In this episode of "Accrued: A Fintech Confidential Series," presented by LoanPro, Host Tedd Huff and Co-Host Sarah Howell sit down with Robert Keil, the Chief Fintech Officer at FinWise Bank, to discuss the evolving world of sponsor banking. Robert shares insights from his rich banking background, shedding light on the pivotal changes and dynamic interplay between fintechs and traditional banking. 

They discuss the challenges associated with sponsor banking and how FinWise Bank manages to stay ahead of the curve. Robert discusses the bank's unique approach to banking solutions, emphasizing technology's critical role in enhancing compliance and operational efficiency. 

They also uncover the importance of the collaborative landscape between fintechs and banks, highlighting the shift in perspective towards viewing fintechs as vendors and the importance of aligning philosophies for successful partnerships. It's an insightful session filled with firsthand experiences and practical strategies from one of the industry's seasoned professionals.

They also peek into the Crystal Ball of the future, offering a glimpse of emerging trends and potential shifts in the sponsor banking arena. Robert's commentary on the importance of B2B opportunities and the potential for embedding financial products in various sectors hints at exciting developments on the horizon. For anyone interested in understanding the intricacies of fintech and banking collaboration, this episode is not just a conversation but a view into the future of Sponsor Banking. It's an essential listen for innovators, thinkers, and anyone curious about the transformative power of technology in finance.

Watch on YouTube.

Key Highlights

• Unlock the Secrets of Sponsor Banking with FinWise's Chief Fintech Officer: With his extensive banking experience, Robert Keil breaks down the complexities of sponsor banking, shedding light on the synergy between fintech innovations and traditional financial systems. Learn about the importance of embedded banking products and how they transform the finance landscape.
• The Future of Transactions: Beyond Deposits and Payments: The emerging trends in digital payments, from seamless transactions to cutting-edge banking solutions, find out how FinWise Bank is leading the charge in redefining how we think about Sponsor banking
• Fintech Compliance and Innovation: Robert Keil shares insights on how FinWise is fostering innovation while maintaining a critical balance between compliance and innovation, ensuring a safe and forward-thinking banking environment.
• Tech-Driven Banking: See how FinWise Bank leverages the latest tech to enhance operational efficiency and offer unparalleled banking experiences.
• The Power of Fintech and Bank Collaborations: Learn how collaborations between fintech companies and traditional banks reshape the financial ecosystem and offer consumers more personalized and efficient services.
• B2B Innovations in Fintech: Discover how FinWise Bank is pioneering solutions that address businesses' unique needs, streamlining operations, and facilitating corporate growth.
• Overcoming Challenges in the Fintech Space: Robert Keil discusses the significant hurdles facing the fintech industry today, from regulatory challenges to technological barriers, and how FinWise Bank navigates these issues to stay ahead of the curve.
• Empowering Fintechs with Cutting-Edge Banking Solutions: Find out how FinWise Bank empowers fintech startups with robust banking platforms. These platforms enable them to innovate and disrupt the traditional banking model while ensuring compliance and security.
• The Evolving Landscape of Digital Banking: Shifts in consumer behavior and how banks adapt to meet these new demands.
• FinWise's Unique Approach to Sponsor Banking: Discover how Finwise has redefined the sponsor bank model by integrating technology and compliance to create a seamless and efficient banking experience.

Takeaways

1. Fintechs as Catalysts for Banking Innovation: Gain insight into how fintech companies are not just partners but catalysts, pushing banks like FinWise to explore new horizons in banking services, ensuring that the sector remains at the forefront of technological advancement and customer service excellence.
2. The Role of Compliance in Fintech Growth: Discover the intricate balance of trust between maintaining rigorous compliance and nurturing growth in the fintech sector. FinWise Bank shares how adhering to regulatory standards is compatible with and essential for the innovative development of banking solutions.
3. Redefining Customer Experiences: Learn about the transformation in customer banking experiences, where personalization and efficiency are key. The Sponsor banking sector is shifting towards services that are not only secure but also custom designed to fit the Fintech needs.
4. Strategic Fintech Partnerships and Their Impact: Unpack the strategic importance of selecting the right fintech partnerships, as discussed by Robert Keil. These collaborations are pivotal for banks aiming to enhance their service offerings and stay relevant in a rapidly evolving regulatory landscape.
5. Anticipating the Future of Financial Services: Get a glimpse into Robert's vision of potential trends in Sponsor banking and fintech. He advocates a more integrated, technology-driven approach to financial services, highlighting the ongoing need for innovation and adaptability.

