at a pace of, I think, 64% were skewing away from traditional FIs. Something high. I don’t remember the exact number.

I think it was probably 64. Yeah, it was high. But then on the other hand, you have the other side of people who signed up with an account because that was their parents’ account, or it was nearby their college.

And then you just don’t drop it. You just add on. You’re like, here’s this, and then here’s like seven more.

Nefty, in your new consultancy, you get a call from a big brand, trusted brand, solving for Wes’s idea here. Would you advise them to become a bank? I think we have to rethink what being a bank means. I remember 10 years ago, it was very popular and provocative to say that banks were going to become dumb pipes.

Fast forward 10 years, we’ve made some progress on the data side. We’re still sort of dumb pipes. And the vision seems to be to make the pipes smart.

We’re going to compete because we’re going to have smart pipes. Well, I think that reflects the regulatory overhang and the safety aspect that we bring to the table, which is we ensure compliance, whether that be with federal laws, state laws, and we protect your assets. Those are different than just dumb pipes.

And the threats that we’re facing now in those two areas are very different than what a smart pipe would be able to accomplish. So I think the only thing that a bank is to a consumer is, is it insured or not? Does it have the FDIC coverage? And if you read the survey data, half of us are worried about the safety of our banks. 50%? That was the Gallup poll that I saw.

Very similar to the 2000, which I’ll get my crisis years screwed up. 2008? Right around that same level. So your customers are very worried about the safety of their money.

And we all sort of pooh-poohed the SVB collapse. That was the best bank in the business, guys, for small business and startups. Best bank in the business.

Did they have any customer loyalty when they were getting kicked? What happened there? So we’re thinking, okay, we’ve got a whole bunch of granular deposits. We can’t have a run like that because we’ve got such a broad consumer base. Whistling in the graveyard, guys.

We have to really double down on safety, we have to double down on convenience, but more importantly, we’ve got to care about our customers more, and maybe care about our profits a little bit less. And that’s why credit unions, I think, will probably compete pretty well in what I’m sure is going to be another contraction in our market over the next five to ten years. Well, two things on that.

One of the best quotes I’ve ever heard, former president of a bank went on to become CEO of a credit union, and this is how he described it. If you talk to the CEO of a credit union, they will not shut up about their members. If you talk to the CEO of a community bank, they will not shut up about their balance sheet.

Which I think is actually pretty accurate in terms of how you think about community banks in particular, and by community I mean from the very small, even up to the super regionals, is they tend to be profit first in both what their shareholders, what their balance sheets are going to look like, and I think that’s going to be a harder place. In a rising interest rate environment, with compression, even though rates are higher, NIM is getting compressed, right now they need to think about new ways to compete. I just realized we should have toothpicks.

Next year, toothpicks. You won’t sit in the front row then. But randomly, one out of every ten toothpicks has something really spicy on it.

A little bit of a Hunger Games thing. Well, let me throw this out, not to be Debbie Downer on it. Are we going to face a mass extinction event of financial institutions? 4,000 today? 2,000 in 10 years? Isn’t that the Brett King prognosis? 50% drop.

My math is better. I think it’s going to happen faster. But I think there’s also, back to is it a bank, I think what we’re going to need to see is banks are going to need to become very different things and become intentional about what they choose to be.

So I can think of one bank has already chosen, they’re not going to be dumb pipes, they’re going to be smart pipes with really good compliance as a service on top of it, but they’re not going to be cut. Which one did you have? I went to the final. The M-Extreme.

Which one was the final? M-Extreme. Wait, I already had that one. I already had that one? You already did the hardest? You’re going the wrong direction.

You can’t just use bank as one size fits all. From a regulatory stance, we need to get away from saying FinTech. What do we mean? I do origination or I’m doing baths.

We just say it’s FinTech or it’s credit union or it’s bank. So there are going to be some banks that choose to be rails and service providers. There are going to be some that choose to be community banks but redefine what it means.

What’s Ron’s term about the community bank thing the hot sauce is taking over? Community driven bank something. Where community doesn’t mean geography. They’re a special niche that I can serve.

Disclosure and investor. Totem is a bank for Native Americans. Why? Turns out an astounding percentage of Native Americans don’t access the benefits that they should be able to because their bank knows nothing about how do I actually go get a mortgage leveraging that service.

It just doesn’t exist. So there’s those kinds of banks. If I think of the big banks, they’re going to become the Costco, Walmarts of the world.

