In this dynamic episode of Accrued, a Fintech Confidential series presented by LoanPro,  hosted by Tedd Huff and co-host Colton Pond, They explore the cutting-edge solutions Column is bringing to sponsor banking. Brian Fishbein, Column's Head of Investing and Treasury, joins the discussion, providing an insider's perspective on how Column is challenging traditional banking norms. By focusing on enabling developers and builders to create novel financial products, Column is uniquely positioned as a nationally chartered bank dedicated to sponsor banking initiatives.

The episode covers Column's commitment to increasing visibility and control within credit programs, their deep understanding of compliance activities, and the ability to address and resolve issues promptly. These aspects are vital for fintech partners and a testament to Column's innovative and responsible approach to financial services.

Further, the conversation highlights Column's unique value proposition. It distinguishes itself from traditional sponsor banks by prioritizing developer needs and allowing for rapid innovation within the regulatory framework. Brian Fishbein's diverse background, from his engineering degree from Princeton University to his significant experience in the financial sector, provides valuable insights into Column's strategies and operations.

As the discussion unfolds, it becomes clear that Column's vision extends beyond merely offering new banking services. It's about creating a more inclusive, efficient, and responsive financial ecosystem, leveraging technologies like blockchain for enhanced security and transparency. The episode concludes on a reflective note, considering the broader societal impacts of fintech innovations, including making financial services more accessible and fostering economic growth.

This episode of Accrued features engaging dialogue with Brian Fishbein and insightful commentary from hosts Tedd Huff and Colton Pond. It illuminates the transformative role of Column in the sponsor banking industry and sets new benchmarks for what's possible in fintech.

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Key Highlights

• Revolutionizing Banking Infrastructure: How Column's innovative platform is setting new standards for real-time financial transactions and service delivery.
• The Founders' Journey: Annie and Eddie's inspirational path from identifying market needs to launching a groundbreaking fintech solution.
• A New Era of Financial Transactions: Column's contribution to making instant payments and streamlined lending a reality for consumers and businesses.
• Building on Trust and Security: Insights into Column's rigorous regulatory and compliance measures that ensure user data protection and trust.
• Overcoming Regulatory Hurdles: The strategic approaches Column used to navigate the complex financial regulatory environment during its early stages.
• Fostering Innovation through Open APIs: How Column empowers developers to create customized financial services and applications.
• The Future of Inclusive Banking: Column's vision for a financial ecosystem that caters to underserved markets and promotes economic inclusion.
• Blockchain's Role in Banking: Exploring the potential impacts of blockchain technology on the future of secure and transparent banking services.
• Challenges and Triumphs: A candid look at the obstacles Column faced and overcame in its mission to redefine banking.
• Beyond Fintech: The broader societal implications of Column's work in promoting financial equality and fostering economic growth.

Takeaways

1. Innovation as a Catalyst for Change: Column's story underscores the transformative power of fintech in reshaping the banking industry and addressing long-standing inefficiencies.
2. Security and Compliance as Cornerstones: The episode highlights the critical importance of building financial services on a foundation of trust, security, and regulatory compliance.
3. The Importance of Flexibility: Column's success illustrates the need for adaptable financial solutions that meet the evolving needs of a digital economy.
4. The Potential of Technology to Democratize Finance: Column's initiatives reveal the potential of emerging technologies to make financial services more accessible and equitable.
5. A Vision for the Future: The episode conveys a compelling vision for a future where banking is more inclusive, efficient, and responsive to global needs.

Column:

Website: https://column.com/

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

X (formerly Twitter): https://twitter.com/column?lang=en

Brian’s LinkedIn Profile: https://www.linkedin.com/in/brian-fishbein/

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/FTconfidential

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

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

Support Provided by:

LoanPro - As default rates continue to rise and margins compress in lending, financial organizations are searching for solutions that combine operational efficiency with innovation. Look no further, as LoanPro allows lenders to enhance their origination, servicing, collections, and payments using the foundation of a modern lending core. Check out loanpro.io to learn more about how 600+ financial organizations have modernized their tech stack with LoanPro.

HAWK:AI - HAWK:AI's game-changing approach to compliance. With real-time monitoring, adaptive learning, and advanced AI, it cuts false positives, simplifying your compliance efforts. Upgrade your surveillance with ease. Visit https://gethawkai.com for more intelligent, more effective compliance.