Links:

Finwise:

Website: https://www.finwise.bank/

LinkedIn: https://www.linkedin.com/company/finwise-bank/

X (formerly Twitter): https://twitter.com/FinWiseBank

Robert’s LinkedIn Profile: https://www.finwise.bank/news/robert-keil-svp-chief-fintech-officer/

Fintech Confidential

YouTube: https://fintechconfidential.com/watch  

Podcast: https://fintechconfidential.com/listen 

Notifications: https://fintechconfidential.com/access 

LinkedIn: https://www.linkedin.com/company/fintechconfidential 

X (formerly Twitter): https://twitter.com/FTconfidentia l

Instagram: https://www.instagram.com/fintechconfidential 

Facebook: https://www.facebook.com/fintechconfidential

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Time Stamps:

00:47 Introduction to Accrued a Fintech Confidential Series presented by LoanPro

04:20 Robert's Journey in the Banking and Fintech World

08:54 The Importance of Embedded Banking and Regulatory Compliance

12:42 FinWise's Unique Approach to Banking Solutions

13:47 The Benefits of FinWise's Technology-Driven Compliance

18:05 Navigating the Changing Landscape of Fintech Collaborations

21:50 The Power Shift in Bank-Fintech Relationships

22:19 The Evolution and Future of Fintech Collaborations

23:52 The Future of FinTech Ecosystems

24:28 Challenges Facing Sponsor Banks

25:10 The FinTech Philosophy vs. Banking Goals

26:34 Navigating Regulatory Challenges and Risk Management

29:37 Leveraging Technology for Compliance and Efficiency

31:18 The Role of AI in Banking and Its Limitations

34:25 Building and Integrating Custom Technology Solutions

41:37 Exploring B2B Opportunities and Embedded Financial Products

45:09 The Role of Sponsor Banks in Supporting Tech Integration

45:25 Predictions for Banking as a Service

45:54 Closing Remarks and Resources

This is a Production of Diamond D3, Media

ABOUT:

Robert Keil: Working with people and problem-solving are two of Robert Keil's passions. It is gratifying to manage a team of extremely talented sales professionals and assist them in reaching their goals. At the same time, it is a pleasure to work with hundreds of FI clients and provide them with the Payment processing solutions they need to meet the account holders' expectations. Over the years, Robert has been responsible for sales, relationship management, sales support, product development, and marketing. He has personally grown and managed a national sales organization with over 70 team members, driving hundreds of millions of dollars in revenue growth. He knows what it takes to build a successful team, from hiring the right talent to training them, organizing them, and inspiring them to achieve great results. His career began in Germany, where he grew up with Dresdner Bank AG and developed his knowledge of the financial services industry. When he moved to the United States, he became an entrepreneur and operated a commercial cleaning franchise that he successfully sold three years later. Eventually, he returned to the corporate financial services world where he is today the Chief Fintech Officer at FinWise Bank.

Finwise Bank: FinWise is reshaping the Banking value chain through Fintech enablement. The Company is at a key expansion point as it incorporates BIN Sponsorship and Payments HUB offerings into its current platforms, creating an integrated Fintech banking solutions provider. Its existing Strategic Program Lending business, done through scalable API-driven infrastructure, powers deposit, lending and payments programs for leading Fintech brands. FinWise also manages other Lending programs such as SBA 7(a), Real Estate, and Leasing, which provide optionality for disciplined balance sheet growth. FinWise is well positioned to help Fintechs through its compliance oversight and risk management-first culture.

Tedd Huff: Tedd Huff is the Co-Founder of Voalyre, and the President & Founder of Diamond D3, a professional services consulting firm focused on global payments and marketing. He is also a video podcast host and producer of Fintech Confidential.

Over the past 24 years, he has contributed to FinTech startups as an Advisory Board Member, Co-Founder, and Chief Experience Officer, providing strategic and tactical direction for Global Payments OpenEdge, Heartland Payments, Nuvei, and TSYS, among others, focusing on growth while delivering innovation, process improvements and user experience-driven value to simplify the complexity of payments.

Sarah Howell:  Sarah Howell, a seasoned expert in banking and fintech, joins the LoanPro leadership team as the Vice President of Partnerships, aiming further to enhance the growth strategies of financial institutions and fintechs while also bolstering bank-fintech partnerships. 

With her extensive background in fostering collaboration between financial institutions and fintechs, Sarah is set to drive growth through innovative partnership strategies for LoanPro. Sarah’s unparalleled expertise in leading partner programs across traditional business models and banking-as-a-service models at Visa and Infinant has equipped her for strong success in this new role at LoanPro.

Sarah’s role in leading partnerships for LoanPro involves building a partner ecosystem designed to advance the growth goals of fintechs, financial institutions, and brands to meet evolving consumer and commercial demands for personalized financial services. Using her deep industry knowledge of embedded finance, credit card processing, and banking technology, Sarah will play an instrumental role in reinventing the collaboration between the entire financial ecosystem, providing strong partnerships and seamless integrations.

Diamond D3, Media: A media creation, management, and production company delivering engaging content globally

And I think we've just scratched the surface as to

what all is possible when you embed banking products in that B2B , B2B2C

setting And, um, the use cases that keep emerging are just fascinating.

What ultimately to happen is

the dust is going to settle the real use cases for.

What we call days, banking as a service will emerge and it will

solve real world problems because the technology will be available.

The understanding is there.

People learn from the mistakes that have been made.

And that's where the real excitement comes in.

Tedd Huff - Fintech Confidential: Welcome to Fintech Confidential, bringing

you the people, tech, and companies that change how you pay and get paid.

Welcome to Accrued, the Fintech Confidential series presented by LoanPro.

In this series, we're deconstructing the complexities of lending and exploring the

compliance, optimization, modernization, and personalization through insightful

conversations with the industry's best.

I'm Tedd Huff, along with my co host Sarah Howell, stepping in for Colton today.

And we're here to guide you through the intricate lending world, whether

you're deep in Lintech or just intrigued how the technology is reshaping Lindi.