Since someone’s going to have to choose what does it mean to be the target of the banking world? Am I far off? I challenge you on that because especially it happening faster. I mean if you look at the piles and piles of regulation that happen those don’t just come from nowhere. Those come from usually events that occur where there was something that was not regulated and the consumers ended up getting impacted because of that.

And so if you strip away all of that now you can argue whether it’s overregulated or not but if you strip that all away and there aren’t banks anymore then you’re swinging the pendulum all the way to the other side and saying there’s no consumer protection whatsoever. So I think it just comes down to what do you define as a bank? I think most people would say how do you define a bank? Because I know at PayPal the whole time we were like should we be a bank? No we should not be a bank. Oh my gosh are you crazy? Because of the regulation.

I think that’s the niche that some banks should go choose which is we’re going to be a bank that for a PayPal of the world or a big brand if you want to get in and provide banking services we’re really good at that compliance level but we’re done with actually being a commercial lender and having branches you walk into or anything consumer. So you’re saying a bank in the traditional form of like there’s okay I got you. Because when I think of a bank I first think of okay there’s regulations there’s compliance aspects of it.

That will always have to be there. That will always be there and I think if you say that is my unique competitive advantage instead of my relationship with my customer I’m really good at compliance I’m going to actually develop a new muscle which is extending that compliance to others. Note the three of us are all sweating and Nerea glistened over with Wes.

Could be the life. I mean I want to leave time for Q&A so why don’t we go to spiciest take for everyone and I’m going to upgrade. I just finished the these data are hot which I highly recommend it’s the right level of hot without overwhelming.

I think the API was actually hotter and I’m dreading the M extreme a little bit. It’s not bad. It’s pretty tasty actually.

Mary you want to start since you just got to wash down the spice. What’s the spiciest take you want to leave people with before Q&A. I’m changing my mind right now.

The themes of this conference to me standing out financial health empathy and you know also there’s always a focus on getting the younger customer but I think you know I blogged on this a little bit ago but like I think older adults are next gen type of customer and I think you know a lot of banks have them as customers but there’s even a new neobank called Charlie that’s focused on the over 62 and I find it super interesting as an idea and it’s very early stage so not all the features are quite there yet but like you know a lot of older people are like overdrafting to pay for their like prescriptions and so it’s just like this massive problem which means there’s a massive opportunity. Yeah I think we’re I think as an industry we’re in a lot of trouble and I think that I’m a little bit I suffer from some PTSD because I was a journalist in a previous life and I thought I would wind up as a columnist somewhere like we all did and you know thank God I got interested in technology when I did because it led to a much more interesting and great career but that said there are some similarities when the first thing that really hit the newspaper industry was a loss of classified ad revenue and that was enough to really wipe out the profit margin for most of the industry right off the bat and so that was followed by predictable rounds of cost-cutting and reinvention and then it became fodder for private equity and you know essentially as journalists we all thought that you know we were indispensable that our information was critical that people would always pay for it and that there was nothing more reliable than a newspaper hitting your doorstep. Okay so how many of us would start a bank today? Would you start it with the apparatus that you have? With the infrastructure that you have? With the organizations that you have? Really we’re in the risk management business and the amount of risk that we’re managing is shrinking right? Payments, that pool of risk that we’re shrinking is shrinking there.

The loan, loans, loan lending and loans are going to be probably a really hard target for a lot of folks so banks will have an advantage there for a while but I can see centers of gravity in the banking industry and when you lose two or three of them okay then you got real problems. So I really hope and I hope to be part of a change that you know continues this incredible banking tradition we have in the U.S. which I think has been a cornerstone you know to our ability to develop as a nation and you know when I think of small business being you know the kind of entities that typically bring us out of really poor economic times you know I think there’s a real opportunity but we still have we’ve neglected the small business segment you know brutally over the years that should be completely digital at this point for those guys and who’s closest to providing that solution? The guys I talked about at the beginning into it right? So there’s an awful lot and if we’re just going to make money off credit cards and we’re just going to make money off loaning money to rich people okay there’s not going to be many of us right? And credit cards what? That’s all about points and spend. So what’s great about this conference and I’ll wrap is there’s a deeper philosophy here Ryan Caldwell probably one of the best examples of that Brandon DeWitt who I still think about pretty much every week who challenged us all to eliminate the number one stress in people’s lives.