Time Stamps:

01:25 The Founders' Journey: From Plaid to Column

01:48 Column's Mission: Blending FinTech Agility with Banking Solidity

02:02 Exploring Column's Impact and Brian Fishbein's Role

02:32 Brian Fishbein: A Personal Introduction

02:49 Column's Approach to Banking as a Service  

04:06 The Evolution of Sponsor Banking

04:20 Column's Unique Position in the Sponsor Banking Industry

06:44 The Future of FinTech Banking with Column

07:43 Column's Technology and Compliance Strategy

14:56 Real-Time Data: The Backbone of Column's Innovation

15:34 Leveraging Technology for Credit Program Innovation

18:41 Column's Differentiation Strategy in FinTech

21:38 Navigating Innovation and Compliance in FinTech

30:09 Column's Approach to Sponsor Banking Partnerships

32:56 Column's Strategic Direction and Industry Trends

33:04 The Future of Lending and Technology in FinTech

37:02 Sponsor Banking: A Look into the Future

40:27 Closing Thoughts from Brian Fishbein

41:40 Reflections and Key Takeaways

This is a Production of Diamond D3, Media

ABOUT:

Brian Fishbein: Brian Fishbein has diverse and extensive work experience in the financial industry, currently serving as the Head of Investing & Treasury at Column. He is an alumnus of Princeton University, where he earned a Bachelor of Science in Mechanical and Aerospace Engineering. His role at Column emphasizes his significant contributions to the company, focusing on investing and treasury management, underlining his profound impact on the fintech sector through his expertise and leadership.

Column: Column is distinguished as the only nationally chartered bank dedicated to empowering developers and builders with the ability to create new financial products. The company's mission is centered around sponsor banking initiatives, offering increased control and visibility for fintech partners over their credit programs. Column's approach is unique, providing a framework that supports rapid and compliant innovation within the regulated environment of a financial entity.

Tedd Huff: Tedd Huff is the Co-Founder of Voalyre and the President and 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.

Colton Pond: Colton Pond is a seasoned marketing executive with a strong fintech and financial services background. In his latest role, Colton is the CMO for LoanPro's API-first lending platform, aiming to meet the increasing market demands. His track record includes a significant tenure at Truv, where he led the marketing team to achieve a 300% growth in year-over-year revenue. Colton has also held key marketing and sales positions at MX, Lucid, and HealthEquity, demonstrating his ability to drive success and innovation within the fintech sector.

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

How do we improve our APIs?

How do we make things simpler for customers?

How do we make this a better product overall for the folks

that we wanna work with?

That might mean that we expand into incremental customer bases.

We start to think about,

how do we better serve other financial institutions that might actually wanna

take advantage of our payments rather than necessarily just kind of like non-banks.

It's mostly just a lot of, let's put our heads down, let's

figure out how we kind of solve, continue to solve these problems.

Because there continue to be a lot of problems out there.

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 Loan Pro.

In this series, we're deconstructing the complexities

of lending, exploring compliance, optimization, and modernization.

Personalization through insightful conversations with industries.

Best.

I'm Tedd Huff and with my co-host Colton Pond.

We're here to guide you through the intricate lending world.

Whether you're deep into Lin Tech or just intrigued by how technology is reshaping

lending, you are in the right place.

Colton, welcome back man.

Thanks.

It's good to be here, Tedd.

I, I'm trying to have as many backgrounds in these episodes as possible.

So new background again today, but it's good to see you.

in this episode, we're turning our attention to Column, a Beacon

of innovation in the FinTech space.

Born from Visionary Minds of William and Annie.

Hockey.

Before the husband and wife team joined forces, William gained his

deep understanding of the FinTech space from being a co-founder of

Plaid and a former Bain consultant.

Thier journey took a pivotal turn when the strategic, strategic

acquisition of NorCal Bank,,

laying the groundwork for a bank designed for the digital age.

Column shows what can happen when you blend the agility of FinTech with

the solidity of a traditional bank.

it's created for developers and builders in the FinTech arena, offering direct APIs

to craft brand new financial products.

and it sets up a fascinating discussion for today's episode

as we explore Column's journey and Brian Fishbein critical role reveals how deep

his finance background and innovation are reshaping the future of FinTech banking.

We will uncover how Column blends traditional banking's robust

framework with groundbreaking innovation and Brian's leadership.

Investing in treasury also emerges as a key force in rewriting the playbook

for credit sponsorship technology.

Colton, I did my best of introducing Brian, but I know you've got a

personal relationship with them.

So I'd love for you to kind of fill in some of the blanks before he gives

us his his falling into FinTech story.

I mean, what's awesome about this is, uh, so Brian, you are our first.

Episode talking about banking as a service industry, or credit sponsorship

or banking sponsorship, and what a great place to start with Column on

the innovation that y'all are doing.

I hear nothing but amazing things, uh, on what you are personally doing

at Column and with the broader team.

It's been super interesting.

I mean, I've been, been doing this in some form or fashion for a

little over a decade at this point.

Um, starting with kind of the traditional banking side where it was a lot of.

Looking at, you know, post origination, us buying loans, financing 'em, or

doing securitizations for some of the larger scale programs to then moving

to a more investing seat where we would look at earlier stage companies

and think about how do we wanna invest in equity or, or

actually acquire those companies.

And that all kinda led to, you know, spending a lot of time thinking about

credit and loan programs and how you kind of build and scale those in a.

It really makes sense and, you know, how do you access the ecosystem?

Who do you wanna be working with?

What are kind of the best in class, uh, companies to be working with?

you know, a lot of that experience indirectly kind and, you know,

frankly, directly shaped how we,

think about things here at Column, right?