You're right in the right place.

And now let's dive into another episode.

Of Accrued

so robert i'm super happy to have you on as you and i were talking before we

hit the uh The record button the last time you and I sat down personally

face to face was at money 2020 last year So i'm really glad that we have

this opportunity to find out what's what's happening over there at finnwise

likewise, and even though it's only October, right?

When 2020 happened, a ton has happened since.

And I think anyone that follows the industry news sees there's new

things happening every week that affect what we do and how we do it.

it's a little bit of a crazy time.

It's also, in my opinion, a very exciting time because, well, what's

happening is Headwind's for some.

For others, and I would count us among that.

It's really a tailwind.

Because Sarah is new to the show, I want to give the audience

kind of a little bit of a background of who she is before I dive into who

Robert is and what the bank's doing.

But let me dive in first with Sarah.

So Sarah is the vice president of partnerships at LoanPro where she

leverages her extensive experience in fostering collaboration between

financial institutions and fintechs.

Her expertise and leading partner programs at Visa and Infinite has

prepared her to drive growth through innovative strategies at LoanPro.

Welcome Sarah to the show.

Thanks so much for the introduction, Tedd Excited to be here.

Robert, great to have you on the show.

Looking forward to all that you have to share with our audience.

Likewise good to see you too

In today's episode, we're putting the spotlight on fin wise bank, a

leader in the lending as a service space.

Robert Kyle, the chief FinTech officer for fin wise has dedicated his career

to revolutionizing sponsor banking.

Enhancing visibility and providing control for FinTech partners

through innovative programs.

Today's journey is going to showcase how FinWise leverages technology alongside

with traditional banking principles to offer groundbreaking solutions.

Their commitment to compliance, innovation, and empower the FinTech

partnerships sets the stage for what we're going to be talking about today.

Robert will be sharing his insights from his extensive background and the pivotal

role that he has taken at FinWise in shaping the future, of FinTech banking.

As we explore how FinWise Bank helps FinTech brands disrupt the

traditional banking model, we'll uncover Robert's transformative

impact in driving compliance and innovation in the FinTech ecosystem.

Robert, it's so great to have you on.

Great to see you again.

I know when we first met, uh, you were at Sutton Bank, which has such a great

history in the sponsor bank space.

Uh, but I know that your career didn't start at Sutton and I know that you,

you're going to do some great things.

You are doing great things at FinWise, but give us a little history about

your career path and trajectory.

Yeah, so my background in banking goes back almost 40 years.

I think in September, it's 40 years ago that I started in, in banking over

in Europe, where I grew up and did my schooling and, uh, got the degree that

was needed if you wanted to be the CEO of a financial institution, and that

included everything that German banks do, uh, things like import, export financing,

running around on the Trading floor of the stock exchange to, um, commercial

banking, consumer banking, and so on.

But eventually, you know, I ended up in the U.

S.

30 some years ago, and initially, nobody knew to do with my banking

background, it while to get back it.

But, um, I was then in the, in the late 90s, I got back into banking in

particular, and in 99 into payments and, um, spend initially a few years at what

became Wells Fargo, focusing on ATM debit processing for banks and credit unions.

And then from there left to spend 17 years at US bank along financial doing

the same was a couple other niche markets.

At a leadership role there, um, eventually left, and that led me through,

uh, over one detour to, to Fiserv.

And that's how I became an almost involuntary participant

in the world of fintech.

Because what happened is the role for which I was hired at Fiserv.

Didn't quite materialize, wasn't vetted with the CEO at the time.

And then people tried to figure out what do we months work about 6 months work,

when that was done, someone said, well, you know, there's these companies like

chime that are popping up money line.

Can you figure out if there's something we have that we could sell to them?

And.

Honestly, I didn't want to do that.

Right.

But at the same time, I didn't want to change jobs again.

So I kind of bit the bullet.

They gave me 1 employee and together we sat like, what do we do?

Right?

We don't even know what a FinTech really is.

And so we started to look at what do we have?

What could be, you know, reposition a little bit, take some Fiserv solutions,

glue them together differently.

And I guess I wouldn't just, I would say to my surprise, it really, really

took off and the team grew really fast and got exposure to some really

good names, but also the banks in the industry and when some changes that

Fiserv happened and I decided to make a career change, I ended up with Sutton

for a little bit, but then when Finwise reached out to see if I had

an interest of moving them from just lending as a service to the full range,

of a FinTech solutions from the bin sponsorship and payments as a service, uh,

I kind of found my forever home, right?

Because it's the right culture.

That's, uh, doing things correctly, but also scalable.

And, uh, so it was kind of the perfect match

That's awesome.

Yeah,

coming from traditional bank banking and all of the different

pieces from investments to the commodity piece of it and being

on the floor and then getting into

Fiserv and being asked to figure this thing out.

I think it would have given you a different perspective of what is really

needed for a sponsor bank relationship.

what ends up happening a lot of times with a lot of my consulting clients,

they ask me, Hey, what makes a sponsor bank, not just good, but truly stand out.

And I'd love for you to break down for us how Finwise is cutting through that

noise in the sponsor banking world.

Based on something that happened earlier this

week, it may sound a little.

Humorous, but the answer to that is don't be a BaaS,

because BaaS banking as a service, I think, has gotten a reputation of

of practices on how not to do it.

