I’m back for Fintech Nexus USA 2023 Day 2, and ready to hit the ground running!
Especially because I wore flats today after yesterday’s complete rookie move wearing heels (forgot just how large Javits actually is).
The Basis Point live blog format is supposed to be fast to capture quotes and takeaways, and just have fun shouting out all the participants and attendees. Our daily work on other posts is where the deeper analysis comes.
So what you see below are quick hits on as many of the sessions as I could attend on Day 2 at Fintech Nexus USA 2023.
Again, we’d like to thank the Fintech Nexus leaders and friends Peter Renton, Bo Brustkern, Todd Anderson, and the whole team for having The Basis Point.
I’ve got a full schedule, so here goes…
Alex Touma, Partner at Allen & Overy, and Simon Khalaf, CEO of Marqeta, took the main stage first thing on Day 2 to talk about embedded finance and its role in modernization. Alex interviewed Simon who had some really great things to say…
This is the best time to build in financial services and in fintech. It is so ripe for disruption across everything you look at.
Once you have a program in the millions/tens of millions of users, being able to swap the program is virtually impossible. You have to make sure you’re building on solid ground.
Companies whose business is not financial services are offering financial services using embedded finance.
The credit card (payment card) has more distribution globally than clean water. It carries your persona so retailers understand who is buying from them. There is so much opportunity with cards.
All was great when working capital was free. Now it’s not. It’s at 15%. When working capital is at 15%, collapsing the time between receivables and payables, is how companies will survive.
Liza Landsman, CEO of Stash was interviewed by Rebecca Kaden, Managing Partner of Union Square Ventures. The topic was “Investing for the 99%,” and Liza had the following to say about how Stash is helping simply investing for those with less experience…
One of the big things front and center for us is continuing to fulfill the promise of guidance and education for less experienced investors.
We actually need the customers to do things that are in their long term best interest, not be actively day trading.
Our job is the reduction of anxiety in one of the most anxiety producing categories that exists.
We’re trying to help people build habits for a lifetime and not for the moment.
I forgot how much fun operating was. It’s great to be back in the trenches.
My Diet Coke consumption has gone dramatically up and is probably approaching dangerous levels again. (ha!)
I expect two or three times the number of subscribers on the platform in the next few years.
If you’re interested in hearing more, Fintech Nexus covered the session in detail here.
Penny Crosman, Tech editor at American Banker, interviewed Stuart Sopp, Founder & CEO of Current about what’s next for neobanks. Stuart started out with some advice for the audience…
Quick bit of advice: Don’t be too early to anything. You have time when it comes to innovation.
We focus on banking people who don’t fit the business model of banking, those living paycheck to paycheck. That’s exciting because we’re solving a problem.
We’re focused on what we can control. For us it’s innovation. It’s providing more value. It’s where we are, and where (I think) a lot of other fintechs are also.
Stuart touched on a bunch of topics below also. As a mother of teenage boys, I was definitely surprised to hear Mr. Beast’s name in this session!
The state of fintech in America specifically, is in a more mature phase than in other countries. We are going into credit building, which is a good first step of getting into lending. Lending traditionally, is how you monetize banking.
From a consumer standpoint for our product (that’s not launched yet – in a few weeks) they have one balance. From a credit or debit point of view. It’s all debited from the same place, and works just like a checking account. The credit part comes form them paying the bill every 15 days.
Working with influencers:
We’re a digital financial platform providing banking services. Where a bank would have physical real estate, we have digital real estate. We focused very heavily on you tube, TikTok, and snapchat.
Mr. Beast (biggest YouTuber in the world):
We signed him 2-3 years ago. We really doubled down on this. Our head of Marketing gave him his first $10k a few years ago.
You can’t sell your product. People need to sell your product. You need a trusted individual to talk about your product.
I think for the first time we’re looking at our partner banks, and their balance sheets. It’s usually the reverse.
If you want to hear more from Stuart or about Current, Fintech Nexus covered the session in detail here.
(left to right)
Caitlin Long, Founder & CEO – Custodia Bank
Jo Ann Barefoot, CEO – Alliance for Innovative Regulation
In this session, Jo Ann Barefoot, CEO of Alliance for Innovative Regulation, interviews Caitlin Long, Founder & CEO of Custodia Bank. They are discussing blockchain innovations with regards to regulation. She has some really interesting opinions…
THE FDIC is not going to insure crypto, which was made clear. You’re either FDIC insured, or you’re in this ‘other’ category. What Custodia Bank is, it is in the ‘other’ category but able to receive deposits.