When, uh, we start looking at new businesses and new lending products

and, and how do we build these credit programs in a way that actually makes

sense and is actually more aligned with, uh, the companies we wanna work

with, rather than, you know, how banks

Jumping right in If we look at the sponsor banking industry

or banking service industry, a lot has changed over the past year.

It.

I, I find it one of the most exciting times when things change

because that's when you know real innovation is happening.

And so for those that are listening and in the audience today that aren't familiar,

if you don't mind, give us a quick overview of the current sponsor banking

industry and then how Column's approaching the problem different and unique.

'cause y'all are truly, as Tedd said, as in his intro, uh,

a bank built for developers, which generally you don't hear.

Help us understand the industry and what you all are doing differently at Column

There, there's obviously been a lot going on.

Um, I wanna rewind for a second though, because I think it's super interesting to

actually think about kind of the history of sponsor banking and how people think

about it and, you know, what really is new and novel and different, right.

Um, sponsor banking, you know, a lot of people think about was kind of a post

GFC 2010 and onward type of, um, thing that banks started to fall into as they

look for other ways to drive revenue.

But really when you think about it, it, this goes back a lot farther.

Genesis, and it's probably even earlier than this, but if you think about

it, is kinda large corporates working with large financial institutions to

acquire customers in a different way.

And the, the very easy example of that is,

citi, you know, had a relationship with American Airlines starting in 1984 to,

you know, basically do sponsor banking.

We just think about it differently and.

The, the real difference here is you had massive scale because you had such

meaningful operational needs when you didn't have all of this technology

that the only people that could do it were the top five banks in the

country and the, you know, fortune 500.

If you fast forward to kind of post 2010,

what you saw with this proliferation was really more a function of, um.

Better technology enabling people to do things when they didn't have that

gigantic scale and actually access kind of the same sorts of distribution

channels that you saw historically.

Um, and so you see that kind of evolution occur where it's not just

credit cards anymore, you can start to think about offering term loans.

But you know, when we think about Column, and I'll get into this in a

little bit, there's a lot of other traditional financial products that

you can offer that folks have kind of.

Focused on from a niche perspective.

So if you think about like the Venmos of the world, right?

That is, you know, payments, which was traditionally a thing that was

Yeah.

um, and, and then kind of got disintermediated as companies

like that started to, uh, gain more traction because they had a better

experience and better technology.

Um, and so you've seen this kind of, not just in credit but across the board

and that has kind of carried through to today, where if you look over the

course of the last couple of years.

More and more banks have realized that the way to access their customer base and the

way to actually broaden their business is not necessarily by saying we're gonna stay

within kind of our geographic footprint or our swim lane, but we're going to

go more broadly and work with other folks who might have better distribution

channels, might be better at marketing, might know how to reach customers

in a way that we typically don't.

over the course of the last year, I think you've seen a lot more of the same, but

the, the difference has been how people think about these partnerships and how

people think about the risks related to them and how you actually manage them.

Right?

Like part of the fallout from SVB and some of the others.

I think about the impact on the sponsor banking industry has been,

you know, really how do banks actually understand the activities

that their end customers are doing?

Are there liquidity risks or other things related to those businesses

that people don't really understand?

so I think that's been, you know, super interesting to see because all it has

brought a lot of stuff that, you know, when we think about what we built, um,

and again, we can talk about it a little bit to the forefront in terms of how

we actually manage this relationships and make sure that not only can we,

you know, best serve our partners and our clients, but also make sure that

we're doing it in a way that, you know, will keep us around for the long term.

as I hear you talk about the.

The bank sponsorship or credit sponsorship side of the house.

It really makes me think back.

I mean, I, I've been in the industry for over 25 years and I've helped

multiple banks and fintechs go through the process of saying, what does it

take for us to sponsor the FinTech?

What does it take for me to be sponsored?

By the bank as a FinTech and really helping them navigate through that white

space that isn't very well called out.

And it's really was really cool when I was doing the research on

Column to see how you've, you've simplified quite a bit of it,

but it still has me wondering like, how are you specifically looking to innovate

in the credit and lending space and.

What was that aha moment that led you guys to really start to focus

on the credit sponsorship piece?

I think The reality is.

Credit sponsorship is a core part of our business because when you think

about traditional finance, right?

Lending products are a core part of any bank or lender or you

know, financial company and even a lot of non-financial companies.

And so right from the jump when we acquired the bank, um, that was

always kind of in the cards in terms of how we were thinking about that.

The problem really became, you know.

Are we going to do it the same way that everybody else does it?

Or are we going to try to bring our technology to bear to um, really

kind of provide a better service and a better solution for folks?

And so, you know, that goes back to kind of how we think about

what our approach is and our differentiation is relative to others.

It really comes down to three things, right?

The technology is a core piece of it, and we've talked about

that a little bit, but like.

That is a driving factor in everything we do, both externally and internally

facing so that we can actually build these robust systems and serve our

customers in the way that we want.

So it's not just, oh, there's a really great API to originate a loan, but

there's all of the stuff behind that that says, are we doing this from

an appropriate risk perspective?

From an appropriate compliance perspective?

What else is actually happening behind the scenes to enable our customers

to reconcile, to manage their LMSs?