Right?

I mean, for too long.

What we've seen is there's some fintech that Stands up a program in

many ways, does whatever they want and then finds a bank that basically

says, yeah, I sponsored this,

but doesn't really have to line of sight and control that is needed.

And so it's this, you know, rent a bank type setup that, um, is often associated

with BaaS and in order to do it, right.

I think the proper way to do it is really.

Embedded banking, meaning you take bank products, bank services,

bank solutions and embed them into a 3rd party ecosystem because

legally compliance ways in every way, shape or form those products

that are offered are the right?

So we are responsible for it and so um

it's not going to be enough.

Uh, to just say, I'll fill out some paperwork and I sponsor the issuance

of a card and I review a couple of disclosures and cardholder agreements.

You really need to take the bank solutions embedded into a 3rd

party ecosystem so your fintech partner can build the UI around it.

But again, you have to controls and, uh, uh, the line of sight

that you need to really stand in front of a regulator and outline.

We know what's going on, and, uh, that is ultimately

the key, in my opinion.

I

So you you, mentioned, you know, the, the embedded piece of it,

how is Finwise cutting through the noise?

I mean, we talked about the noise.

We talked about all the noise around BaaS, but how are you cutting through

that, that noise that's going on?

In most cases, a sponsor bank and their oversight, they sample, right?

Send me 50 loans, send me loans, and then manually relationship But

especially in a large relationship, if you do millions of loans every year,

It's virtually impossible to manually do statistically relevant review,

So that sets you up for trouble.

So what FinWise did is it built this platform and

when we approve a FinTech partner, talk about the process, you know,

so that pick the right We approve

We approve and review every aspect of that program, right?

Underwriting models, terms, conditions, everything.

Um, when the partners then go out and do their customer acquisition,

they really do a form of, I would call it pre underwriting.

They apply the approved standards and then all the applicable data gets

ingested into our own platform by API.

And we re underwrite the law, making sure the partner stuck to

the agreed upon, uh, guidelines.

And so if you have a loan that doesn't meet that now it spits out and you

review it, if you actually still approve it, well, then you document

it as an exception to the credit policy, but you can literally say

rightfully to a regulator I've seen.

Every single loan, it has gone through the filter and then on top of that, right?

So that's the technology piece.

That's important.

But we argument that was the human insights where every quarter we do an

on site visitation with our partners.

Sometimes it's virtual, but 1 quarter we focus on all things.

1 quarter.

It's all things compliance.

Then it's a quarter of it.

So.

You're not just looking at every loan, but you're keeping your finger

on the tab just to make sure, um, there's nothing, nothing else.

That already taught us how technology is important.

And so now, as we're expanding into the sponsorship of card programs

or payment solutions, right?

May that be ACH and wire and RTP and FedNow and RPPS and a few others.

We're putting those into an open banking platform where we

have ledgering capabilities.

So we can take checking accounts.

We can take savings accounts.

We can take those payment rails, embed them in a third party ecosystem.

But in order to do that, you got to go through our KYC, nothing

happens till you pass our KYC.

We will do the transaction monitoring, right?

We don't delegate that.

And so that gives you a lot of that line of sight and control

that is just so critical.

And that has often been neglected.

That's a lot different than what we've seen over the years with

the traditional bank sponsorship model.

So that's a, that's definitely a unique approach.

Are you guys system of record in that?

Are you guys system of record in that, um, that ladder, the

deposit side and payment side

We can be.

Um, so, uh, you know, there's some we limit ourselves when it comes

to, like, for example, to card processing to a small number of, uh,

processors, and in some cases, they don't have ledger and capability.

So, in those cases, in our platform, we will have the ledger.

It's basically a digital core, um, and do that in other cases.

Uh, if, you know, the card processor has is approved by us and they

have the ledger and capabilities that went through our review and

we feel comfortable having them be,

the system of record and, uh, tie us in for the other pieces still means, though,

you've got to use my KYC before you

that's I love the, the using technology to enforce

kind of compliance and controls.

And it sounds like the approach that FinWise is taking is a little bit

different than some in the industry, but how are you seeing that benefit FinWise

and then some of the FinTechs that you

yeah.

So when you look at the world of FinTech, right, a lot of

what's happening right now is.

Because what, what I just described

wasn't possible, right?

I mean, when, when you look at the early fintechs, that's what they wanted.

They wanted to have basically a customized version of the bank's

core, but the bank's are all 1990s building for, here's a building.

Come on in, give me money and we deposit it or money and we'll loan it to

you right

It's not designed for, for customizing and taking it elsewhere.

And that's what.

As a result of that has given burst it is very patchwork ecosystem and,

um, and that's ultimately where we solve some operational issues.

When you look at some fintechs right now, the way they function is, let's

say they have a credit card program.

They have a sponsor bank for that, and maybe that bank even helps with some

ACH when it comes to loan payments, but then they have another vendor for

KYC, um, or some other LoanProducts.

Let's say it's, it's a lending product and they want to disperse

a loan via push to card, right?

It'd be a direct transaction.

Well, then with another bank, a different tech and all that.

And by the all said and They deal with four different stacks, three or

four different and yet nobody has a clear line of sight into where's the

money coming from, where is it going, because it's so cobbled together.

And so by being in many ways the one stop shop, or it could be a two stop

shop, like so, and when we partner with LoanPro, you're kind of the The one end

that takes care of the loan servicing.

We're kind of the rest.

You have two tech stacks, one bank.

So now, operationally, it's easier, but then also to keep the program safe

on the compliance side is a whole lot easier just right We see it all right.

and that's where you make a

100 percent and they've been on the flip side

from a LoanPro perspective.

If that fintech grows so big and you don't want to support every new, you

know, lending product that they roll out, they can plug in a different,

a different sponsor bank as well.

So that they can continue to grow and you can continue to stick

within your, you know, bank policy

Exactly.

That's there.

But even there, I'll throw, you know, 1 qualifier, you know, I've often said

to Fintech, you need to have more than 1 bank, um, for, you know, it's just.

Smart, but for us as a bank, honestly, we're kind of picky as to who would

you potentially choose because you can become quickly collateral damage

these days.

And, uh, if if a partner were to choose the wrong bank, we definitely would would

have to have some some discussions there.

Well, and even, even this morning is, is, uh, today we're

recording this on Friday, March 1st.

So just kind of put that in perspective, but like this morning,

It was announced that another banking as a service provider has been

removed from from their sponsor bank.

We don't have any details yet, but we can kind of assume based upon past

behaviors of what actually happened there.

And, you know, with that being said, The only constant that we're seeing in this

industry is that it just keeps changing day to day, sometimes hour to hour.

it keeps changing

in the space of sponsor banking and FinTech collaborations.

How, how has FinWise riding this wave of change and shaping the future of the

landscape, especially as you mentioned,

you guys are pretty particular on who you bring in.

How are you, how are you staying on top of that wave without falling behind?

You take some tried and proven core banking principles, you

take, um, a disciplined approach that's sometimes hard because human nature

takes you, uh, in a different direction.

But, uh, here's what I mean by that.

So tried and true banking principles, when you take

the issues that have been experienced and you condense it down, 80, 90

percent of it comes down to this.

Do you know who you're doing business with, and are they

who they say they are, right?

So that's the KYC component.

If you can make sure that you know that and can prove it to a regulator,

you're in pretty good shape.

The other pieces are where's the money coming from and where is it going, right?

In other words, is anything that runs through you money laundering or not?

And so that's that line of sight component.

If you just cover those bases.

You already set yourself apart, and so whatever you do, that has to

really go through your mind, right?

Is it that?

And then maybe a third piece that's a more FinTech specific

principle is, is the sniff test.

I've used that a couple of times in example.

If a FinTech brings the program to you, is something you would actually offer in your

that's good.

I've used as an example, the idea of tipping.

I'm a hundred percent certain there's not going to be a single bank in the

country that says, you know what?

Come on in, we're going to loan you money.

We're not going to charge you interest.

Just give me a tip, right?

That wouldn't happen.

So if you would never offer it in your branch, why would you sponsor it?

it is your product, now,

the other part when I talked about, you got to fight human nature, right?

If you're in business, you typically have that strong urge, the customer's right.

I want to make my customers happy.

And that's where there is often a fundamental misunderstanding.

Too many banks that jumped into this without thinking it through, viewed

the FinTech as a customer, right?

And the FinTech wants,

Fintech gets, yeah.

The fintech is not a customer.

The fintech is a vendor, is a vendor of the bank that

services the bank's customers.

It happens to be a vendor that pays for the privilege.

But they are a vendor.

Robert, would you say that the percent perspective has shifted from

being a customer to now I'm extending my.

My charter out into the world versus I'm allowing you to send me customers and

money.

well, let's put it this way, uh, for the team at fin wise, which

is something that really attracted me.

That has always been the mindset, right?

The bank is offering its solutions through, um, a fintech partner,

an increasing number of banks has woken up to the fact that yes, the fintech is a

vendor and, but here's where that affects.

The mindset, right?

Um, what do you do with a vendor that doesn't perform?

Well, you sometimes give them a chance or two, but then

ultimately you fire them, right?

now human nature is, well, they're paying me money, I want the revenue.

No.

If they're not performing, you gotta fire

the old adage of some revenues better than no revenue is Not always a

good one to talk about it in the face

I think the banks are starting to have the power

differential in the relationship.

Now, when you had so much B.

C.

Money going into the industry, the fintechs really did a lot of times,

especially, you know, with smaller banks, they had that power differential.

And so now is a great time, at least in my opinion, for banks to start to rise up.

Take that power differential back, um, and and really start

helping shape the industry in a way that's going to protect it.

But I would be, I would welcome your thoughts on that.

Robert.

One of the things going on right now, Or what it reminds me is.

the dot com bubble in the 90s and right time you right?

There was a time you had a power point and maybe you had a

domain didn't have to be live.

Here's thirty million dollars go, right?

And then all of a sudden

the dot com bubble blew up and you saw in the newspaper things

are the Internet's going away.

It's a fad.

It's it's dead, right?

But what really happened is the real use cases started to emerge

because the Internet itself.

Was here to stay,

Nobody back then envisioned that stream all of our entertainment video Internet

that we would do video conference calls voice over IP and so on and something

similar is going on with BaaS, right?

3 years ago.

I have a nice PowerPoint here a hundred million dollars go and then,

crazy stuff

I can't believe I missed that by the way.

Like I can't believe I missed that, that era.

I miss both of them now.

and, uh, but I think like the

Internet banking as a service of FinTech relationships are here to stay.

There's that, you know, toothpaste is out of the tube.

But now the real use cases are starting to emerge and just like there's many

players in the Internet days that.

Blue up early.

Now, the real use cases are coming out and And out how to do this right.

And,

as we've already seen, you mentioned some of the news.

Yeah, there's some victims now, right?

Sometimes it's fintech.

Sometimes it's banks that are exiting the space.

So that cleanup is going on and it will go on for a little bit longer.

I think we have not nearly seen the end of it.

But when it's all said and done, there will be a much healthier ecosystem,

and it's an ecosystem that will solve real world problems, not some of the

gimmicky products that are solutions looking for a problem, but real stuff.

And that's ultimately exciting, right?

Well, and every, every story has, you know, that, that hurdle, that

big piece that you have to get through.

And, you know, we, we've talked about all the great things that, that FinWise

is doing and the direction you're going and you're enabling the technology.

But I'd really like to understand, you know, what are some of the challenges

that you're facing as a sponsor bank?

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How are you guys turning those challenges into

victories?

here's maybe fundamentally the biggest challenge, and I've

seen that not just at Finwise, but in my years in the industry,

I've sometimes said FinTechs, heavy on the tech, light the fin, right?

That's, uh, sometimes the, the big, big issue.

And when, when you really think it through.

The fintechs as technology companies have often goals that are directly

opposed to the goals of a bank.

A fintech is valued by the number of subscribers, number of customers.

So they want to drive those numbers up.

Some of them are stolen identities.

Who cares?

It's the subscriber, right?

It meets their mission.

The goal of the bank is totally different.

And, um, that philosophical difference is maybe the biggest challenge, right?

And somewhat related to that is.

Fintechs as technology companies tend to apply a lot of common sense, right?

Because they come from a world where one plus one equals one.

That's just makes sense.

You look at banking regulation, sometimes there is no common

sense, but it's still the law.

You have from some of the technology leaders statements like, well, you

know, if there are rules, go break them.

That's fine in the technology world,

Move fast,

to

move and break

you're in

trouble rule,

Can't do it.

you're in trouble.

You cannot do it.

And so to get those philosophies aligned is ultimately, um, the biggest

challenge.

And specifically regarding regulatory challenges and risk management,

you talked about a couple of things earlier, um, KYC that you own end

to end, AML checks that are 100%.

Um, what are some of the other compliance and operational efficiencies that you guys

have put in place that have really, um, increased the high standards of compliance

some of the things that we do, and to be honest, of our partners

don't love it, that's still what it is.

Um, you know, if they use some sort of model, And especially when it comes

to lending, find the deployment of AI.

Which in itself is fine, but that can get you into hot water it comes to

fair lending regularly So our partners have to regularly get their models

tested by knowledgeable third parties.

That's not cheap, but to make sure that you're not accidentally

violating lending rules.

stakes a table stakes.

even though we We have all these, you know, uh, site visits that I mentioned,

our partners have to get once a year from a knowledgeable party, a PSA

audit, a compliance audit, an IT audit.

So there's just constantly checking, checking, right?

We check, they, Fintech partners are the first line of defense, and

then there's an external look at it.

And if you keep doing that, if something's not right, you catch it when it's this

small, not when it's this big, right?

This is one of those things where you take technology where you can, but

then also use some of the, the human insights to keep the technology in check

It's almost like you're sub, you really are sub delegated or

deputized regulators for the FDIC and the Fed and for the OCC and

those roles that you're playing.

It really is, you know, the, the, the panel was on early in the week.

It was, was the CEO of a Canadian bank that has somewhat of a similar model.

He has been doing it for a long time and he actually.

Called it providing regulation partners.

So, his, his

that's an interesting way to

put it.

um, and, and to some degree, uh, yeah, you could argue.

We're kind of the regulators of the fintechs it upon us

to make sure we do right way.

could start charging the regulators with this type of a model.

No, just

no, no.

We work with them.

And

Oh, I'm not going to be invited back to the show.

Getting us all in trouble here, Sarah.

I'm kidding.

Um,

one of the things that, um, you know.

I, I hear you talk about all the regulators and regular, Um,

regulation as a service, I think is what you called it, or the Canadian

well, that's what

the Canadian banker called

Canadian

Yeah.

You know, looking at it from that perspective, there's, There's a lot of

technology you mentioned that is in a lot of places that end up in the human hands

with so many technology changes.

And, you know, I'll throw out the, the wonderful buzzword of good old

AI, whatever you want to put in what bucket you want to put that in.

When you look at that, how are, how are you guys staying ahead?

How are you guys staying innovative?

And can you share how you're leveraging the technology to stay ahead?

it starts with the non technical part, which is in this business.

Compliance is at the core of it, right?

It has to be first.

So when you look at what is needed to demonstrate appropriate

compliance, then you can start looking at the various functions

and look at what can be automated, you know, at least at this point.

Once you identify those areas, you can look at, does it make

sense for us to build it?

Like we did with our LoanProcessing platform, you can look at, do we

have someone build it for us or do we deploy an existing solution?

based on cost and timing, you make the decision.