With crypto, we have a new payment system. For fintechs, it’s particularly interesting. It’s all technology and API based. Once it’s natively digital, now you can do a lot with it. What we want is for these two systems to not blow each other up (banks and stablecoins).
Banks cannot handle immediate payments.
As we speed up settlement, banks have to carry more liquidity.
The internet knows no borders and nor does this technology.
This is exactly what the regulators fear – that the innovation is going into the shadows, and exploding in size in the shadows.
It is flourishing in a big way outside of the U.S.
The U.S. has diverged massively and it’s just going to flourish off shore. And the U.S. is going to regret that call.
It’s not dying, it’s just gone off shore to the Euro dollar market.
(left to right)
Liz Nutting, Discover Global Network
Fonta Gilliam, CEO & Founder – Wellthi Technologies
In this breakout session, Liz Nutting of Discover interviewed CEO/Co-Founder of Wellthi Technologies, Fonta Gilliam. They discussed how emerging fintechs can benefit banks and Fonta used the context of Wellthi’s offerings. Wellthi is a white label solution that banks can configure and insert into their digital banking software. It is a branded social savings wallet that focuses on social saving, social spend, networking.
FONTA: Wellthi is primarily focused on ‘social finance.’
What’s universal across all diff cultures is the idea that “I’m much more likely to reach my financial goals when I share them with someone I trust.” Positive peer pressure and FOMO drive this.
Wellthi is meant to feel like an Instagram or a TikTok inside your banking app.
Digital wallet can be connected to any card or account. You can save from private goals individually, or group savings to keep each other accountable.
Discover was one of the first big banks to get Wellthi off the ground. They worked together to create an ecosystem of partners.
For fintechs, it can be really hard to get that as an early company just starting out.
OBSTACLES TO THE PROGRAM:
You think you know what you want and then you get into implementation and have to tweak along the way.
As a black woman-owned company, it was about having the confidence to walk into the room and explain that communities they may not be aware of ARE important.
We’re trying to help banks talk to the younger, multicultural customers in a way they understand, and also cultivate and strengthen relationships with them.
Mainstreaming a concept like social finance is not an easy thing and a lot of people are skeptical.
I encourage financial institutions to think out of box and look at new ways to partner with fintechs.
(left to right)
Justin Hosie, Hudson Cook (Moderator)
Jeffrey Rogers, LiftForward
Erika White, Affirm
Mia Huntington, Elavon, Inc.
Albert Periu, Zilch Technologies
This was one of the larger panels I attended, and each of the 5 panelists had such great comments. I broke it out below by who was speaking.
ERIKA: All the parties entering the buy no pay later space validate that it is really here to stay.
ALBERT: The pandemic increased a lot more adoption for us and awareness. It’s not adding more debt. It’s continuing to take share from a very expensive competitor.
MIA: It’s solving a specific consumer need that was unmet.
ERIKA: One word we keep hearing on this panel is “options.” That’s what retailers and consumers are looking for. They want more options when it comes to pulling out their wallets. Merchants are following the consumers so they want to offer more options at checkout too.
MIA: Consumers are asking for it so the retailers are putting up their hands and saying “I want to understand this.”
The fintechs got it right as far as the user experience.
ALBERT: There’s a cost for what we do. How do we get back as much as we can, but not from the consumer?
ERIKA: Looking forward to driving a true omni-channel experience. Someone I interviewed about the product once said “I thought I hacked the system. I didn’t think this could be real.”
There’s a psychology of “Ooh if I can’t get to this in 30 days, then I’m really hosed.” And we’re trying to gain back that trust. I find the psychology really interesting as we’re battling a lot of PTSD as it related to traditional credit card products.
MIA: The transparency helps with the consumer decisions as they’re going through the flow.
JEFFREY: The nice thing is we come together to solve problems. Now what we start to see is that more and more brands are moving faster than they were pre-COVID to add these payment options.
ALBERT: Questions that need to be asked are: Are the proper disclosures there? Are we doing everything we can to ensure the customer can pay us back?
MIA: You can self-regulate or expect that the regulators are going to tell you how to do it. As much as we can all be responsible, I think everybody wins, and as an industry, we win. Eventually the reg is coming.
There a lot of negative headlines ppl focus on when it comes to BNPL. But a lot tend to be about the ‘Pay in 4’ market.