So go back and do that and you’re going to find value that you didn’t even dream of you couldn’t brainstorm it right? Because you’re connecting with your customers on an intimate level and you’re building for them but watch the tech companies don’t watch the other banks because those are the guys that are coming for your lunch. I want to build on that Wes you’re going to bring us home before Q&A because I might be choking by then although I agree with you the MX stream was maybe my favorite of the group. Alex Johnson published something this week where he said you know maybe doing nothing is the safest strategy which I think ties into what you were just saying Nef and he and I are going to be debating this next week as planned is I think doing nothing is the most profitable strategy if you don’t plan to be an ongoing entity.

Right. It’s profitable right up until it’s not and drive off the cliff and it ends dramatically and I contrast that with a bank conversation I had and not a small institution not a community bank but someone you consider further on the chain I had mentioned I was so excited headed to Money Experience MX so like that’s some cutting edge stuff and I’m like not that MX doesn’t do cutting edge stuff but if I think back to the long history with MX MX is becoming whether it’s with MX or you know someone else this is table stakes to be playing in data and personalization and insights like this is not cutting edge SHIT this is what you need to be doing if you want to be an ongoing entity and so I worry the those who look at the the safest thing to do is to do nothing is what’s going to drive that mass extinction event. Yeah.

I think it’s nuts and I think some of it comes from probably you you have to make some big big bets sometimes and if you make the wrong big bets I think that’s where that’s coming from is like well we don’t know where the industry is going to go but I’m with you I think if you’re not like figuring out and actually making some moves and that goes back to our conversation about about the glacial pace of some institutions like speed is going to matter a ton speed and agility right 100% the velocity with which you go in a direction agility is the speed with which you change yeah 100% and so companies have to be in a position to be able to to pivot to move to move the yardstick to actually move the North Star on a whim and so I think that the companies that are entrenched with a lot of legacy tech debt legacy code et cetera like they’re going to be at a huge disadvantage because there are going to be the you know companies that come out of nowhere a couple folks in a garage come up with a great solution that can move much much faster and even if the institutions have tens or hundreds of millions of dollars to go put behind that they still can’t move at the pace they need to all right so if you agree with us disagree with us when I ask a question make a point change your mind the microphone in the hot yeah change my mind the hot sauce is yours we have some fresh wings coming out any takers Shamir I’m looking right at you right dead center what kind of sauce would you like Jillian give me the hottest one the hottest all right I can’t even what is the spiciest I don’t know when you talk about the downward spiral or extinction future elimination of banks do you see banking as a service being a means or way for banks to thrive with those tech companies that need the banks to back them behind the scenes like Goldman Sachs with Apple for example profitable pipes but you lose the consumer relationship right so respond go ahead you had a good good well I mean banking as a service is a great way to think of a new revenue source right and we’ve talked about it got to flip the switch there my former employer talked about it quite a bit but you know I think it’s much easier said than done I mean it puts you in a different kind of business where you’re managing external relationships instead of managing you know your customers right you’re managing the relationship with your customers so it’s a whole new industry and I thought in general I thought we were lousy at being a tech company I think we were really good at being a customer centric financial services company but the regulators make it really difficult to be an integrated financial services company so if I was starting a play from scratch I’d go over the top and I’d look for the in the top best way to do it and the best to do it but I think we’re really lousy at being a company that manages external relationships So what I’m struggling with here is like the regulators, right? It feels like, especially in the last two years, the regulators have become more anti-crypto for sure, and maybe anti-Fintech as well, and the regulatory burden on banks has just continued to increase, and it’s probably also increased. So I’m like, well, if we don’t get new bank charters, and existing banks kind of are forced to increase their compliance load and stick closer to their netting, how do we get from here to there? Because it feels obvious like we’re going to get to that future world where everything is Fintech and without a charter, but I just want to see how we get from here to there. Yeah, I mean, it’s a great point, and as we talked about unilateralized banking as a service, I think if there is a way for Fintechs to specialize in certain areas and for the compliance to narrow down into specific areas and specific Fintechs versus being super broad and banks having to cover so much, there might be a chance there.

But I think you’re right. I mean, that’s what I said earlier. I think saying it’s going to happen fast, I don’t believe it.

I think we should try to make it happen fast, but I don’t think it’s going to happen fast because there’s so much entrenched in that. How do you pull yourself out of that and how do you move beyond that? And to me, the only way you can really do that is to start to narrow down focuses of companies that have solutions. But then when you do that, you run into the risk of like, you don’t want the few big ones to control all of it.

And so I think it’s just a conundrum that you have to like, how do you address that? And I don’t know how you can do that without just starting from scratch on the compliance fund, which will never happen. So I want to double click on that. How do you see open banking or open data playing a role in creating that distributed experiences across institutions, Fintechs, you named the party? He’s a hot wing.