The LoanPros of the world.

In a way that doesn't break in a month when they try to do a

reconciliation for kind of their internal finance and accounting.

Um, and then the, the, the second thing as we think about it is really focused

on these direct relationships that we wanna have with our partners rather

than necessarily working through kind of other vendors or other software.

And that gets back to the technology, which is we built that for ourselves so

that we don't need to rely on other people with things that we don't necessarily

kind of fully understand when we want to originate these sorts of products.

and then kind of to your third point, credit in a nutshell is great and

you can really be super successful.

And we've seen that obviously with a lot of other banks in niche.

But kind of where we think our value is to a lot of these companies is much more

in the breadth of the offering, right?

Um, there are folks that only want to lend money and that's great, and we think

that we can serve those really well.

But at the end of the day, I think what we've seen a lot of

it and can talk about trends a.

Is folks that want to kind of broaden the customer relationship

and broaden that customer wallet.

And so what does that mean?

Expanding into other loan products, expanding into other financial

products like DDAs, offering money, movement services, et cetera.

And when you think about that, right, it's a holistic offering where we can say,

we can do loans, we can do um, payments, we can, we can offer a deposit account

that really starts to get people excited and really gets us excited when we.

Yeah, so I, I love lots of aspects of what you talked

about, Brian, and what, uh, Column is doing, and I, I really view Column

and, and the work that you're doing at Column is strategic moves in the.

Banking sponsorship industry.

Um, help us understand your view on how you see that experience, then

shaping what the future looks like and how, uh, that future of, of credit

sponsorship and lending technology and marrying that with compliance.

What does it look like, uh, moving forward?

I think a lot of it is really around how do we reduce a lot of

the kind of manual operational compliance and oversight requirements, right?

The, the reality is like, Originating a unsecured installment loan is not

a super challenging process that requires a lot of innovation, right?

The application process and the disbursement process

is kind of what it is.

And like anybody can do that.

And I don't think that that we would say there's like a ton of differentiation

on literally that ability, right?

I think you see the differentiation is really, you can access our APIs

to start doing things in real time.

your giving us

all of the data that you would otherwise be collecting and might be bashing and

sending at the end of the month through an Excel file or through some other means

in kind of real time such that we can say, yep, we have created a loan account

for this individual borrower that maps one-to-one with your internal systems.

and, we know that borrower is a good borrower and we can disperse funds,

and then you can start to say, okay, what do I build on top of it now that

I have this kinda real time insight and what can I start doing with that?

Well, if you just stop there, that's our loan origination business.

We can kind of do credit sponsorship and that's great, but then you can

start saying, okay, we have a servicer.

We integrated with Column already.

We have this kind of data model that maps to our own internal,

uh, processes pretty cleanly.

Well, when we start collecting money.

We can start really allocating that at the account level without having

a giant pool of servicing account.

And then we can start saying, okay, incremental complexity on that.

I have securitizations, I have loan buyers, I have other pockets

of capital where those are the actual owners of those cash flows.

When I want to, you know, I.

Um, make sure that I am cleanly allocating funds to the right place.

I can start doing that without having a person sitting in the middle

to kind of do all of that work.

And so that really addresses a lot of like operational concerns that frankly I've

seen When you think about what, what do a lot of people spend their time doing?

Because it's really important to get those sorts of things right.

But then you also start to see the other side, which is you have all this data

that enables such a rich, um, view of kind of the compliance and backend as well.

That also lets you start saying, well, if there are, uh, trends that become,

that become emergent, you know, we start noticing that adverse action letters

aren't being sent or something else.

You're not seeing that 90 days later you are seeing that kind of day one, Hey, we

saw these rejects, but we didn't see this other thing that was supposed to happen.

Let's make that in the bud before it becomes a real issue.

the idea is, you know, mitigate a lot of the risks that you would otherwise

need to mitigate through a lot of manual

Yeah, Tedd.

Tedd, we always come.

Consistent themes, right?

Real time data.

We talked about it.

Episode with Bast the importance of getting realtime data in a different

context, but it's same themes of like, how do we get access to that realtime data?

Well, and then how do, how do we that data?

How do we leverage that data comes up and what I think is really unique with, with.

Columns approach.

approaching it from a completely different direction than any of

the guests we've talked to so far.

'cause it's all about technology, it's all about the data.

It's all about getting it and making it useful.

I'd really like to understand Brian, like how are you guys using the technology

and the technology partnerships to really reinvent the way credit programs and

fintechs really support their customers?

It is a good question.

It's a lot it, it does come down to a lot of real time data sharing and real time

kind of integrations across folks, right?

I think when you start seeing.

Uh, batch processes or Excel file transfers or something else, you start to

risk losing, you know, either urgency in kind of the process because you need

to action on some piece of information more, uh, more quickly than you might

otherwise be able to, or, um, data loss because you, you know, there is a person

on the other end that is processing it.

When we think about it, you know, a really good example is.

Okay, you want to disperse loans to folks, you know, same day or in real time, right?