JEFFREY: (re: post transaction servicing) Servicing has been the same for a long time. At the end of the day, you have to go and collect your money. If that’s a good customer, you want to try to keep that customer. We try to engage that customer at the end of the term to get them to use us again.
ERIKA: We don’t want ppl to be late, and we will annoy them a little to not be late.
ALBERT: We remain cautious and have taken some views towards underwriting criteria and trying to be careful. The macro is deteriorating but we haven’t seen it show in a way that is meaningful at all for our customer.
ERIKA: We’re a a point in time that if you manage credit correctly, you’re going to see a stickiness effect.
ALBERT: At the point of sale, at that moment we will say ‘Yay’ or ‘Nay’ based on it they can afford that product vs credit card companies that give them a blanket amount and they can charge and charge and charge until they’re all maxed out and then they’re in trouble.
MIA: It’s a misconception that we in this space are not pulling credit.
ALBERT: It’s not just about buying the expensive sneakers. Sometimes it’s about providing something for them that they need at that moment, without the expensive credit option.
(left to right)
Rohit Chopra, Director of CFPB
Phil Goldfeder, CEO American Fintech Council
I just want to see a consumer finance world where people aren’t stuck. They can switch easily, take business elsewhere, fire a bank that isn’t servicing them.
We’re going to be proposing rules that make it so that big incumbents can’t block new players from getting in the game. You’re going to see us try to create rules that are timeless in a way that is fair and in a way that the regs can point to and have confidence in.
Some people might see an open banking ecosystem as a rouse where they can surveil people, take detailed transaction behavior, and use it for other purposes, like advertising. We’re going to have to figure out “how do we stop that.” We don’t want the early years of the open banking world to be polluted by scammers.
I think BNPL is part of a broader trend of trying to offer different types of products outside of credit cards. It’s really a competitive alternative. We want to make sure it’s not built on some sort of regulatory arbitrage. We think it’s here to stay and we need to make sure it’s on a level playing field.
Historically, financial regulations was pretty tilted towards incumbents and banks — often complicated and prescriptive. I think when you design the rules just for the biggest incumbents, you create problems.
We’re looking at how do you make sure that middle men don’t eat a big part of the pie.
I think a big benefit will be helping the financial services industry be less reliant on credit scores.
I think we’ll at least be able to give consumers the ability to threaten to switch more.
We generally find Artificial Intelligence to be a nebulous marketing term. I often challenge the team to think about what might banking in the metaverse look like. If it’s giving false info or violating the law, you have to take responsibility for that. Ultimately we want tech to have meaningful human progress in how it can achieve their financial dreams and not be used to cheat or scam people.
I don’t want these bank runs to be an excuse to slow down open banking.
Many people are rightfully thinking, “Is the money that I have stored in my Venmo or an app account … is that insured?” And in many cases, it is not. We need to do some things in order to give people that confidence, I think a world where people can move money more quickly, and low income workers can get paid at the end of their shift, that is really meaningful.
We want to make sure that innovation is really about human progress. You will face some tensions where people may be looking for exits and what’s next. If you have strong laws and rules of the road, you will allow yourself to have high levels of confidence and map human progress.
(left to right)
Shivani Siroya, CEO & Founder – Tala
Nicole Casperson, Founder – Fintech is Femme
Co-Founder & CEO of Tala, Shivani Siroya sat down on the main stage with Nicole Casperson (Fintech is Femme) to discuss how Tala is on a global financial inclusion mission. She describes Tala’s journey and the special approach needed to spread financial inclusion globally…
The first thing we need to prove is that credit scoring this population, using alternative data IS possible.
We ended up creating a unique proprietary platform to deliver financial services to the underserved.
2/3 of our customers tell us they have never had access to this type of digital financial access before Tala.
Our global repayment rate is 92% and 95% of our customers repeat and stay with Tala.
We calculate credit worthiness using wide variety of different data sources that ultimately come from the customer. It’s not traditional. It’s all in cash.
The way I predicted risk was by actually walking alongside them and seeing them in their daily lives. And the question became, how to we create technology to replicate this?
We piece together a daily life picture. It’s not a one-size-fits-all price, size of loan, or term.
Instead of asking: How much data can I gain? It’s: How much value can I give back to them for THEIR data?
You need to prove to yourself, to your team, to your investors, that you’ve solved the first part. From there, people believe us a little bit, then we go to the next part.