I got it. You’re an extra hot wing. Jason needs that.

He’s from San Antonio, too. Give him something hot. Yeah.

I mean, I can start. I think the great thing about open banking is it gives consumers the power and the ability to take their data wherever they want with them. And it ensures that you don’t have the really large banks kind of holding that and using that for their own purposes.

And so I think it actually creates a lot of extra flexibility and innovation and puts the power in the consumer’s hands. Doug. Okay.

So let’s spin this the other way around. What’s the Fintech extinction events that we should all be looking at? Nobody’s going to get funded this year. It’s brutal out there.

It’s brutal out there. No one’s great. Yeah.

Nobody. Series Bs run out of cash. No revenue.

Good luck. Well, I’m going to drill one step deeper. Unit economics.

Who knew that unit economics mattered? Because it was growth. Right. It was growth at all costs.

And then there’s the pivot. Right. Because we hit the cash crunch.

But you’re going to see a lot of good companies go for just bargain basement prices. So if you’ve got an M&A unit, get them fired up. M&A is really hard because there are a lot of people that you’re going to acquire a lot smarter than a lot of your folks.

But they don’t have any idea how to be compliant, probably, or follow the regs. So there’s going to be a culture clash. Half of all acquisitions fail.

But I think it’s a big opportunity for folks to leap forward here on some of these companies going to run out of fuel. Because there’s $100 billion that was invested in Fintech in the U.S. alone over 10 years. $50 billion in Bitcoin and distributed ledger technologies.

What happened to that? I mean, best minds of a generation working on that stuff. So at some point, there’s some real interesting distributed networks that have been built underneath there. Probably some interesting identity stuff that’s underneath the covers there.

But it could be a really good time if you’ve got some money in your pocket. I think the problem was the bull market actually masked a lot of opportunities to go actually solve really hard stuff. Because it was that growth at all costs.

I mean, Shamir made this point at Fintech DevCon. We were doing a panel on neobanks. He and I were the OG, is the old guard, versus the neobanks.

And Shamir made the point, it was like, you know, Perks Review is 2010. You were what, 2011? Right? And he’s like, so we can get our paycheck two days faster? Like, that’s what we’ve come up with, you know, in all this time period? But it was growth at all costs. Is there another question out there? I see anyone.

Stacey? Uh-oh. Minnesotan. Where’s the ranch for her? Ranch is a must.

So fast forward five years, will we still be talking about fintechs? Or do you think this is all going to meld together? Bass, banks, fintech. Because I think as we go through this down cycle, the fintechs, and yeah, a lot of good businesses are going to be gone. They’re going to get snapped up by maybe larger fintechs or banks.

So will we say fintech in five years? I think so. I think so because I remember like five years ago, people were like, when will we just drop fintech? It’s just banking. And we’re still definitely like team fintech, team bank.

And I think that will stick because it’s also sort of like entrepreneur versus tried and true, the stereotype. I think someone will invent some kind of new, clever buzzword, you know, but I think fintech will still be here because regtech, I think regtech is our hidden salvation underneath there. You know, and that’s actually a pretty interesting, you know, little vertical that’ll persist, I think.

And that might be really the vision of the dumb pipe, smart pipe kind of vision there. But you know, the whole reason to build these open APIs and to adopt this, and we know which we didn’t really get over that we haven’t crossed that final threshold at my former employer. The whole reason to do that was so that we could keep pace with the innovation outside of our walls.

Right? It wasn’t necessarily to expose, it was to be able to sell on the edge, to be able to actually meet our customers where they are. That’s where that vision was going. And that’s not a vision that drives people back to a website.

All right, maybe do that to give them some documentation. My daughters are 24 and 27, I should know this, right? They’ve been in a bank lobby twice in their life, and I worked in the banking industry. Boy, did I do a lousy job of that, right? We don’t have a lot of branches, in fairness.

But they don’t have any sense of physical presence to a bank. And, you know, go ahead and do your own survey. Check with the cool kids.

See how many of them actually go into banks, and think of banks as places. It’s really just a service, and that service should be wherever they want it. All right, so we are at time.

If you were one of those walking in late, this will be rebroadcast on Breaking Banks. There’s also going to be an ongoing MX-driven series of hot takes with a number of the speakers here. If you’d like to be one of those after trying some of this delicious sauce, you know, hit us up.

But thank you guys for enduring the hot sauce. Nobody died. I’ll see you all in the back buying Pepto-Bismol right after this.

And thank you for being part of a different format. 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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