What makes the most sense?

Now, we're fortunately now living in a, in a time when.

You can keep your platforms more scalable right?

With, you know, and cloud and A.I.

And whatnot else,

which helps for the future.

We're not necessarily in the traditional bank or world where it's 1990s.

Technology was a ton of spaghetti code.

If you make a change here, 5 things break over there.

Everything is a little bit more modular and that in itself helps.

Right?

in our platform that we're standing up to a zero trust based platform was

a dual ledger where you constantly have your checks in the system, the

checks and balances where you can, um,

do things that make it easier and quicker to reconcile and

keep your finger tab and, um.

AI will be great.

You just have to make sure since actually the regulations pretty clear

on when you use a model when you use AI,

what requirements does it have to meet.

And so AI by itself is something that can really make a difference.

But I sometimes I'm a little bit of a wet blanket on AI because yeah.

What AI, in my opinion, does is

it's never going to be smarter than its creators, right?

It's just going to do what the creators do faster and quicker.

And so the quality of an AI really depends on the quality of the creator of the AI.

if there is a flaw in there, what an AI will do is it will magnify it, right?

So there's a certain risk there.

If something is not done right, then.

Things can really break, right?

And I remember as an example, not pertaining to banking,

but I remember there was some early test with some conversational AI where.

All of a sudden, after some questioning, the felt that the Holocaust was a

great you Just because you tricked it and it reflected incorrect thinking.

And those are the dangers where you really have to make sure when you deploy it,

you really got to make sure it's doing more of the right things and faster.

But not all of a sudden magnifying a mistake.

When I look at AI being used in banking and payments,

identifying abnormalities, the ability to To do the, the data crunching,

the ability to do the identification of how things have changed.

I think all of that is fantastic.

But the one thing that, that we can't get even at a generative AI.

what it lacks is the ability to do, uh, assessment of relevance

and assessment of impact.

Because all it's doing is looking just at the data and

saying, what does the data say?

Doesn't matter what.

What the context was in a lot of cases, and that comes down also

to what you were talking about.

It's only as good as the creator, and we don't quite yet have enough control

over the creation to give it that that.

view of relevance.

Exactly.

That's exactly the point, right?

I mean, I talked a couple of times here recently to our CTO.

And when it comes to things like auto reconciliation of

everything going on, right?

His big point is before we can automate that

we have to understand how to do it by hand, right?

If you don't it by hand manually, then automate it.

that's when it comes down to like identifying

abnormalities and whatnot else.

You really got to make sure you identify the right ones.

Yeah, you can identify a bunch of irrelevant abnormalities, and then

you spend your time investigating those that are, you know, outliers

and don't necessarily right

And I, and I, I jumped way ahead.

Um, just because it was something that was in my head.

Um, but you know, one of the things that you've, you've mentioned a

couple of times that you guys have built some of your own technology,

and that seems to be a theme in just about everybody that we've been

talking to is that they built a piece of the technology where they feel

that they have the expertise and the understanding, but they've outsourced

other things and then they plugged in other pieces and just really, but Kept

control over the inputs and the outputs.

I'd really like to understand how these services and solutions.

are going to drive lenders and fintechs forward.

As the LoanPro team knows, I'm a big fan of them, um, because it.

Allows for customization while still operating in a, in a safe environment.,

right, wrong and different.

A lot of the things that are pertaining they're to banking,

Mm-Hmm.

still pretty outdated, right?

So, you know, it's not that long ago when I had to open somewhere a bank

account and I walked away an inch of papers were printed out, It's

like, that's still what you have.

And while we're nowhere near yet to have it all digital with

deploying technology, the way we do.

We can automate a lot more of that eliminate manual steps.

And in the end, that's that's what fintechs want.

Right?

I mean, with their technology, they're really good about.

Customizing solutions that that meet users needs,

doing things in a way that are more intuitive.

Right?

And if we're enabling them to do that by bringing the right technology to

them, then that's mission accomplished.

Right?

And that's where I think the synergy of the bank and

fintech ecosystem really lies.

Banks traditionally, I think it's fair to say.

Not good at marketing, right?

Not very good at innovation.

it's pretty shocking how, uh, with a few exceptions, you look at mobile

banking apps pretty darn clunky.

It's like you feel like you need to use an owner's manual just to figure out

some basic functions that you want to do.

Whereas you look at a lot of the fintech created apps intuitively, you know, a

child just look at this and it works

If we can enable the Fintech's to do what they do best by giving them at

least the back end, the plumbing, then I think the mission is accomplished.

or if the bank or if the fintech

gives the bank line of sight Direct line of sight into that system so that you

can have a good understanding what's

happening from a compliant perspective I think it's it takes everybody in

the ecosystem working together to create good good compliance standards

at The same time, that's also the challenge that

some of the banks have, right?

I mean, most of the sponsor banks out there.

Or smaller and often don't have the technical expertise.

I mean, I feel really blessed to have

the team that we have, which was Richard Thiessen as our CTO that

can build stuff and be top modern.

I know from first hand experience, not every bank has that, right?

And, um, doesn't quite know how to get there, but ultimately.

They got to figure that out if they want to be survivors and this thing.

you've mentioned a number of things about how you guys are doing things

differently, how you're moving forward with technology, not just yours, but

through partnerships that we've discussed like LoanPro and a handful of others,

looking at Um, I'm going to ask You to pull out Your crystal ball, sit it

down in the middle of the table and give us your perspective of what future

trends and opportunities are on the horizon for sponsor banks like yourself

and the fintechs when collaborating together in a harmonious manner,

So, yeah, my crystal ball, um, that

that changes every couple of months these days right?

Uh, based on

how fast things are changing, but here's where I think.

It's headed, we'll see a lot less collaboration between

banks and fintechs on anything pertaining to consumer programs.

Um, there's a number of reasons for that.

You know, a lot of it is the change in VC money, because I think it has become

very apparent that consumer programs.

A much harder to make profitable, lower volumes and, and, and often

whose pursuit are segments that are not necessarily a profitable banking customer.

Right?

And so sooner or later, that falls apart.

But I still see in the small business, mid sized business community, a very large

underserved market, you know, I've had some, some, some LLCs where I have some

rental properties and opening a, okay.

Business account was the bank for that.

It was shocking.

I mean, it's like 1990s.

There's like no tools and it was a pretty big bank that really helped

me make things easier for myself.

If you are a fortune 500 company, and you have one of the top 5 banks customize

some sort of, uh, corporate card program.

So, yeah, you're in good shape.

But if you're not fortune 500, it gets really hard to have a banking product that

makes your operational efficiency better

that's where it's underserved.

There's a lot of opportunity.

And, um, That's where, you know, some opportunities are there, but

then there's other opportunities that are not necessarily fitting

that fintech description, right?

Because right now, everyone thinks of fintech as a neobank of sorts, but

there is, um, a whole lot of other use cases where banking products.

Can make or enable a, a real business.

So let me give you an example.

You know, there's some of the food pickup and grocery pickup, uh,

services out there that at 1 point, when they started out had a problem.

And that was when they had the driver that was supposed to pick up something, right?

Let's say it was a food.

They got hungry and said, you know what?

Throw in an order of wings for myself.

Now you had an accounting nightmare, right?

It's like, how do I take the personal expense out?

But then also, how do you prevent the situation that someone shows

up at the wrong restaurant and then tries to pick up the wrong order?

solutions have been created there.

Where, you know, you give the drivers a prepaid card, corporate card, but

it's inactive until they are at the place with the right GPS coordinates.

And then you fund it in real time down to the penny so

that they cannot add anything.

And then, ideally, on the back end, you automatically integrate it into the bank

system, so it feeds GL or whatever else

Perfect

Right.

food delivery or grocery delivery company might not view itself as a fintech,

but they need these products by someone and then these banking

products and able to real business.

Right.

They're not in the business of making interchange.

They're in the business of picking up stuff and delivering it.

And I think we've just scratched the surface as to what all is possible when

you embed banking products in that B2B B2B2C setting And, um, the use cases

that keep emerging are just fascinating.

I mean, even you take the healthcare sector, it is amazing how antiquated money

moves in the healthcare industry, right?

And you occasionally see someone that.

Knows the space and takes technology and understands if we bundle in some banking

services, we really That's headaches.

That's it's ultimately going to be heading Now, there is still a few use cases,

in my opinion, in the consumer world, where the right combination of bank and

fintech will solve real world problems.

But in a profitable way, going to give all of those away I've got to keep of

ourselves stuff for sauce ourselves.

But, um, they're still there.

You just got to be more more selective

I'm hearing you say it's headed to B2B, which I 100 percent agree.

Um, and you know, eliminating first party, party fraud scenarios, which

is like the delivery driver experience that you talked about, but it really is

safeguarding those B2B embedded financial flows that we could really focus on too.

And I think just even having As you have ERP systems that are moving down

market to become like operating systems for specific business verticals, like

a veterinary clinic operating system or a chiropractic clinic operating system.

There's so many opportunities to embed financial products

into those types of systems.

But even if you take, um, you know, it's a little bit the other

side of the world of payments, but when you look at a provider like toast,

they initially created a point of sale system specific to restaurants.

And then all of a sudden that became your order management system and the

online ordering and whatnot else.

And they just focused on that segment and then did more than just moving money and

created a very profitable, good business.

Right.

um,

which is.

very similar to mind body.

Mind body did the exact same thing with the self wellness, Arena as well.

it's horizontal integration for these SAS technology

companies that focus on a specific

Exactly.

but as they go to those different horizontals, as they scale,

like having a bank partner that helps them be like, okay, that's an embedded flow.

That's an embedded flow.

We can automate that.

Um, it really, I think that just creates such value from a sponsor

bank perspective to a growing fintech.

Probably 6 months or a year from now, the crystal ball might

show something different what ultimately to happen is like we said, right?

The dust is going to settle the real use cases for.

What we call days, banking as a service will emerge and it will

solve real world problems because the technology will be available.

The understanding is there.

People learn from the mistakes that have been made.

And that's where the real excitement comes in.

Right

Well, that is a great statement to end today's episode

of Accrued, a Fintech Confidential series presented by LoanPro and

Robert as always, man, I always love the conversations with you and

I'm so happy to have had you on.

So thank you for taking time out of your busy day.

Thanks for having me.

It was fun.

flow.

And I'm sure we'll discussions as time goes on.

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