Transcription:
Chana Schoenberger: (
Thanks for joining us this morning. Day two of three. We have so many people on this panel. What I'm gonna suggest is please tell us who you are, what you do, and really briefly what your company does. Go ahead Kristen.
Kristen Kines: (
Hey, good morning. So I am Kristen Kines. I am the Business Development Officer and Vice President of FinTech at Evolve Bank and Trust. We specialize in BaaS services in the FinTech space.
Mike Butler: (
I am Mike Butler, CEO of Grasshopper Bank. We're a three year old startup digital bank. That's serving the business and innovation economy, mainly the SMB market with industry leading technology and human capital.
Rajiv Appana: (
Thank you, Mike. Rajiv, I'm the director of product management of Google Pay. I lead the North America product management team here at Google and specifically focused on payments on Android and Chrome.
Amit Parikh: (
Hi everyone. My name's Amit Parikh. I am the head of BaaS at Green Dot. Green Dot has, three business units, our consumer business, our tax business, our paycard business and the BaaS business that I run.
Chana Schoenberger: (
Okay. So why don't you start, let's just say, what is BaaS as you define it and how does your company use it?
Amit Parikh: (
Yeah.
Chana Schoenberger: (
Because, there doesn't seem to be an accepted definition for BaaS.
Amit Parikh: (
Well, I think it's very broad and I think it depends upon what you're trying to solve in the discussion. So I think we hear BaaS, we hear banking platform services, we hear embedded finance. At the end of the day, I believe this comes down to how to use your technology, to be able to provide a great customer experience. So how do you provide the banking services, the platform and that embed that into a partner's experience or build the experience for your partner. I think there's three different ways in BaaS. There's been sponsorship, there's the platform and there's program management. As an industry, we are very confused in what roles each partner plays.
Chana Schoenberger: (
Maybe we will solve that today.
Amit Parikh: (
Yeah. And luckily we own our own bank and so we are a full stack BaaS provider. So we do the bank, the platform plus the program management.
Chana Schoenberger: (
Got it. Okay. How about for Google?
Rajiv Appana: (
So for us, we're not a bank. We don't intend to be one, but the, the way we, the way we look at banking as a service and especially in the industry, is if you look at what financial institutions and banks provide, they really do two things, right? One, they provide all of the financial aspects of the business and then they provide the regulatory aspects of the business and then exposing these as a set of services that different partners can build on is the way sort of, I define what BaaS is. So then it allows these atomic units to be stitched together in very interesting ways to solve real customer needs.
Chana Schoenberger: (
Okay. How about for grasshopper?
Mike Butler: (
Okay. So, our view of banking as a service really emanates from a very firm belief that this FinTech evolution revolution is real and that there continues to be a Exodus of clients from the traditional banking world into fintechs. And we can use a bunch of different examples of how that happens. We believe that as a banking organization, we want to be a partner with the fintechs who are attracting these clients and who mainly want to provide, banking services that they otherwise couldn't provide to build out their customer relationship and allows us to add customers that we otherwise wouldn't get because they're fleeing to the FinTech environment. So our banking as a service model is designed as a revenue generating client acquisition tool to partner with FinTech's to create a opportunity for both organizations to be more successful.
Chana Schoenberger: (
Got it. Okay.
Kristen Kines: (
And just to expand on that a little bit, the way Evolve Bank and trust thinks about it. I approach a market with two different scopes, really. We have our direct FinTech partnerships and then we have more of what we call our aggregator type relationships. We do a ton of bin sponsorship, both on the acquiring and issuing side. Then we have stacks of APIs for retail banking as well. So in taking a look at these different partnerships, what really kind of defines, whether it's gonna be a direct relationship or whether it's gonna be one of our aggregators, such as like a deserve or a Railsbank or synapse it, it really just depends on the stage of the company.
Chana Schoenberger: (
Okay. This makes perfect sense. So one of the questions that you seem to hear a lot here this week, and some large percentage of the people here come from banks is why do BaaS what's in it for the banks? What are the pros and cons, should we offer it? Should we not offer it here at my bank? Obviously I don't have a bank. So why do you guys do it?
Kristen Kines: (
Well, I think Mike just touched on it here briefly. It's a great way to start gathering large scale deposits. We do a ton of work in the stored value ecosystem type space. So we're constantly looking at new ways to get money into those ecosystems and back out again. And it's a great way to start generating, recurring revenue off fees and different services that we're providing. So it's our fastest growing division. We're fully invested into this space and we're very, very bullish on the market.