The best way to predict the future is to create it.
What’s the future we want to create? We want to create a future where we are saying “yes” more often. Instead of thinking how do we assess risk? We are saying, How do we look at this population and how do we assign value?
The change I want to see is the momentum to continue in the financial inclusion space. We’re starting to see the actual ability and we need to start to put more power in the consumers’ hands and give them more access, and trust that they can navigate it. I’d love to see more momentum and collaboration.
My Day 2 lunch break right now consists of finding the charging station to recharge my phone, fielding random questions from conference attendees who mistook the desk I was sitting at as an ‘information desk’ (they keep walking up to me and asking where various company booths are), a quick visit to the Puppy Park (because, well…puppies), and preparing my acceptance speech for when I win the autographed Aaron Judge jersey. They’ll be announcing the winner on the main stage in the 2 o’clock hour and I am pretty pumped for my big win.
(left to right)
Steve McLaughlin, CEO & Managing Partner – FT Partners
Patricia Kemp, Co-founder & Managing Partner – Oak
I haven’t seen anything this rough since the dot com bust.
Why put money in if you’re not sure where the exit is?
The VCs don’t have the appetite to back every company in their portfolio.
It’s a shame the VCs and PE folks are not leaning forward. I think they’re missing some real opportunities.
It’s not bc they don’t deserve the capital, they just haven’t gotten the capital. It’s a tricky moment for raising money of any kind right now.
Even when the market is tough — everyone is licking their wounds and no one is getting capital — there IS capital going somewhere. You have to kind of willpower yourself to the capital.
There’s a lot of things you need to do. You have to get ahead of it and do the right things.
It’s creative time on the M&A side.
There is no easy answer on M&A right now.
It’s not like there are massive amounts of incumbents who are buying things. You’d think that they would be buying all these companies, but they’re really not.
If you want to get ahead of the M&A game, you’ve really got to start soon. You’ll be in a real world of pain if you wait until you have 3 months of cash left. They’re going to negotiate you down to a tough place. You’ve really got to get the DNA right and then you’ve got to get the strategy right.
You need to find the investor that believes in you. Just like when you were a Series A company. It’s a matter of finding the right party to back you. And in a lot of instances, it’s going to be a strategic party.
In the first instance, I would think about strategic investors.
Then those deals can then, in a positive way, turn into an M&A deal down the road.
The international scene in emerging markets is really strong right now.
I think if your company is in a position to consolidate with others of the same size, it could be a big upside for you.
There’s potential to pick up some really interesting assets and operate them the right way.
Out of this can come really great things. To every company in this room trying to raise money, I do think there is a solution for you. This is as bad as it gets. It also feels like the beginning of something big.
We’re in for another two-decade-run for fintech.
I don’t want to talk about it.
(left to right)
Manish Gupta, CEO – Corridor Platforms (MODERATOR)
Gavin Harding, Director – Experian
Ash Gupta, Chairman – Corridor Platforms
Murli Buluswar, Head U.S Personal Banking Analytics – Citibank
Houman Motaharian, President – LendingPoint
This group was fun. And they had a lot to say and a lot of experience between the 5 of them to back it all up.
GAVIN: We are in an extraordinarily complex dynamic environment. We don’t see the environment ever becoming less complex or less fast moving. How do we engage? How do we understand? How do make sense? How do we move forward?
We have a lot of ppl who have never been through this type of environment in the industry, founders, startups, and on the regulatory side.
ASH: The future and past are not totally in sync. Utilization of data in wise and nimble ways to relate to the current environment, but for the future.
MURLI: Re: radical empathy – It’s being able to use the power of your data of every interaction and transaction to separate noise from signal, and infer your customers’ needs in a proactive way, and engage with them in ways they they might not have expected.
HOUMAN: The reason our company has a right to exist is because we solve customer problems.
The next generation of products needs to be personalized. Consumer has 2 hours of free time a week. You need to be where the customer is. Know who the customer is, and be where they are.
ASH: The most important thing is pre-recession planning. Recession is a time to gain tremendous customer confidence.
MURLI: AI is about being able to adapt to a world where you have to understand risk, behavior, & needs through a microscope while they’re moving at lightning speed.
ASH: It’s not Technology driving Finance. It’s Finance utilizing Technology.
HOUMAN: Every recession is like a snowflake. They’re all different.