There are certain limitations of the payment system, but once you kind of

get past timing of if you want a loan at 11:00 PM at night, like, you know, it's

gonna be hard for you to get that wire.

You can start to say, well, if I'm receiving an Excel file next

day for the originations that were approved yesterday, right, the

soonest I can disperse is next day.

Whereas if we're saying we are directly integrated with your application

process, somebody walks in the door at 2:00 PM, fills in all their information

and it all looks good, and they're approved for a thousand dollars loan.

There's no reason why at 2 0 5 we can't actually be initiating that disbursement.

And so you start to think about, well, how do I create a better

customer experience for folks?

And it's through things like that, which, you know, again, come back to, we need to

know and we need to get this information for us to be able to action on it.

And so the question is, how do you actually kind of

drive through that process?

I think the second thing, um, is around some of, you know, the credit and

compliance aspects, which is right.

have a program where we agree on kind of what are we going to originate, what

does that box look like, et cetera.

And it's very easy for you to say, okay, we need to run manual

checks to confirm that all this is actually working as appropriate.

but, a lot of this stuff is very quantitative, right?

You can basically just set up rules in the background that say like, this is the box

that we're supposed to be operating in.

These are the types of customers that we're going to accept.

And very quickly screen and flag whether or not things are actually

working as they're supposed to.

If they're not, it enables you to quickly fix it versus end up in a situation where

you say, oh, we've actually originated loans that we didn't necessarily

think we wanted to, but because it was kind of a referral model, um.

We're backwards looking to try to solve that problem rather

than, um, addressing at home.

I love that.

So along those lines, Brian, uh, there's really, uh, three

consistent themes in this podcast series that we've heard from folks.

how do you drive optimization?

And everyone right now is like, how do I drive greater margins?

How do I drive profitability?

How do I drive efficiency in what I do?

if you wouldn't mind, would love to understand how Column's approach as

a sponsor bank with technology is helping the fintechs you partner with

drive differentiation and increase optimization of their credit program.

Yeah, so I think we've talked a little bit about optimization.

All of those things around data drive more operational efficiency,

People can spend their time doing more interesting things.

And so maybe I won't har harp on that too much.

Where I think there is a little bit, um, more interesting differentiation

really comes back to, well, if you've solved the technology aspect and we offer

this really flexible product, right?

From a technical's perspective, there's no limit to what you

can do with our offering, right?

You can pair different financial products together to create something that you

know, provides more value to the user.

You can offer both with a credit card and a loan in the same platform, and

let everybody kind of understand and view that without necessarily needing

multiple sponsor banks that don't necessarily talk to each other and

might have reconciliation issues.

And so you start to say, okay, if everything is technically, possible

from an engineering perspective.

Then how do we actually add that differentiation and it, it comes back

to, well, now we've got a lot of free time that our operations and compliance

folks internally at the bank have that they're not thinking about, okay, are we

actually doing what we think we're doing?

Or how do we need to be testing and managing this because we have all

this automated alerting and data, and so then it's okay, we talked

about this very vanilla product.

What do we want to add on top of it?

What are the things that we think we can do differently?

How can we get creative?

To actually meet the true customer need versus just saying, you know,

we have this program, this is how we do credit sponsorship, and

this is the box that we fit in.

And I think that's one of the interesting things about Column from a differentiation

perspective, is we've really invested in the people and the relationships such that

we don't necessarily say this is the box that every single one of our customers

and partners needs to operate within.

It is, okay, you want to do something a little bit differently.

You wanna structure this loan product with, you know, these sorts of terms.

we do that?

Is that within the bounds of, you know, the regulatory framework?

And if it is, then how do we do it?

Um, and I think that's different from, you know, what we've seen with

other sponsor banks where, you know, you might be a commercial lender,

but they also do consumer lending.

And so you have to comply with all the consumer rights as well because

it's really easy to standardize.

Right.

And I think that's just not the approach that we take when we think

about these programs because to.

That then prevents them from differentiating from others in the market.

Tedd Huff, Fintech Confidential - Host (Detached audio): As you talk about availability of data,

you talk about the flexibility of the use, like all of these things, the hairs

on the back of my neck start to stand up.

'cause I, I can only see, you know, your chief risk officer, your chief

compliance officer, just cringing a little bit every time you say it.

But you know the story that that's been.

Talked about both in our previous episodes and in the industry in

general been how to, how do we balance between innovation and compliance?

I mean,

just today we had a, um, a consent order go out on a financial institution and

they have two technology partners that are being massively impacted by it.

And I would really like to understand how does Column navigate?

This balance, especially with all of the regulatory things that go

into between the commercial and the consumer that you just talked about.

Yeah, it's a, it's a really great question.

Um, it's very topical, obviously.

What I said about not just externally facing technology, but

internally facing technology, right?

And so we've developed a ton of things in-House that are like solely designed

to help our risk and compliance teams understand what's going on.

When you think about it relative to.

How some of the others have structured their programs in this space, right?

We create these products that are meant to give us the level of insight that,

our risk and our compliance people would expect without creating such

crazy obligations on our partners.

And again, that's because we have.

These APIs, um, that and, and, and, uh, data models that allow us to get that

granular and really help our partners when we think about kind of what is the

information that they're giving and what are they getting back from us, right?

And so, you know, what's a really concrete example?

If you think about,

some of the reconciliation issues that you might have seen in, in FBO accounts, for

example, where it's hard for the bank to figure out what the balances actually are.

The way that we think about it is fundamentally different, which is

it's not just a giant pot of money,

it is a pot of money that is very specifically allocated to specific

accounts where we will require within our data model to understand

kind of what are all of the,

end customers that people are working with, even if they're

not necessarily customers of the

So as soon as you said pot of money, all I could think

about was Lucky Charms and the Rainbow and he, me, pot of gold.

Like that's, for some reason that's exactly where my brain went.

But I'll, I'll let you finish it.

Just.

But it's kinda right.

It's all, I mean, the marshmallows melt and dissolve and it all just like

mixes together and you have no, I mean, not to take the analogy too far, but

it, it's very hard to, uh, kind of disaggregate once you go down that path.

and it has all these knock on effects.

When you think about like, what does pass through insurance actually mean if you're

a customer with an FBO account, right?

If you hold more than $250,000, but you can't readily identify what,

who, whose funds those are at any given point in time, it's really

hard to say, well we think that we can actually insure these funds.

and so When you like kind of get down to it, right?

If you have a model where there is kind of this one-to-one

mapping and reconciliation.

You should never end up in a scenario where you're meaningfully off on a

dollar balance, or if you are, it's going to become apparent that day, not

months later, where you're, you can't really kind of like disaggregate and

untangle everything that happened.

what is the compliance and risk impact of that?

You get much better and richer insights into what's going on.

Which means like there are going to be really, really good actors,

or there might be some places where

customers need more attention and we can really focus on making sure that we're

addressing those rather than necessarily saying like, we have a checklist.

We're just gonna go through everybody because we don't

actually know who is who we

It's interestingg you talk about the, the sub ledgering

and the importance of that and making sure that it's all in real time.

There have been a number of clients that I've worked with.

When we went to talk to a bank about getting the sponsorship

we were able to bring them, the technology, a partnerships to show

that sub ledgering technology.

But it's really nice to see that.

Folks like Column are, are offering that as part of the service versus

having to figure out who do I partner with, who do I build it with?

How do I make sure it maintains compliance?

There's a lot of different things that fall into that, but as you were

talking about it, it's like, yeah, that that is a really hard part of the job.

Yeah, and I mean, to bring it back to credit, right?

If you think about kind of how loan servicers operate our, uh, fund

like models where there's just a, again, it's a, a pool of funds where

you're just dispersing kinda out of that without really understanding,

you know, necessarily, you know.

What money is allocated to whom until later, right?

You end up with this model where, um, it does create room for those right?

Did like the a thousand dollars that was supposed to get paid to

one investor actually go there or did it go somewhere else?

And when we think about it, this kind of more detailed, uh.

Tagging in our data model actually enables you to avoid those issues.

Does it represent a shift from how some other folks might do it?

Absolutely.

But do we think that ultimately it better serves our clients as well

as obviously, you know, ourselves for risk matter perspective?

Absolutely.

And you know, again, eliminates that need down the line for a person to

like spend their days untangling all this information because it

should already kind of prospectively work from a automated systems

And you, you hit the nail on the head there, Brian, in that there's

a lot of people that view innovation and compliance at odds with each other.

Uh, one of the, the themes we've seen is they don't need

to be at odds with each other.

They can, they can balance, uh,

okay.

um, so help.

If you were to speak to a Skepticist, someone that's a skeptic out there

and like, ah, I can't innovate because I need to drive compliance.

Uh, what are some of the advice and insights you would give?

The reality, uh, is that you know, uh, maybe this is a

unfair thing to say, but that statement you know, more a function of you

needing to kind of put in more work in terms of what you want to do, right?

The regulatory environment isn't actually as strict as everybody.

Makes it out to be on some metrics, are certain things that

you always have to do, right?

If you lend to a consumer, you have to give them a truth and lending statement.

But like once you get beyond those requirements, more about, you

know, we need to actually treat this customer fairly and while we

offer them a financial product.

And if like, that's the philosophy with what you're offering, which is

we have somebody out there who has a demand for this type of product and

we think we can offer in a clear way.

There's no reason why you can't Right.

And I think that's like the, the core of it, which is you might run into

other people who say, I can't innovate because is this checklist of several

thousand things and the bank do it.

Maybe that is, you know, more of a limiting factor.

I think that's what we try to shy away from when we think about kind of, this

is not one all, but you know, we every day have conversations between our.

Legal risk and compliance people talking to customers who say like,

here's the way that I wanna do it.

Here's this tweak.

Here's this thing that I think would be like super interesting and why

we think our customers need it.

And you know, our response is always like, okay, like let's iterate on that.

Let's figure out how we can actually do that the right way rather than.

You know, we can't do it.

And sometimes you actually say like, okay, somebody has an idea.

And like, we actually can't do that.

Like, that would be against the law.

can't, you can't all, uh, get a hundred percent hit rate.

But I think the answer is the first answer from our, our team and like, this is what

we really try to agree with our culture and, and kind of how we've hired out is

it's not, no, it's like how do we do that?

Right?

Maybe this exact iteration doesn't work, but something close

to it

Well, that comes into the the yes but type philosophy, right?

Not a no because, but a yes, but philosophy and you know.

For those fintechs that are, are listening to you, Brian, and, and

looking at the website and seeing all these great technology offerings

you guys have, and they're thinking, I love what Brian's saying and I

love what Column is, is offering and I want them to be my sponsor bank.

important is it for them to combine the tech, their technology,

and the personalization and, but also at the same time.

What's the likelihood of them having you become their sponsor bank?

I think it depends on exactly what they're trying to do.

We, uh, we work with a lot of people and we are continuing to

onboard people every single day.

Um, and there are very, very simple use cases, right, where we have folks

who just wanna open a bank account for their own personal use to user APIs

because they do high volumes of payment.

Um, and then there are extremely complex use cases and I think, you

know, when we think about kind of those complex use cases and the complexity

of the product, right, the expectation set, obviously scales as well.

And so if you are, you know, a, um, business that wants to offer.

A, you know, non-traditional lending product to subprime consumers.

I think there's going to be, you know, a, a higher level of discussion and a

higher level of scrutiny applied to we think about entering into that sort of

partnership relative to a very basic, you know, I want to pay my bills, right?

Um, you know, when we think about kind of like what is our qualification and, and

how do we think about our customer set?

Uh, we work with companies that are, you know, on the smaller scale and are

still kind of building out their, um, product and building out, you know,

their team.

And then we work with, you know, very, very mature organizations that

already know how they're supposed to do everything and this is their, you know,

for their fourth or fifth bank partner.

Um, but I mean, apart from kind of the usual suspects, which is like.

We don't support crypto today.

We don't support cannabis today.

Things like that where I think you start to get into more regulatory

considerations than necessarily like product considerations, right?

In terms of what that business actually looks like.

everything that we put on our website is, are things that we

do with customers every day,

it was fun.

Um, going through and, and looking at it.

I remember looking at Column long ago and then just seeing the, the.

Distance that you guys have come, how far you've taken it so far.

And there's been a lot that has changed since the inception of

Column, and obviously you can't keep doing the same thing and expecting

the same, or, better results.

So I would love to understand, you know, from, from your perspective and

the strategic direction of Column.

What do you see as trends in lending and technology with fintechs and banks and

what they're gonna need to prepare, not just for 2024, but for the years to come?

When we think about kind of, uh, the future, right?

I.

For us, it's a lot more of continuing to build out the, the technology

that we've already started on.

How do we improve our APIs?

How do we make things simpler for customers?

How do we make this a better product overall for the folks

that we wanna work with?

and That's just gonna be

a continuous challenge for us to always be upleveling ourselves.

You know, that might mean that we expand into incremental customer bases.

We start to think about, you know, how do we better serve other financial

institutions that might actually wanna take advantage of our payments rather than

necessarily just kind of like non-banks.

That's like when we think about our internal roadmap, it's, it's mostly

just a lot of, let's put our heads down, let's figure out how we kind of

solve, continue to solve these problems.

Because there continue to be a lot of problems out there.

We are by no means offering every single financial product that a

traditional bank can offer yet.

I think we've kind of just scratched the surface.

But I think when you think about kind of the industry more broadly, right?

There's, there's two paths at this point, right?

There are folks out there who have made their entire business.

Credit sponsorship and these lending partnerships, and

that's really great business.

And you can, you can look at their call reports and you can

see, um, how well they're doing by kind of just focusing on that.

And I think that's going to continue, right?

There's always gonna be folks out there that say like, this is our swim lane.

We know what we're really good at and we're going to continue to do that.

And then I think what you're gonna see is kind of the alternative, which is.

A recognition that there are businesses out there where lending is not their sole

business, or having multiple bank partners is not actually the optimal path for 'em.

And how do we actually start driving more of that consolidation where,

you know, you're not working with seven bank partners, you're only

working with a couple across products.

The flip side of that, of course, is everyone kind of recognizes

that there's now a bunch of concentration risk in the industry.

And so while you want your banks to offer multiple products, I

think you're gonna start seeing redundancy in the fact that there's,

two or three banks that do all of these things for these customers, because

they're really going to be focused on, well, if one of them suddenly can't

operate or needs to scale down, or, you know, god forbid, shuts down, um, how

do we continue operating our business?

That redundancy trend is then gonna drive more competition, most likely, right?

As you start to see other banks that can,

generate incremental earnings and generat incremental revenue streams.

Not necessarily by saying, we're going to lean into this all the

way, but we can, um, start being one of a stable of banks and, uh, kind

of managing our programs that way.

It's gonna be pretty interesting to watch as kinda the industry involves

the, the, you know, kind of thing in the background for all of this is of course

the regulatory environment and how people are going to, um, you know, actually react

to more banks getting into this space.

What banks are going to leave and what sort of consolidation that

drives in terms of the business.

Because I think, you know, at least what we've seen over the

last year is the regulatory activity has certainly stepped up.

And I think you're gonna kind of continue to see that scrutiny

regardless of, you know, what happens in the broader political ecosystem.

The change that the OCC and the FDIC and the Fed doesn't

necessarily happen overnight.

And so, um, it's been pretty clear the stance that, you know, folks have taken

so far on these sorts of partnerships and what regulators expect from banks.

Um, but that doesn't necessarily mean that next year is gonna

be the same thing or that

, you know, it's not going to cause, uh, ripples in the ecosystem when

the regulators tell Their, their banks that they have to do things

a certain way and you know, what does that mean for all companies

yeah, I love that.

And Brian, several things you brought up there tie into what the future looks like.

One of the things we love to do on these episodes is to take a step.

3, 5, 10 years in the future, hop in like a DeLorean with Marty McFly.

Let's go into the future and let's look at what sponsor

banking looks like in five years.

I would love your perspective on what it looks like and how it

evolves and changes, um, and what those, those themes look like.

Yeah, definitely.

I mean, the short answer is this is not going away, and I think it's

unrealistic to think that's the case.

The reality is financial technology companies exist for a reason.

They have clearly shown that, you know, they do a better job of

serving certain customer segments than traditional banks, right?

And you can kind of pick your niche or, or what have you, but you,

you see this across the board.

And I think, you know, as you think about kind of the banking space

more broadly, traditional banking in kind of the branch in your hometown.

That's probably not going away either.

There's always going to be a cohort of the population you know, wants

to continue to engage that way.

But I think you're going to see a larger percentage of the population

that is growing towards a more tech native, higher expectation set for what

services should look like when they engage with their financial, um, uh,

institutions similar to what you've seen with other sorts of software, right?

Um, and so I think what you're gonna end up seeing is that.

The space only gets bigger and only starts to kind of continue to take

market share from what you might think of as traditional banks, which is going

to continue to drive, you know, the.

Interest from banking institutions in serving these sorts of customers, rather

than necessarily saying, we're going to stick to our tried and true strategy.

And so ultimately I think what you're gonna need to see is some sort of

shift from a technology perspective for banks to catch up so that not

necessarily they can serve, you know, end customers, but so that they can

serve these folks that are distributing financial products and services in the

way that these customers actually want.

I think that's gonna be, you know, super interesting to see over the

course of the next five years.

But I think the flip side of it, which is, you know, what we've

seen today is the very, very niche businesses that say we're only going

to focus on X, Y, Z customer segment.

Those are going to start to consolidate, right?

It's very hard to say we're gonna run a single product lender that doesn't do

yeah,

um,

focus on people that love,

focus on people that love cats, right?

Like,

yeah,

yeah.

Um, and don't get me wrong, that product could still

be valuable and that customer segment could still be valuable.

But I don't think that is like the end all, be all in terms of

how you can run a business just because the reality is the financial

system is so large and really, I.

In order to have viable businesses, you do have to operate at

some level of scale, right?

Um, and so I think you see there's going to be more folks who say, you know,

we have these three different kind of customer segments or business lines,

you know, what else do we need to add?

And who else out there can we add it to, or, you know, sell to in order

to actually kind of make this all make sense at a corporate level,

even if the unit economics are.

So Brian, before we, we.

Close up for the day.

I've, I've been blown away by, by how you guys are at Column, looking at

not only the, the sponsorship, but the technology and the compliance.

I mean, there's, there's so many things that you guys have pulled together.

Do you have a closing statement for us?

You wanna make sure the audience hears that?

Maybe we didn't touch on that.

You're like, I just gotta tell 'em this.

We've talked about a lot, but I, I think the closing statement is

really, you know, we are out here to serve kind of the financial community writ large

and try to provide the best technology out there to enable folks to, to grow

their own businesses and to support them.

Right?

We, our long term success in the way that we think about our business is.

Totally predicated on being able to serve this customer set rather than

necessarily, you know, the traditional banking that you might see from others.

And so, you know, uh, really just want to hammer home the point that that's

kind of all we're, we're focused on building and doing out there.

Brian, I I want to thank you, um, for, for taking the time

out to sit down with us to, answer the questions and, and really, uh,

participate in, in this discussion.

Yeah.

Absolutely.

I appreciate you guys having me

brian, thanks for coming.

The future is exciting.

Tedd, like, buckle up, giddy up.

Let's go.

Uh, big things are coming.

I, I'm excited in the role.

I sit in looking at what's, what's upcoming, especially

in the sponsor making space.

You know, the big, the big things that I took away

from from today's conversation really are data is a gold mine.

Compliance is.

Not an option.

And the last, but not least, the way that banking has always been done

can't continue to be done that way.

And those are the three things that I took away from today's discussion.

Agreed.

Yeah.

well, what I wanna do is.

Thank you everybody that has made it this far into the episode.

will continue to invite more industry leaders to have discussions like this to

really dive in to what the world of Lin Tech is throughout this entire series.

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