Mike Butler: (
Yeah. If you're coming back this way, I would say, why do it, why do it, you have to believe that this FinTech evolution revolution is taking clients away from you and that the digital demand from your clients is real and that you wanna find a way to participate in it. And if you do then partnering with fintechs and providing a service that you otherwise provide to your clients every single day, and trying to repurpose that and resell it into the FinTech environment to create a client acquisition channel. And that's one way to really look at it is, can you acquire clients? I used to say that when we build a banking as a service relationship, we were building a branch at the corner of Grasshopper and XYZ FinTech, because that's where technophiles and people who wanna work digitally are gonna go. And if we want a part of that, you're not traditionally the place that a client would go. So a great opportunity through this partnership to acquire clients and be a part of what we think is the real change inside the industry. Now, you also said something like, why not do it right? So, I'll maybe echo some points there. Don't do it. If you aren't committed, right? This is not something to just play around with. I don't believe and think you can just be a banking as a service provider. You've got to be committed with people and you've got to be committed with some technology. And, I would say across the way in that exhibition hall, there are a whole bunch of really great companies that I know we have used from mantle to alloy, to Narmi to others that have been great providers of helping you get to the technology place you need to be, but don't do it. If you don't wanna get there with a really good technology stack and a real commitment inside the organization. Go bigger, go home. Well, it's got to be a commitment. Most people would say in life, if you're not committed, it's dangerous. Right? So just be committed. And if you are, then there's a whole bunch. Why I mentioned those guys over there is there's tools to help you do it, you're not alone. But you do have to think a little bit more broadly about where you've been before and where you want to go. It's just a personal opinion. Sorry.
Chana Schoenberger: (
That's why you're here. We invited you here for your personal opinion.
Rajiv Appana: (
I'll take a slightly different approach to this. We are looking at it from our vantage point. Things are slightly different, right? What are customers looking for? Right? Customers today are looking to build, get smart experiences, right? They're looking for in context experiences, they're looking for something that is different and does not exist in the market today. And for the FinTech industry to provide that they need to have the ability to access all of the services that these credit companies are providing so that they can build those experiences. And like I said, if you think about what we do, we allow all of the banks, the FinTechs to provide these services and provide them at scale across the platforms that we have, right? Whether it's Chrome, whether it's Android, whether it's maps with search, we work across all of these places so that the experiences that are built on these bank banking as a service providers show up in context for the user. Very recently, we at Google IO, we just launched virtual card numbers, essentially the ability for users to take their credit card, create a virtual card and use that for online shopping. That's powerful. Not all companies can do that out of the box. So partnering really helps. And that's why there exists the need for some of these players in the market.
Amit Parikh: (
I think, the commitment point's really important because it is a commitment, from putting the right people to driving the right outcomes versus, Hey, everyone's getting into BaaS, so let's get into BaaS. But the most important, the first speaker this morning, Tim from US Bank talked about essentially cash flow and convenience. So how do you create an experience through a Google, through a partner that drives that customer demand, which is cashflow and convenience. And so underlying the platform has to be stable. You have to have the right people. And it is a significant investment from a time and resource standpoint. So it can't be a hobby.
Chana Schoenberger: (
So the experience sounds like it's really key for the customers. Then for the whatever FinTech or whatever brand you're partnering with, how do you do that? How do you make sure? I mean, I, as a civilian, I use all the consumer apps. We all use. I use Uber, I live in New York, so I get my groceries from Fresh Direct, and I'm completely used to simply picking up my phone and five seconds later, groceries are coming to my door or a car is coming to me. I don't understand as a consumer, why banking would be any different. So how do you, create experiences that make people feel like there's still floating in the VC funded bubble of consumer delight?
Amit Parikh: (
Well, Rajiv, you know.
Rajiv Appana: (
We're not in the VC funded bubble, but, I think the way we look at it is the platforms that we have and the platforms that we operate. There's all of these billions of users who are participating in commerce on these platforms. Right? And then if you think about how traditional FinTechs have been participating in online commerce, they're essentially trying to participate with 16 digit card number, and that doesn't really work and scale in this new world. That is the reason that we look at it and say, how can we be an enabler? How can we create an ecosystem that enables all of the banks, the FinTechs and financial service providers to meet their customers, where they are and provide those magical experiences for their customers, in context of the user. Like I said, in context is where we're looking at it. For example, let's say you were an issuer of a credit card, and then you had a buy now pay later or split in three product on your card. Yes. You can expect people to come afterwards and then remember to split their payments. But what if you were able to do it in context while you were paying on Chrome on Android, and these are the kind of experiences that we want to enable, and we want to be a partner to all of the FinTechs and banks and the overall financial ecosystem to bring these experiences to life. Like you said, Hey, you wake up, you're trying to do something. It needs to be magical. It needs to happen. It doesn't matter what that thing is. The friction needs to be removed and that's where we come in.
Chana Schoenberger: (
Yes. The magic sprinkles of fairy dust.
Mike Butler: (
So, you hit on a really important point about this whole digital world and we've got a lot of time, so I'm gonna spend a little time here, but anyway, so it really does start this banking service is a component of what the customer experience needs to be in a digital world. And the way we look at it is and what we found and we believe it's real is that the demands of a digital client are way higher than they are for a traditional banking client. It's simple, right? If somebody's willing to wait in line and drive to a bank, to a branch and have an experience, well, then they can't expect that much. I'm not being critical of branches or the people who work in them, but it's different than sitting home and hitting a button and having something happen for you. So they're a very discerning client that has high demands and it is the future of our client base. So the question is, how do you deliver that? As banks, and sometimes as community banks, we are not the most kind of advanced in the technology world to be able to deliver those solutions. We've got sometimes complicated infrastructures. I don't know, somebody said that guy from Wells Fargo said he had 48 different systems before he launched something that's real and that's complicated, but that's why you start to look at the FinTech world and banking as a service to bring people who are developing these great customer experiences together, and then figure out how you bring that customer experience into your ecosystem, through a variety of different ways that are real, including making your core alive and well versus maybe not as alive and well as it is today by using the FinTech partnerships. Then they help you deal because their attitude towards a client is far different than banks traditionally were. This is really important. If you're gonna be in the digital world really important, if you're gonna be in the BaaS world, you're gonna find that any BaaS client has an incredible high demand for that customer experience and you have to find a way to deliver that.
Kristen Kines: (
Those are all great points. I'm going to approach it from a slightly different perspective. Here, just from the bank's perspective, the FinTech that come to us and the platforms that come to us ultimately own the user experience and the UI and the UX that goes out to the actual end customer. So some of the things that we think about as a bank when supporting these platforms is, do these guys have the correct controls in place to be able to stand us up long term and to be able to sustain it and deliver to the market when there are issues for, fraud or a consumer, can't get their money out of their account. How are they going to be able to respond to that? So things like customer service, compliance, the KYC, BSA, AML programs, that you're standing up on the front end are all areas that we heavily heavily diligence with these guys ahead of time. We've worked very hard with standing up individual teams on each one of these different components. We've duplicated it separate from the rest of the side of the bank, cuz the more traditional side of the bank is so different than what we're doing in this FinTech space. So for things like customer service and responding to the needs of the actual end user and the customer, I think that has to be a focus of the underlying financial institution.
Chana Schoenberger: (
Yeah. That makes a ton of sense. I would love to hear some stories from the front lines of BaaS. Do you have any great anecdotes about a BaaS situation you were in that either went really well or very poorly?
Amit Parikh: (
So I'll tell one. I have a 14 year old, actually 15, she's turned 15, over the weekend. So I have a 15 year old and a six year old. My daughter was saying, Hey, there's the parents' work thing at the school. Like bring your parents.
Chana Schoenberger: (
Career day.
Amit Parikh: (
Career day. Thank you. And, she's like, what do you do? And,
Chana Schoenberger: (
And you said, I have zoom calls all day
Amit Parikh: (
Yeah, right, exactly. I drive you around. When my daughter asks for money, she sends a text and I respond back with money. Usually now she doesn't text me cuz I don't give her nearly as much money as my wife does. So it's a whole other story
Chana Schoenberger: (
Opinion shopping.
Amit Parikh: (
Exactly, she's smart. But the fact that she can send me a text and I can respond back and the money's in her account and she can go tap at a small business. And I live in the San Francisco bay area in Danville, California. So that experience GreenDot powers the experience of apple cash of moving that money and, tapping at that small business. When that small business, we also power QuickBooks checking. When they move the money into their checking account. I explain it to her in that story, this is what we do and it was like, oh, so you make it easy for me to spend your money. Essentially.
Chana Schoenberger: (
Smart girl
Amit Parikh: (
Yeah smart, but that's the story. I was at apple before I joined GreenDot and the whole premise of apple cash was send money just as easy as sending a text. If you think about the evolution, like these stories of being at the contextual touch, touch point, financial services used to be top of wallet, you'd have your top of wallet, payment credentialed, and now it's all about the transaction type. So the stories I like to give are the apple cash story, the QuickBooks checking story. Also, whenever I get home there's packages on the front doorstep, that was an Amazon. A lot of times that's an Amazon flex delivery driver providing the last mile delivery that delivery driver can get paid right away and also put money in a savings vault to manage the taxes. Those are experiences that I think 10 years ago, would've been very difficult for us to think about of how are we going to deliver that, these instant funding, instant cash movement in a safe and secure way. And so I think those are three great examples of being able to take embedded financial services and making it easier that cashflow and convenience for the end consumer leveraging partners,
Chana Schoenberger: (
Right. As long as your kid can convince you. So you're the stumbling block here. The money is no longer the stumbling block. You can transfer the money instantly.
Amit Parikh: (
You can, but there's the other side of that, as our header fraud will say, as moving money is instant as is the fraud. So, how do you ensure that we are evolving as quickly as we can to keep up with, what's happening in the risk management space, because at the end blocking a good customer is the other side of this, which is a terrible experience.
Chana Schoenberger: (
Right. And we're gonna come back to that because we've written a ton about fraud and online banking, and it's an enormous problem. Do you have a good anecdote for us, Rajiv?
Rajiv Appana: (
I'll talk about, with my daughter as well, but a slightly different story. She wanted to go and sign up for the swim team. Right. Then we said, okay, we need to do that. I'm always trying to shop online and, do that. She sent me the form. She said, okay, dad, fill it up. And then I look for GooglePay. Of course it wasn't on that one specific website. So then I said, okay, let's just go to the merchant and try to fill out the form. Then I say, in context, we show you all the payment credentials you stored at Google. We allowed the merchant to access that credential at the time of purchase. Then that is interesting because we are providing the ability for every merchant who has a web presence to access this credentials from traditional financial players, from banking as a service providers from FinTechs to make that purchase in the moment. And now we're saying, let's take that to the next level. Let's try to make it more secure. Let's also try to make it more helpful. For example, could I split that payment in three options? Can I show you how many rewards that you would get out of that transaction? So that's where I find that we're still in that moment of purchase when you're making that transaction, it is still a fairly standard, basic information and our mission to organize the world's information. If you apply that principle to that experience, we can do so much more. And that's what we're focused on. We're just scratching the surface here.
Mike Butler: (
Okay. Couple of thoughts here. One is when you think about good and bad experiences, I would spend a couple of minutes telling you how important it is, the upfront selection process to find a partner. There are hundreds, thousands of FinTech companies that have reasons to partner with banks in a variety of different ways. I would just say, I would just be very clear in saying it's important in the selection process of who you want to do business with, and get to know these companies as well as you possibly can. Our view is we need absolute cultural alignment from any FinTech partner that we work with. They've got to think the same way, we consider them a subsidiary of our business. So you got to think the same way you got to have the same mission about what you're trying to accomplish. Ours would be a client first mission. You've got to have an unbelievable commitment to the regulatory side of the world. What I would say, respect our charter. This would be no different than old school banks, acquiring companies that are non-bank to does that non-bank respect the fact that you have a charter before it didn't have a charter and is the business plan real and viable and are they funded by great companies that would, commit monies to them. So that's very important and that reduces the bad experiences. If you go through a very good selection process, but nothing's perfect. I like to say in the banking as a service business, breaking up is hard to do, but sometimes you got to do it, right? So the bad part is, I'm gonna touch a little bit on what you referenced as fraud. We had a situation in which we had, what we thought was a very great banking partner. And all of a sudden we started to see a lot of fraud in their activities and found out that they were looking in places for clients that we didn't necessarily agree with or understand that they'd be looking for. And while all of that is really on them, as it relates to fraud and cost, we were still being from a brand perspective, burdened by too much negative activity inside the organization. We had to break it off. The reason we broke it off is because we said, this is what we agreed to in the beginning, you are not operating or behaving. Like you said you were, you want to go in a different path and maybe you should find a different banking as a service provider. Again, it's not easy. Those conversations are hard, you've committed some cost to bring on and onboard that client. And it's never good to have a bad experience, but it's important. It was important for us to protect our brand and our commitment that we made to each other, to do what we say we're gonna do. The other side of it is when you pick a FinTech, that has a plan. That plan exponentially goes a hundred times more than what they originally thought. So there's the win. So we've had experiences where we've worked with young companies who said that they were gonna grow X. And we said, ah, that's a little bit of a stretch, but we'll go with it. And they've grown 10 times X and all of a sudden, they're a big player, they're a unicorn. And we're behind the scenes and we're trying to deal with the problems of growth, which is also a problem. You've got to be able to deal with that as well. But those things happen inside the banking as a service environment. And I'd go back and say so important on the selection process. We happen to be a quality over quantity shop. And so we'll work with fewer because we don't like to break up part of it.
Kristen Kines: (
So I'm gonna tee off of what you just said there, as far as I'm gonna start with the bad, and then I'll, I'll circle back around to the good as well, but absolutely 100%, you've got a diligence, these platforms and set the proper expectations, kind of moving forward. One of the things as we've gained more and more experience in the space is really trying to be proactive with these FinTech platforms with, okay, what is your ongoing strategy? What are your future marketing campaigns that you guys are gonna do? So when these guys are rolling out new things like cash back rewards, or maybe they are advertising back to the client base or the end consumer base, maybe a new APY these are things that from a disclosure stance, legal, regulatory compliance stance, we need to make sure everybody's on the same page. All the language represents, the true construct of the relationship. We need to make sure that as a financial institution, you should be proactively working with these guys on this and having that open communication there. We've just learned that that's very, very important. As far as just kind of a success thing, I found it was super neat this last year, the holiday season, everybody's got all these different platforms going on, everybody's doing online shopping, and just talking with friends or maybe even my daughter about, what are you doing for Christmas gifts? Those sorts of things everybody's using the after pays and the affirm and the klarna and all of those out there. So it's just been super exciting to see the stuff come full circle and to be able to explain, Hey, this is some of the stuff that we do, some of the stuff that we support and it's nice to see it come full circle.
Chana Schoenberger: (
That's so interesting. Many of you have teenagers and you're basically using the consumer shopping ecosystem to explain your job to teenagers.
Kristen Kines: (
Otherwise they totally won't get it.
Chana Schoenberger: (
No, they never get it. My kids don't understand what I do and I bring home a physical magazine. I do this, yeah. So just to bring it back to fraud, cuz a couple people mentioned fraud, this is a subject we cover constantly and, online digital account opening fraud, all these things are very big and they don't seem to be going away. It sort of ties into the issue of due diligence of how do you really know your partners? How do you know, obviously you're gonna try not to choose a fraudulent company, but how do you know when you sign up with them, how they will deal with what happens to them in the fraud space?
Kristen Kines: (
So I can take a first stab at that. We have a very, very extensive due diligence process when moving forward with these platforms and it's an ever evolving process. As we've learned more about the space, we're examining newer products, newer things and trends within the market. Different things pop up there. We actively have a team that is working on policies and procedures and getting this stuff documented. It just make sure that we stay on point and on trends, with responses back from our regulators and with our, compliance and legal teams as well. So there's an extensive list of due diligence documents from a policies and procedure stance that we take a look at before those out to different teams. Let the experts on the different teams. I am totally not your compliance person but we form those out to the different teams, let them start doing, conducting the reviews. While we talk through different things like strategy marketing campaigns, what is your go to market strategy as far as how are you marketing this to the end customer? We look at website reviews, app reviews, legal reviews, compliance. This is a very, very important piece and understanding, which companies we really wanna move forward with. I'd say one of the other components that I'd take a look at would be the financial health of the company. We really take time to forecast out, okay, here's how much they've raised. This is the burn rate, take a look at this, how much runway do these guys have if they're doing anything in the lending space or in the credit card issuing space, do they have a warehouse line, who's that with? There's a lot of different moving parts that I can go into it. Now that aside you also have to mirror that up against. Okay, just because we've done business with these types of platforms over here, there is an asset allocation stance that you've got to mirror up with the rest of the bank based off your collective portfolio. So maybe we've done more over here on the remittance piece. So maybe we're maxed out from that vertical, from that stance. There are so many different variables that go into this and it's an ongoing conversation and it's gonna be an ever evolving, learning situation for everybody involved.
Mike Butler: (
Yeah. So fraud is real. I would just say it's real, it's simple. The idea of, no one is gonna walk into a branch and try and defraud anymore. They have way better opportunities to do it via technology. And if you're gonna be a digital bank or involved in banking as a service, you're gonna open yourself up to more fraud. I ran a bank called radius bank for 10 years before grasshopper and we were a consumer digital bank. One of the things that got us focused on banking as a service was that we were first at digital bank and we first understood, how to online or onboard a virtual customer and to do it the right way. Once we figured that out, we thought it was good then to offer it in banking as a service, but you've got to understand what it's like to onboard a digital and virtual client and the compliance is necessary. I would probably say you definitely need a rockstar compliance person, to be able to really work through the rules and regulations related to KYC, AML, all the other things that are real because you're gonna get fraud. There is no doubt about it. I would tell you that, in our direct space direct to clients, we only approve about 40% of the applicants that come through to open a DDA account.
Chana Schoenberger: (
Wow.
Mike Butler: (
Now, and about an half of that decline is related to fraud. The other half is just really poor performance, but when you think about the lending world and you say, I'm approving 35% of my loan applicants, you'd say cool, but this is 40% of people that were willing to take their money, but somehow they want us to take their money to perpetrate some type of bad event that would really cost us money. So really important to have a really rockstar compliance person. It's really best if you do it yourself for your own business and then offer it as a banking as a service. I would say the other thing is contractual obligations on the part of the FinTech. We make it very clear that the obligation on the part of the FinTech is to cover fraud. Then what we do is we make sure we have the rights to go in and audit every one of these FinTechs as it relates to what their compliance programs are. We can require certain reports. Sometimes, every FinTech wants a different relationship. Some is a FBO account. Some is a straight, we call it Encore when it's Encore, we're responsible for the fraud and the underwriting. We like that the best because it's our method, but if it's gonna be on them, then we make sure the contract has all the rights in it for us to go in and make changes or, require certain rules and certain activities for them to be able to do it and audit rights to check on them.
Chana Schoenberger: (
So this is the case for good lawyers.
Kristen Kines: (
Yes.
Mike Butler: (
Well, yeah, for sure, because you've got to contractually think about how this event is gonna unfold and think about what the same thing with the breakup. I'd go back to the breakup. You got to understand what happens in a breakup upfront and think through that rather than wait for event to occur.
Kristen Kines: (
I would say probably half of my calls are all legal meetings, talking through this stuff. So very, very important.
Rajiv Appana: (
Again, I'll give you an answer that is not exactly from a banking as the service, but it's sort of what Mike said earlier, right? You got to be committed to doing this. Fraud was constantly evolved people, to find new ways to defraud customers. And it's not just about what you're doing at the time of signing up a partner, which you should, of course do the regulatory and compliance, but you should also look at it from a technology standpoint. What are the security parameters that have been set up? What are the paradigms that they use? How do they secure their APIs? Because that is a way information transmits in the new world. That's one angle to it. The second one really comes down to what happens when the customer is already live, right? Which is Mike talked about 40% decline rates or 40% acceptance rates. What happens to those customers? How are you making sure that they continue to stay in compliance? What are the data analytics that you have? How do you get the real time reporting? How do you make sure that there are anomalies happening in the system? And that is an art in the science. Of course, you need to get all of your data, and get that data in front built out so that you can spot these trends early on and you need to be able to catch them early on. We spend a lot of time in that, right? But then there's also the qualitative aspects. What's happening in industry. What kind of new models are fraudsters looking at? So you have to have your ear to the ground, understand what's happening and build in proactive measures so that you can protect ultimately, what are we doing? We're protecting our users, their money and their data. And we have to do that. I think it's not the responsibility of one, one player in this ecosystem. It is a responsibility of, I would say everyone in this ecosystem, everyone in this room. So back to what Mike said, you have to commit to doing these products the right way. Otherwise you'll end up with scenarios where it will be uncomfortable and you have to use the backing out which breakup was always hard,
Amit Parikh: (
Which is one of the things that I've found fascinating is how easy someone will provide their driver's license. On social media for a hundred bucks, give me this information, to fraudsters. So that was a big, and this has happened over the last few years. So that's one very interesting thing that we were very surprised about. Second, the advent of mobile IDs. So Google and apple both have announced that they're supporting government issued credentials in the device. And so I think that's a really interesting over the next few years, the frauds are gonna change. But at the end of the day, when you have a government issued credential bound to the device that you're able to then, provide a, do a new say event with a financial institution, I think that's gonna be a very interesting, just change in the, we know this customer, we know this device just because, the device doesn't necessarily know that's the customer and vice versa. So I think, there's some interesting trends happening over the next, two to three years that we're gonna see as more and more states are allowing Google and apple to be, provisioning their IDs into the phones.
Chana Schoenberger: (
So will that make things more secure? Because it would be more difficult for me to sell my driver's license for a hundred bucks on social media, to a fraudster to then use that.
Amit Parikh: (
I think it's more secure, but it's just an evolution. So fraudsters will figure out a way, but there's just signals from the device. And from that provisioning event, that's going to make it more secure for your best customers. Love to get the big issue are the folks that you don't know, right. Where they're coming in net new.
Chana Schoenberger: (
Yeah.
Amit Parikh: (
Either you don't know what marketing campaign they're come through. They coming through the overall open internet. And you have no idea who this person is, you know? Right. So I think that the identity with the device is gonna make it a lot easier. From our business, we have a direct to consumer business that we run and we also run this partnership business. So to the point earlier, if you're gonna do fraud, do it for your own business. And then also, we also do it for our partners. So, we have to invest in fraud because we have our direct to consumer business that then we are able to provide to partners. But I think the fraudsters are always gonna evolve. I just think that it's going to be a much stronger connection between the individual and the device, over the next few years,
Chana Schoenberger: (
Which is sort of a bigger commentary on our society. What is wrong with people?
Mike Butler: (
Yeah, there's no doubt that unfortunately there's more bad people than good people out there. There's more people trying to defraud than not trying to defraud, and it's hard to keep pace. And that's why you need a culture inside your organization of understanding that that's a real part of what you do. And it's just, you got to accept it and put the programs in place. And like I say, I think there's a whole bunch of people on that side of the room that can help you do that. A whole bunch of people sitting right here that can help you do it too.
Chana Schoenberger: (
So where are the opportunities that you see for BaaS? Where do we not have BaaS right now that we really could or should?
Kristen Kines: (
I mean, we see all kinds of use cases all day long, both consumer commercial, we see it in the cart, issuing space. We see it with issuing, stored value ecosystem type stuff, virtual accounts, disbursements. I really do not see any shortage of, we are very bull in this FinTech space. We believe it's gonna continue to grow over time and expand over time as payments get faster, and people are more familiar with, these types of companies and platforms, that I just think that this is just going to continue to grow.
Mike Butler: (
Yeah. It, maybe this is a question what's cool. What's next.
Chana Schoenberger: (
There always.
Mike Butler: (
Probably for me personally, where I've been intrigued is in this concept of, embedded finance, or eCommerce that's rapidly growing and has been growing, but again, I look at things very simply, but we're transacting so much business phone to phone that, so many companies have, and there needs to be some level of financing that goes on behind the scenes. I mean, we, as bankers, we were all traditional people that finance people's accounts receivable and inventory for the paint store around the corner or for whoever it was. And now everybody is transacting business and Google's doing a lot to help it, but transacting business, via their phone and the payments, but there's financing that needs to go on there. I sell you paint and I get a 60 or 90 day, pay me later, but I got to finance that 60 or 90 days. And there's so many smart companies that are emerging that are finding ways to finance these eCommerce companies, but need a bank behind them. They can't balance sheet all of the assets associated with it, but the world continues to shift to where you found your assets before as a bank and where you need to find them in the future. And again, we found them on the corner of fourth and Fulton street because that's where the paint store was. And you knew the guy, but now we got to start finding them somewhere in this eCommerce world where there's this embedded finance happening. And I think that banking as a service can provide a great tool to help the evolution of those companies, which help the economy and help the SMB sector.
Kristen Kines: (
That's a great point. One of the things that I've seen, relative to evolve, it seemed like all of 2021 was all about credit and you have this big influx and this trend of all these, FinTechs and these different companies that are wanting to launch credit cards, they're always looking for the next evolution of, okay, what is the next product that we're gonna continue to keep these end users engaged? So 2021 seemed to be all about credit. You know what I think a lot of these guys are starting to figure out is it's a heck of a lot harder to come up with the capital to sustain those programs long term. And it's a heck of a lot harder to actually secure these warehouse lines from the guys, like the credit suisse of the world, or, some of these other, some of these other large institutions. And what we're kind of seeing now is the shift of all these different types of platforms, trying to figure it out and solve for it. How are they gonna get this launched and get it off to market, without actually going and securing a hundred million dollars from a warehouse line, we're seeing kind of a trend more into secured card constructs. So I think it's gonna be super interesting to see over the next coming months, over the next coming year, which programs are really gonna be successful in getting this stuff launched and how are they gonna do it? And, are the capital providers and the capital partners gonna come to the table to help them once they're able to produce a proof of concept.
Rajiv Appana: (
When I think about this problem, I think it's interesting. You talked about, embedded finance in context. I think that's going to be bigger and bigger part of how people access. Some of these services. I'll talk to you about something outside of the US. We operate Google Pay globally, and in India, we operate it at some scale. And the thing that we're realizing is so many people, because they're actually transacting with Google Pay to make their everyday purchases. We're seeing both loan originations from our bank partners in India, both from a consumer as well as small business, right. And that what they can do is now access the money within the payment in the payment ecosystem itself, and then use it for their capital needs or for their day to day expenses. And I think that that's very, very interesting for the user not to go out of context, do something and come back. The embedded finance is an area which I think FinTech players are saying, let me go in and try to do something there versus let me be embedded finance native. I think that's an opportunity that I haven't seen. I'm starting to see some of that, but I think it's a much larger opportunity that will make itself available in the next few years,
Amit Parikh: (
To me, how do we help our partners create a deeper relationship with their customers? And so from a financial services standpoint, that's super critical. And so you can go down a list if it's sending money as easy to text message, if it's easier way to get working capital, an easier way to identify yourself. There's so many aspects that the financial system touches and how do we help remove all the complexity so that our partners can have a deeper relationship with our customer, with their customers. And so that at the end of the day allows a customer to have a better view of their cash flow and make it more convenient. And so I think we're very early in this, and while we go through it, there's gonna be lots of UP there's gonna be a lot of things that are launched. That actually don't make sense because it's actually not making things easier for our customer and the cognitive load that where are my financial products, what responsibilities have I taken out over multiple different, either websites or apps. I think there's a big consolidation as we've expanded, and there's gonna be a consolidation, especially with the current funding cycle also.
Chana Schoenberger: (
Definitely. And it's interesting too, because when you talk about the convenience of embedded finance and removing all the friction, the other side of this is the whole financial literacy financial inclusion piece, which is that most Americans have no savings. So when you talk about this on the consumer side, if we're making it easier for them to spend money, they're just gonna have less money. That's a little frightening. So that's a discussion for a different time. We only have time for one more question. So I would love to know what is the coolest thing you've seen recently in tech specifically FinTech, that is not your own company.
Kristen Kines: (
I'll take a stab at it.
Chana Schoenberger: (
Okay.
Kristen Kines: (
Recently this last week spent a lot of time with the digital payments group over at MasterCard. Got to see a lot of what they're doing with biometrics as far as facial recognition stuff for faster payments. I think it's super cool. It's nothing that we're doing yet, but I think it's back to really knowing who your customer is and being able to validate that when you are using your own facial biometrics, that's again, back to the fraud piece. I think that's something that's super important and very interesting.
Chana Schoenberger: (
Cool.
Mike Butler: (
Yeah. I probably answered some of this already, but I would say the embedded finance world, and some of the technology that's being deployed to determine how somebody will get working capital to support their business on eCommerce and what data points are being used to be able to make that decision. We've seen some companies that are selecting certain receivables, that they will finance in other receivables they won't. So they know I will pay the liquor store before I pay the grocery store. Okay. Just to say it right. But I have a propensity to pay that better and faster than I do the other. So they're financing that receivable and they're not financing the other. This is very cool and advanced technology as it relates to some of the basic lending that we've done.
Rajiv Appana: (
Interesting. I'll give you a personal one. So I'm looking at a lot of the traditional banks. And I love how they're now partnering with FinTechs to bring some of these novel experiences. Recently, I got my daughter, her first debit card with the chase green light partnership. And it's super cool. It's one app on my phone. I can move money between the accounts. Usually it's me moving money to her, but happens. Right. I like how they're innovating without having to build everything and then bringing those two things together to create a better experience for their customers. I look at it as embedded finance itself.
Chana Schoenberger: (
Cool.
Amit Parikh: (
The thing which I mentioned earlier, the thing that I find fascinating is the continual evolution in identity. As we all have to, from a bank standpoint, you get to know your customer. And so the, the progress we've made in moving money very quickly has in my mind progressed way faster than our ability to identify people in a more specific way. And so that's where I spend a lot of my time is cuz that's gonna help both onboarding and it's gonna help with fraud. And so, there's a lot of cool new technology out there when it comes to identity.
Chana Schoenberger: (
Great. Well, thank you so much, everybody. I really appreciate you coming up here today. That's all the time we have.