I’m a credit guy. My job is to worry all the time. (ha)
(left to right)
Terry O’Neill, Head of Citi Embedded Commerce & Strategic Growth – Citi
Meidad Sharon, CEO – ChargeAfter
Jeffrey Tower, EVP Global Business Development & Strategy – ChargeAfter (MODERATOR)
MEIDAD: The key is combining flexibility in choice with simplicity. Several challenges fintechs are facing today are regulation, cost of capital with rising interest rates, and availability of capital/supply side.
TERRY: If you’re partnering with a bank with history, you have a partner who has the balance sheet and understands how to underwrite the consumers at point of sale, and can serve loans/customers in any economic situation.
The worst thing you can do in our business is delay the point of sale. You never want to be the reason for lines at the registers on Black Friday. You never want to be the partner who is creating that spinning wheel when checking out online. Banks are trained to do that because we’ve been doing it for a very long time.
Customers want financing options at time of purchase, and many times it’s a discretionary or unplanned purchase. By giving them flexibility or optionality, that’s your first relationship step with that customer. You have to also think about how quickly you bring them in the door.
TERRY: If you’re a merchant looking for a payment partner, look for someone who you want to be a long-term partner. Someone who has balance sheet, has invested in UX, has aligned with you to increase sales, reduce cost to credit, introduce new revenue streams. A partner who shares values and understands retail space and cycles, and understand experience at point of sale. Do you have a partner that can receive the requested sale amount. Make sure you have a partner who is known and who is trusted. 9 in 10 are looking for service from a brand that they know because they feel their funds will be safer.
MEIDAD: Quality is about trust and longterm relationship. POS and checkout is the most sensitive point for the merchant. If something doesn’t work there, then it is critical. And security is very important. Merchants would like to have visibility to the consumer journey and how they are moving through the funnel. They would like control and visibility. They would like to leverage it and change the settings and optimize. We want to enable them to use those products as they see fit.
MEIDAD: With BPNL, we are bringing originations and payments together at POS. We will see this as the future of credit and becoming more and more dominant as a payment option. Merchants will use it more and more as a way to acquire more consumer and make them loyal to them.
TERRY: Healthy competition will result in better products for both merchants and consumers.
(left to right)
Rebecca Greene, Co-Founder & CTO – Regal.io
Tony Zerucha, Writer – Fintech Nexus
REBECCA: Just yesterday CPI shows rates coming down a little bit, but our expectation is that they don’t expect rates to come down very much and this is kind of the new normal. If you’re in a high interest rate environment, how do you compete?
‘Digital transformation’ is a loaded phrase. How do you use tech to know your customers better and help them move from more product centric to more customer centric?
1. Be where your customers are. More and more they’re online. It’s not enough to have apps and mobile presence. If you have a ton of legacy systems behind the scenes and your’e trying to transact, it varies on how fast you’re able to do that.
2. Know your customer. It was easier in the brick and mortar to have a relationship. The way to do it online: we use data and invest in CDPs.
3. Activate that data to make the experience better for customer.
Alternative data (in a lending use case) is everything that’s not on the credit report.
What we find is that when they collect their CDP, it tends to be more first party data like every email open, click, article they’ve read, every step in the application process.
Unlocking the ultimate first party data asset: phone conversations … transcribing phone conversations, and then use that data to power customer journeys, based on something that was said in the conversation.
Today online, funding rates is 30%. Why is that? Behind the scenes, they’re just looking at it on their phone, and once they leave your site, what can you do?
We see 10% response rates on SMS.
We see 30% answer rates on the phone.
The most valuable moments are moments of friction. Ie, when documents need to be produced. It’s where drops seem to happen.
SoFi is a partner with Regal on student lending and personal lending. One key part is loan completion rates and loan conversion rates. Have seen double digit growth in completion rates. High single digit growth in conversion. Double digit growth in loan value.
They also work with Valon in the mortgage space. Valon wants to use data and take the decisioning out of the LO’s hands.
Well, that’s a wrap for this year, but looking forward to next year’s Fintech Nexus USA 2024 already.
If you’re interested in more perspectives on the event, and the current state of fintech overall, check out the following analyst note from PitchBook: 16 Key Takeways from Fintech Nexus USA 2023.
And here’s Fintech Nexus USA 2023 Live Blog Day 1
By the way, if you want us to Live Blog your industry or corporate event, please reach out.
Here are two other Live Blog samples.
This one is from Goldman Sachs:
And this one is from bank marketing fintech Total Expert: