"Fintech Confidential Uncut" is a show that brings you 100% raw, real, and uncut conversations about the world of fintech. In this episode, co-hosts Tedd Huff and Matt Vanhouten dive deep into the challenges and potential pivots faced by legacy players in the fintech industry.

Don't miss these topics:

• Will Visa's acquisitions impact innovation within the company?
• Is consumer protection at risk with alternative account-to-account payments?
• PIX in Brazil, UPI in India, and the US's confusion with RTP and FedNow
• Will banks and FIntech finally hold hands down the aisle?

Staying up-to-date with the latest trends and insights in the fintech industry, sign up for the Fintech Confidential emails at www.fintechconfidential.com/access and Don't miss out on the raw and uncut conversations that will give you a deeper understanding of the challenges and opportunities in the world of fintech.

Also, watch the entire episode on YouTube.

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Time Stamps:

Legacy Players in Fintech [00:00:00]

Are legacy players in the fintech industry facing major challenges? Let's take a look at the struggles of companies like Kodak and Xerox.

Visa's Dominance and Potential Challenges [00:04:51]

Visa is ruling the card payment industry, but can it maintain its dominance? Find out about the uncertainties surrounding Visa's future.

Contrasting Visa and Mastercard [00:10:24]

Visa vs. Mastercard: Who's the real fintech leader? Discover the different strategies and approaches of these two giants.

Visa's acquisition strategy [00:13:28]

Visa's acquisition game plan is not as innovative as Mastercard's. Learn why Visa needs to step up its game.

The threat to Visa's dominance [00:17:16]

Is Visa's reign in danger? Find out if an upstart can knock Visa off its throne and steal its market share.

Push to card payments [00:21:15]

Push to card payments: Are they worth it? Get the lowdown on the pricing and risks involved compared to traditional payment methods.

The challenges of social engineering [00:25:06]

Beware of social engineering! Find out why it's on the rise and how you can protect yourself from scams.

The need for trust in account-to-account payments [00:28:32]

Trust is crucial in account-to-account payments. Discover why banks play a vital role in building trust with customers.

The importance of resolving issues and protecting consumers [00:34:50]

A bank that takes responsibility? It's possible! Learn how resolving issues and protecting consumers can boost trust in payment services.

The challenges of alternative payment methods [00:34:59]

Why are older folks slow to adopt alternative payment methods? And what do younger generations expect? Find out here.

The impact of interchange rules on banks [00:36:17]

Interchange rules are shaking things up for banks. Discover how these changes could influence their card-issuing strategies.

The decrease in credit card rewards and increasing interchange fees [00:37:33]

Credit card rewards are dwindling, and interchange fees are rising. Is it time to ditch your credit card? Find out here.

The government mandate in Brazil and India [00:47:02]

Governments in Brazil and India are calling the shots in finance. Learn about their heavy-handed approach and its impact on banks.

Paying with installments in Brazil [00:48:07]

Buy now, pay later: the Brazilian way. Explore the unique practice of paying in installments and the fees that come with it.

Visa's potential acquisition of Pismo [00:51:31]

Visa's eyeing Pismo in Brazil. Discover how this acquisition could open up new revenue streams and global opportunities for Visa.

The moat of Visa's business model [00:59:07]

Visa's got a stronghold on cross-border transactions. Find out why its business model is a force to be reckoned with.

The convergence of fintech and banks [01:02:03]

Are fintech and banks joining forces? Dive into the discussion on how they can work together to solve financial problems.

The potential for new models in global money movement [01:05:56]

Traditional infrastructure is not the only way to move money globally. Explore new models like tokenization that could revolutionize the industry.

The direct to consumer strategy [01:10:33]

Cutting out the middleman: the direct to consumer strategy. Uncover the challenges and benefits of this approach in fintech.

Opportunity for banks to bank technology companies [01:11:39]

Banks embracing technology companies? It's happening! Discover the opportunities that arise when banks become customers of tech companies.

Banks looking to scale and support technology companies [01:13:04]

Banks are scaling up and supporting tech companies. Learn about their hiring, policies, and regulatory considerations in this new era.

The challenges of scaling and flexibility [01:21:56]

Legacy players struggle to scale and be flexible. Find out why regulatory oversight and old processes are holding them back.

Streamlining onboarding processes [01:22:47]

Banks need to streamline onboarding for fintechs. Discover why simplifying the process is crucial in the app store environment.

The potential for third-party service providers [01:26:54]

A new industry is emerging to help fintechs onboard with banks. Learn how third-party service providers can accelerate implementation.

The challenges faced by legacy players in the fintech industry [01:33:05]

Legacy players in fintech face major challenges. Join the discussion on the hurdles they must overcome, with a focus on Visa.

The features of Sky Flow's design [01:33:05]

Sky Flow's design is a game-changer. Explore its secure and tokenized personal information collection, encrypted data analysis, and more.

Disclaimer and caution regarding financial decisions [01:33:39]

Caution! This information is not financial advice. Do your research and make independent decisions to protect your finances.

This is a Production of Diamond D3, Media

Diamond D3, Media is a multi-media creation, management, and production company delivering engaging content globally

Matt VanHouten - Contributor, Fintech Confidential: sometimes breaking things is helpful

and then other times breaking things can bring down a bank, right?

And so it can be difficult to know.

Um, at, at, at the outset, which of these is happening right now?

Is this the kind of, uh, disruption that is likely to lead to a

lot of new value being created?

Or is this the kind of disruption that that could be, you know,

putting an entire bank at risk?

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

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

Tedd Huff- Founder, Fintech Confidential: Hey there.

Welcome to the first episode of FinTech Confidential Uncut.

This is where we keep it a hundred percent real about all things FinTech.

I'm Ted Huff, and I'm so stoked for today's chat.

Now let's dive into the main event.

Let me introduce you to Matt Van Houten.

This isn't his first rodeo in the FinTech world, and he's hailing

from the San Francisco Bay Area.

Matt's been a dynamo in the industry and he's been a driving

force behind the modern payments as their principal consultant, guiding

companies on their payment strategies.

Before that, he was at the helm of Ansible Labs as the head of product,

steering their ship with his expertise.

But that's not all.

Matt's journey also took him to giants like Visa, where he was

the VP of product for Visa Direct.

And if you're talking about big players, well, he's also made

his mark at Wells Fargo and J.

P.

Morgan.

So here's the real deal.

Matt's not just dropping by.

He's joining our fintech confidential crew as a contributor.

So brace yourselves for some real talk, deep dives and unfiltered

insights about the fintech world.

We're talking raw, unscripted and straight from the heart.

So without further ado, it's time to jump right in, explore the world

of FinTech with Matt Van Houten.

Matt, let's get started and welcome them to FinTech Confidential Uncut.

Matt VanHouten - Contributor, Fintech Confidential: Hey Ted.

Thanks for having me.

Tedd Huff- Host, Fintech Confidential: Yeah, so, oh man, I'm, I'm so

glad I finally got you on the mic.

Uh, you've, you've been writing some very good high quality material that

people can find on LinkedIn and, and on.

Oh my gosh.

I just forgot.

Is it sub stack?

Is that where, where

Matt VanHouten - Contributor, Fintech Confidential: Uh, I do have some sub stack

and then also a medium.

Yeah,

Tedd Huff- Host, Fintech Confidential: Okay.

I couldn't remember if it was medium or sub.

So I guess it's both.

So, I mean, you've been putting out massive amounts of content, really high

quality stuff, and I'm super happy to, to have you on and to have you join in forces

to really discuss some of these things at a little bit deeper level into what's

going on in the realm of, of FinTech.

Um, and maybe we can bring in a few things that, uh, some people don't

know and and support the, the FinTech confidential side of the house.

So I think one of the things that you brought up as we were throwing

around ideas for, for our discussion today was really Looking at the legacy

players that are in the FinTech market and, and more pointedly folks like

Visa that they've been chugging along, they've been been doing really great

things on the surface, they've been making announcements left and right,

but it's really starting to feel like, like that Kodak moment where they're,

they're, they're dominating right now, but are they able to do the pivot?

Are they willing to take on the digital camera of payments to transition over,

or are they gonna hold tight to it and just become another instant camera

company that you can buy it at Best Buy.

Matt VanHouten - Contributor, Fintech Confidential: Yeah, I love, I love that analogy.

And, uh, I should say, I grew up in, uh, the city of Rochester, around the

city of Rochester, which is the, uh, the, the, the ancestral home of Kodak.

Um, when I, when I lived there, the George Eastman house was right next door.

Um, we'd, we'd, we'd take a walk through its grounds.

It's a beautiful, beautiful building.

Um, and, and it honestly was like one of the most magnificent, uh, elements left

of that . Legacy at the time, right?

So when this is in, you know, 2010, 2012, Kodak had gone from dominating, you know,

film production and, and photography,

uh, to, to almost being a footnote in, uh, Wikipedia entry.

And, uh, another, another famous company also, uh, based in, in

Rochester, uh, is Xerox, right?

Xerox had its own dominant period and, and owned, you know, digital, or

not digital, like Xerography, right?

Even, even, uh, the, the very term that,

uh, it was all built around, uh, came from the company's name.

And, and, you know, they, they made a bunch of decisions.

I think in each case they're slightly different.

Um, they, they honestly didn't take the competition seriously

and they didn't take the transitions in society that were happening, uh, seriously

early enough to make the changes that they needed to make, to stay relevant.

Yeah, you're right.

Both of them, uh, have seen in either their, their, their

market share precipitously drop, uh, or in the case of Kodak is

basically just a brand now, right?

Like they, they really don't even make anything anymore.

Um, and so I, I do think that, that, you know, you look at a company like

Visa today and you look at how dominant they are in, in the world of card

payments, and you can see 70% roughly of US cards issued carry the Visa logo.

Um, they, they continued, as you mentioned, to make announcement

after announcement about various partnerships, acquisitions, and, and,

um, they, they undoubtedly are at the, the top of the pile when it comes to

consumer initiated payments in, in, in, um, in in a number of use cases.

But, Yes, I do believe that there are, there are some chinks in the

armor, as it were, and, uh, it is far from certain whether that, uh,

dominant position that they're in today is, is one that they can sustain.

Tedd Huff- Host, Fintech Confidential: like, so when I start to think about

it, for me, if I go back and I start thinking about all the different

places that, uh, and all the different products and services that they've,

they've launched over the years.

For me, the place where I feel like the pivot really happened to where they may

have Quote, unquote, lost their edge, really was when they decided to offer JP

Morgan Chase their own instance, per se,

Matt VanHouten - Contributor, Fintech Confidential: Chase net.

Yeah.

Tedd Huff- Host, Fintech Confidential: for ChaseNet.

And for me, at that point there, it was almost like they, they

realized that they're, they're, they're, they're, they've jumped the

shark, for lack of a better term.

Right?

And so since then they, they've acquired, um, CyberSource auth.net.

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: Um, they've, they've launched their own

services around transaction security.

They, they just, they've, all of the things have just kind of

been like, check boxes, I guess is the way I would describe it.

Nothing really moving forward, like looking at MasterCard.

They bought a money movement company in Europe so that they

could really dive a little bit deeper into that localized method.

Matt VanHouten - Contributor, Fintech Confidential: You thinking vocal link in this, in

Tedd Huff- Host, Fintech Confidential: yeah.

yeah.

Vocal link.

Yeah.

Matt VanHouten - Contributor, Fintech Confidential: Right.

Tedd Huff- Host, Fintech Confidential: Yeah.

So like I'm seeing what, what the other brands are doing and hearing

the conversations from the other brands as if they're like Visa can

have, can have the card payments.

Because, because honestly that's, yes, that's important now.

And yes, we're gonna see still put money into it, but we're really gonna

focus on what's the next thing And we're gonna spend a lot of time,

effort, and energy and figuring out how do we participate in the next thing.

It's it's way beyond announcements.

The, the level of, of detail and the diving in that frankly discover blows

my mind what the amount of focus that they've put on, the alternative

options that are coming to the market.

MasterCard's not far behind.

I'll say the only one that may be even further behind from Visa

is gonna be American Express.

Matt VanHouten - Contributor, Fintech Confidential: Yeah,

' Tedd Huff- Host, Fintech Confidential: cause

there, there's, they're, they're still lifting off of their, their

t and e stuff that they've had for decades, even the, the

foundation of the original card.

So, I, I guess what I'm saying in short is, I love the fact that

everybody's making announcements.

I love the fact that they're talking about the ability to

do stable coin settlement now.

Who can handle that?

It's a different story.

Um, how's it going to work?

Trying to get a little bit closer to the, to the small businesses of the

merchants is, is a interesting perspective and a direction, but I don't think

it's enough to, to sustain over time.

I'd love to kind of get your perspective on that.

Matt VanHouten - Contributor, Fintech Confidential: Yeah, I think it's pretty, it's

pretty interesting to contrast Visa and MasterCard in, in

this, uh, through this lens.

And, um, it, when you look at, yes, VOCA link, uh, was, was acquired

by MasterCard and Mike MEbA, right?

Is now c who, who was the head of, of OpenLink is now c e o of MasterCard.

Right?

And so you have a person that's running the company who comes from

other payment methodologies that, that are not card based, right?

If you look at the Visa leadership team, they are.

Almost all veterans of the card business, and very few of them have

experience in, in, uh, in any other, in any other, uh, methodology.

So I think there's, to me, the biggest question is really

around leadership, right?

Like, does, does, do each of these companies have leaders who understand

the nature of the ecosystem as a whole?

And, um, and are they well positioning, not just simply the betts that they're

making in terms of buying, you know, assets and, and uh, and, and, and doing

partnership deals, but also also in like creating a cohesive, you know, platform

that can, that can, that can offer value?

Uh, I would say, uh, I don't know that much about like how the, the integration.

Quality has been at MasterCard, but I can say from my time at, at Visa, the,

the most of the business units that have been acquired continue to operate

pretty independently of, of each other and of a lot of Visa's core business.

So they may carry, you know, the logo, they may say they're a Visa company.

Um, but when you look under the hood and say like, okay, well what,

what am I, what am I now getting through this particular partner?

Uh, that that is better because it's part of the, the Visa ecosystem.

And, and I think in many cases you'd be hard pressed to find those differences,

you know, and, and in some cases I think you even would see companies

that are acquired because they're

innovative.

Because they're entrepreneurial after they've been acquired.

They don't, they don't have those same motives, they don't

have those same incentives.

And so you, you could, you could almost have the counter starting to happen,

which is, it suppresses innovation.

And, and while you, you can check that box as you mentioned, um, it's, it can also,

the checkbox could freeze you in time.

And the, and then the new ideas, the, the, the different ways of thinking

about and solving problems that are looking at the, uh, the things through

the lens of the whole customer base,

not simply those that are existing members of the one

particular network or the other.

Uh, you, you, you can lose that.

Right?

And so I, I, I do see that MasterCard has moved first in a number of these areas.

I don't know that vocal link itself was actually that smart of an

investment in terms of like, Direct contributions to the bottom line,

but in terms of the, the thought leadership and the, the

knowledge base of the team that came with the acquisition, I,

I, do think that, that, that may prove to be the most valuable asset is the people

that came over from that acquisition.

Tedd Huff- Host, Fintech Confidential: Yeah.

And, and that's, I guess that's the biggest piece that you really look at

if, even if you look at the acquisitions that both companies have made.

Um,

another one that comes to mind is that I noticed, like with MasterCard, a lot of

their acquisitions are around privacy, around security, um, around, around things

to, to secure, to secure the bag, right?

They're, They're, protecting the house, um, no matter, no matter what it is.

Whereas Visa, it's like, how, how can we bring the revenue that

others are making based off of something that we're doing in-house?

And like, one that comes to mind really for the visa side of the house,

and I was actually really excited for this, was when

Visa decided to buy, verify.

Because Verify had struggled with, with getting data from Visa

Verify, had struggled with, uh, optimizing onboarding process.

I mean, all of these things that verify struggled with.

I was super excited with the thoughts that, well, maybe now that they have

the Visa backing, they're going to be able to deliver on all these things

that they've been talking about,

only to find out that they have no plans of doing anything new, anything different.

It's more spreadsheets, it's more emails that have just moved over

to the visa to ticketing system.

So I don't know if that's better or worse, but it still feels like more of the same

and that that to me is more of.

The way to describe where Visa's been at lately is just more of the same.

And I'm, I'm, I'm hopeful that they can get out of that mode and really start

to contribute to them moving forward.

Um, but unfortunately, you know, they're, they're struggling

a bit right now with that

Matt VanHouten - Contributor, Fintech Confidential: Yeah, I, and I, I would say that

the, um, you know, share a little bit about the, you call it the, the

confidential side of FinTech Confidential

that I, I, it, it, it is not, is not anything that I, I would say

is inappropriate to share as well.

It's like Visa does take very seriously the threats.

It is a, I wouldn't say it's a paranoid company, but it's definitely

not like Kodak in the way of, or Xerox in the way of feeling like

this is, this is a, you know, uh, a,

a privilege that we, we've earned and will continue to exist, you

know, independent of, of, of what happens around the rest of the market.

Tedd Huff- Host, Fintech Confidential: Mm-hmm.

Matt VanHouten - Contributor, Fintech Confidential: Um, I, I know from like, as an example

with, with, um, with Xerox, right?

I think this is a really good, good counter, uh, story to kind of think about.

Xerox lost over time because they just didn't value the bottom of the market.

They, they, they were making these huge machines that were dominating,

um, at the, the high, high end.

And, and they, they just stopped really paying attention to the low end.

So low volume, you know, small business kind of machines.

And, and then these companies that most people at that time had never

heard of, like Canon, sharp Rico, they started to make low end machines.

And, and Xerox looked at them and said, eh, they can have it.

It's not profitable.

It's, uh, it's a waste of time.

Um, and, and then they lost that market, right?

They, they were, they were fine with it, right?

They didn't even, it didn't bother them at all.

Tedd Huff- Host, Fintech Confidential: Mm-hmm.

Matt VanHouten - Contributor, Fintech Confidential: Then, then those same companies

start making mid, mid-range, and then it's like, oh, mid-range.

Sure.

Yeah.

Mid range.

Mid-range.

We don't want them to take too much market share from midrange, but we

could just cut our prices a little bit.

We'll just up our sales kind of incentives and we can we'll be fine.

Right?

Um, but the product quality wasn't as good.

And so they started to lose on capabilities.

And, And, then, then once it hit the, you know, it's a natural progression,

you know, like once those same companies started to move up into the, the,

the higher, um, production, uh, lines they had, they had lost the momentum.

Right.

And they couldn't get it back.

And so I think the real question here is like, is is there, is there a story

whi which shows any kind of an upstart being able to really significantly

affect Visa's ability to stay on top?

And my my belief is that there isn't, I.

I think their network power is so significant that I don't

actually see a likelihood of another network displacing them.

I'm, it's much more likely that other methods of payment, other, other ways

of facilitating the same kinds of transactions will dilute the value.

And that, um, the economics of, of building around interchange

are, are not here for forever.

Like, there will come a point in time when interchange is not nearly as,

as lucrative, uh, as it has been.

You know, we have examples in the UK and in Europe there's a, there's a

credit card competition act that's, that's gonna go in front of congress.

I don't know if this one's gonna pass, but it, it is.

I just see the long term I.

Trends point to lower fees for domestic payments.

And if, if, if at the point in time that those go into effect, the company hasn't

radically diversified how it makes money, I, I do think that they could be in for

a pretty quick and painful, um, decline.

Tedd Huff- Host, Fintech Confidential: Well, I mean, and you also look at,

at other options that are in the marketplace, you you look at a c h, which

is asynchronous, and it's a low cost, but there's no guarantee that that the,

that the end u the, the receiver's going to receive the money.

Right.

So that you have that one.

We

have

Matt VanHouten - Contributor, Fintech Confidential: only, not only that they'll

receive the money, but even if they do, if there's a problem, like,

I don't know, the service wasn't really provided.

Um, and, and so like the liability protection that people are accustomed to

with a card network based transaction.

often not off available if you make a payment using a different

method of payment there.

Fraud protections, you know, may be there to some extent.

Um, but all of that's funded by interchange, right?

And so it's like if you don't have interchange, you can't afford

to have a zero liability policy.

And so the, right now, I think there's an advantage of the networks not only

having ease of use and predictability that the transactions will work.

Uh, but also you can, you, you can know that like if somebody uses my card

in a way that I didn't authorize, I, I'm not gonna be responsible for it.

Right?

That's kind of like you don't think about it much as a risk

because you get protection.

But once you, once you start to, to eat into the revenue associated

with inter interchange, if that, if that did happen, that

That buffer isn't there anymore.

Right.

And so, and so you end up having a much more even playing field when it

comes to where you have protection.

And then it's purely a matter of ease of use and, um, and reliability.

It does need to be reliable.

Tedd Huff- Host, Fintech Confidential: Well, I mean, and, and if you look at,

you know, the Proliferation of account to account push payments that have shown up.

We, we have Venmo and we have Zelle, and we have Cash App.

Um, we have R T P, we have like, uh, fed Now that just got

relaunched.

All of these different things.

Matt VanHouten - Contributor, Fintech Confidential: but we do, you do need

to include push to card in that framework as well,

which both Visa and MasterCard offer and I, I think is an example of, uh,

a space where the networks have seen.

That there's an an another way of thinking about how to do what's

historically been done only one way and, and do it differently.

Is it is, is it enough?

Right.

And are they also participating in all of those other methods Right.

Sufficiently to, to be as dominant a player in the future that's a

lot more fragmented and diverse.

That's where I think it's, it's very debatable

Tedd Huff- Host, Fintech Confidential: well, so.

When you look at, at the push to card that Visa and MasterCard both offer their,

their pricing is significantly less than the, the traditional, uh, acquiring model.

Matt VanHouten - Contributor, Fintech Confidential: purchases.

Yeah.

Right.

Tedd Huff- Host, Fintech Confidential: So how, from your perspective,

how are they able to do that?

Even though I still feel like the risk is still there?

Matt VanHouten - Contributor, Fintech Confidential: Well, so this is what's

really fascinating.

Um, I.

For an O C T, which is the original credit transaction with Visa liability

coverage doesn't apply to those.

That's no different than if you were to send a payment through an A C H

or R T P or Zelle or, or anyone else.

It's like, because it's a, we think, we think of it as a,

uh, user originated payment.

So I'm authorizing this payment to be sent to me.

Uh, it is, or sent to another, you know, it could be a business as well.

It is, it is.

It is not something that, uh, that has to comply with those same liability

rules, and so it, it it comes.

And also one other thing to just, to do.

I think is important to know is like the fees that, that the networks

collect for a push payment versus a pull payment, they're pretty similar.

So the, the network makes about the same amount per transaction.

In, in, in either case.

The key difference is that banks make a lot more money when a user is, is,

is requesting authorization to pull funds from an account versus telling

a, you know, a platform to send money.

And, and so that, that's the, there's a huge difference there.

Right?

And so I think it, it really depends on who's authorizing the transaction and,

and over what rail is it, is it settling?

Is, is really I think what we're gonna, what we're gonna have to ask ourselves

like is, is it sufficiently better that it could encourage new behavior?

Uh, it was 'cause it means that you and I, we don't just like give someone

a card number and then say, Hey, go, go ask my bank for the money.

Um, We, we, we may be taking a more active role in, in, in directing where,

where a payment might, might land and, and that could be a better ecosystem in

the future, but it's certainly different.

And anytime you're gonna change behavior, you need to have a really

compelling, you know, value proposition for both, you know, the, the,

the, the payer and the recipient.

Tedd Huff- Host, Fintech Confidential: Well, I know earlier this year,

uh, I was at the M P C conference in Atlanta, and we had a number

of financial institutions there.

Um, really talking about the, the real time payment.

And when I say that, I'm not just talking about R T P, it includes

Fed now, it includes Zelle, it includes the push to card

and how they were talking about the need to approach.

Fraud and risk in a completely different way because now it is

harder to pull the, the money back.

It's harder to

Matt VanHouten - Contributor, Fintech Confidential: Right.

Tedd Huff- Host, Fintech Confidential: the consumer in these types of areas.

And even Zelle had a number of things come out against them because people

were getting quote unquote hacked, I

won't call it hacked.

It was just social engineered,

Matt VanHouten - Contributor, Fintech Confidential: Right.

Mm-hmm.

Tedd Huff- Host, Fintech Confidential: total social engineering,

um, into that.

And now the financial institutions that I've spoken with are like, are

trying to understand how do we help the consumer protect themselves

against social engineering?

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: Because with a card, if you get

social engineered into a card,

like you mentioned, it's easy to hop on the app and dispute the charge, right.

Matt VanHouten - Contributor, Fintech Confidential: say it wasn't me.

And then you're, and you could be, at least in my experience, I have

never had a situation where, um, a, some fraudster had access to

a credential of mine and used it.

In a way that was not authorized by me, that that then I, I held the risk, right?

It always was covered by, um, by my bank.

But in this case, it's harder to differentiate that because in,

in, in the, in the, in the, just mechanically speaking, you are

authorizing the funds to be pushed.

And then in, in the UK this is like, they, they're further ahead in, in this kind of

journey than, than we are here in the us.

And so for several years they've, they've been thinking a lot about this

and they call it a p p fraud, right?

Authorized push payments, fraud.

And, And, and, like, one of the typical examples is, Um, you know,

you're doing work on your house and you have a little sign out in

the front yard says your contractor is here, you know, doing the work.

Fraudsters drive up and down the street.

They make note of the contractor working at this house.

They figure out who you are, and then they send you a fake invoice that looks like it

comes from the contractor doing the job.

And they say, oh, you're due to pay the next installment.

And you, you think it's real.

And so you send the money to the account that's listed on the

invoice, and lo and behold, that account is not your contractor.

Right.

And now you go to your bank and say, I want my money back.

And the bank says, well, you authorized this transaction like you sent the money.

I have the proof, I have receipts you sent, uh, on this day you signed in.

I have, I have everything here.

Um, yeah, be more careful next time.

Right.

That's a, this is pretty terrible feeling from, from a

consumer perspective.

and, and and I think you don't have to have that experience too often

before you just say like, I'm, I'm not, I'm not using that service.

Tedd Huff- Host, Fintech Confidential: So do you, do you think that that

there is anything in the account to account payments space that can really

take any sort of hold to displace the batch or card type transactions?

I mean, I struggle to see it.

Um, and, and I, I work with a number of financial institutions and, and businesses

that are wanting to go to the push payment side of the house, but they're scared.

They're scared to go there.

Do you see that there's a, is there gonna be a time when they're not as scared?

You know, what is it, do you see that They might, might go,

okay, I feel comfortable now.

And, and how do you see it transitioning?

I know that's a whole bunch of questions, but like,

Matt VanHouten - Contributor, Fintech Confidential: Yeah.

Yeah.

Yeah.

Tedd Huff- Host, Fintech Confidential: like, I, I'm, let's just

start with the first one.

Like, how do you see them not being scared of it?

Matt VanHouten - Contributor, Fintech Confidential: I think the first thing that has to

happen is people need to trust that the system is on their side and that, and

that if there's a problem, they're, I.

They're gonna, if they didn't do anything wrong, that they're not

gonna be left holding the bag.

and and so for example, in the uk, again, I, I look there just,

I think they're, they've, they've done some good thinking on this.

They've put some rules in place that require banks to support

clients who have a problem.

Right.

And 'cause initially they would literally just tell them

tough, you know, tough luck.

And they wouldn't even assist with determining, you know, where

the money actually went, like how they could possibly get it back.

They, they, they leave it, they leave it to the, to the customer.

Um, and so I think there, there could be rule changes that require

banks to provide material support to clients who have a fraud issue.

This includes with Zelle, by the way, too.

Right.

I had an issue with Zelle personally, where someone sent me money.

They, they claimed it was by mistake and they wanted it back.

I was, some research and asked, asked my friends on LinkedIn as well, like,

Hey, should I send the money back?

And the the crowdsource answer was, do not send it back.

It's probably fake, right?

They probably have funded a, uh, digital wallet on Zelle with a stolen credit card,

and if you send it back to them, you're helping them take the money that they

fraudulently put into that system and, and then put it in a real bank account.

So just don't do it.

So I said, oh, okay.

Well, I called my bank.

My bank had no way to help me.

No way to know where'd the money come from?

Is this a real person?

It was, it was shocking.

And I, and I banked with a big bank, um, uh, the biggest bank

in the us we'll say , um, and,

uh,

Tedd Huff- Host, Fintech Confidential: of a tip of the

Matt VanHouten - Contributor, Fintech Confidential: yeah, .yeah, . Generally their services.

I, I, I don't have many problems with the service when I need it, but in this case

it was, it is not, it's not their fault.

It's the, it's the.

The way Zelle is constructed, it's very much like you're on your own, you know?

So, um, that's not a great feeling.

And I think as long as it stays that way, you'll find that when it, when there's

an alternative that costs the same or similar and that you're used to and,

and trust you just, you're not likely to take that on in terms of additional risk.

So that's the first thing is like, uh, the, the rules kind of

guaranteeing that you will have somebody looking out for you.

The other thing that they've done in the UK is they, they, they also have

this, this service where before you send a payment, you can, can see some

information about the, the, the place where you're trying to send the money.

So it's, in this case, like, I think I'm sending money to my contractor if I

pinging this account number and it comes back with some totally unrelated name.

Well, all right.

I can suspect that this is not legitimate, and then I won't send that payment.

Right.

And, and so I think that's, that's a, that's another fairly basic

step that a person could take.

If you ever do Venmo and you send money to a phone number that you've never sent

money to before, or an email that you've never sent money to before, it'll ask you,

do you know the last four digits of this phone number that's

associated with that, that person.

and, and, or you could see a picture, right?

There's, there's some, it's not great.

Right?

It's still

Tedd Huff- Host, Fintech Confidential: Well, and Zelle Z's pretty

much the same way I've noticed,

like a few, uh, a few months ago, and I was paying, uh, one of, one of the guys

on my team to, to do some additional work, and I went to Zelle him the money

and it failed.

So I tried it again and it failed, and I tried it again and it failed.

But I was not getting any sort of failed message.

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: And so you look at my, you look at

the thing and it's like, money, money, money, money, out, out, out, out, out.

I'm like, oh crap.

How many of these just went out?

My oldest daughter had the same issue happen with JP Morgan, where

they sent her rent payment to her

landlord three times

Matt VanHouten - Contributor, Fintech Confidential: Oh man.

Tedd Huff- Host, Fintech Confidential: and completely demolished her account.

Now, mind you,

Matt VanHouten - Contributor, Fintech Confidential: that, that was the, the

public issue, right?

That was the one that, that, that, uh, was like last month or

Tedd Huff- Host, Fintech Confidential: Oh, it's been a, it is been a few months ago.

Yeah, it's been

a few months ago.

They just talked about it like a month ago, but it

happened months and months ago.

And, and so first thing she did is she called the bank.

I mean, she calls me first actually,

she calls me and says, dad, what do I do?

Uh, and I said, how did you pay it?

Matt VanHouten - Contributor, Fintech Confidential: we gotta be good for something, Ted.

You know, once the kids, once the kids get out on their own,

you gotta have a reason to get

Tedd Huff- Host, Fintech Confidential: Yeah.

Uh, so exactly.

So I say, what was it, Zelle?

Yeah, it was Zelle.

Did you, are you sure you didn't hit the button three times?

That's the first question I have to ask.

I.

And she says,

Matt VanHouten - Contributor, Fintech Confidential: All right.

I see what you're saying because you'd had the experience of it

but sometimes a failure is not actually a failure in the back end.

Right.

This, that happened to me at Taco Bell.

The app told me it's failed, and my daughter's like, I'm so hungry.

I said, okay.

She orders it again, we show up and they're both there.

two orders, like,

we didn't need, we didn't need two of these.

You know,

Tedd Huff- Host, Fintech Confidential: But, but Taco Bell.

Taco Bell is not as bad as three months worth of rent.

New York, New York city, rent of all places

Matt VanHouten - Contributor, Fintech Confidential: close, right?

Tedd Huff- Host, Fintech Confidential: nicked out of a bank account.

But you know, the call, then she picks up the phone, she calls, um, and I

have no problem calling out the bank.

I mean, it's JP Morgan.

They called the bank and the person on the other end is

says, we're aware of the issue.

You will not be charged any overdraft fees and the additional payments

will be put back into your account no later than tomorrow morning.

I was completely shocked because that is Not the response that I

had from my financial institution, which supports US veterans

Matt VanHouten - Contributor, Fintech Confidential: Hmm

Tedd Huff- Host, Fintech Confidential: specifically.

Matt VanHouten - Contributor, Fintech Confidential: mm-hmm.

Tedd Huff- Host, Fintech Confidential: So it was really interesting to see

someone who touts, being very friendly,

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: helpful, and someone who you

would expect to not be very helpful, being very helpful.

And she feels more comfortable using Zelle than I do now.

Matt VanHouten - Contributor, Fintech Confidential: Hmm.

Tedd Huff- Host, Fintech Confidential: And

it was

Matt VanHouten - Contributor, Fintech Confidential: it is, and, and, and when they,

and that's a great example, right?

Like there's an issue.

They take responsibility for resolving the issue, and then they

assure you that you're, you're, you're, you're gonna be protected.

So to the extent that they stepped in and, and, and took

that posture across the board.

Not just simply when it's one high profile or, you know, thing that,

that they're concerned is probably gonna create some bad press.

Uh, I, I think you would see a lot of those, those alternative

methods being, uh, experimented with and especially by younger people.

Right.

You know, it's, a lot of this stuff changes slowly part in part

because most of the value in our economy still sits with people who

are generally older and, and maybe less likely to try something new.

But, um, over time I do think that, that the younger folks are gonna try different

things, but even they are gonna wanna know that they're, that they're not,

especially I think Gen Z I have Gen Z kids and, um, yeah, they

want to, they wanna know that they're being looked after, right?

They, they, they feel, they feel, they feel like they didn't get

a great deal, you know, in terms

of what the world that they're inheriting.

And, and I think you're gonna see their expectations around,

uh, coverage of, of fraud.

Regardless of whether the, was the transaction was done with a piece

of plastic or some other, some other, you know, form factor that,

that if something goes bump, they won't be responsible if it wasn't their fault.

Tedd Huff- Host, Fintech Confidential: Yeah, and

Matt VanHouten - Contributor, Fintech Confidential: That's the biggest issue.

Yeah, that's definitely the biggest issue with all these alternatives

and, and then you have to ask yourself, well, do the banks have

an incentive to lean in like that?

I think, I think honestly the only way this happens is if the credit

card and debit card interchange rules fully cap interchange to an extent

where banks have to re restructure the way that they think about why

they issue cards in the first place.

Tedd Huff- Host, Fintech Confidential: I mean, the amount of interchange

that is, that is generating revenue, um, in the marketplaces.

Is amazing.

Uh, like I'm blown away.

Um, how much, and I, I, I work with small issuing companies

that and program managers, and

I look at the revenue that's generated off of their small-ish programs.

And when I say small-ish, I'm talking like a hundred thousand

cards in the marketplace.

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: And, and you see the, the revenue

that's generated and then you look at the fraud side of the house.

If you deduct that out of there, it's still a pretty substantial

number, uh, that, that they're generating in annual revenue.

But I think the other piece that's gonna come into play is that if, if they cap

interchange, then all of the benefits that we've come, the rewards are gonna

go away.

Heck, the rewards have already started to go away.

I mean, I, I got the Amex, uh, Delta Amex card because I was excited

because I put all my business expenses on that Delta card.

And

man, I was gonna get me a vacation.

Now I, I, I nearly have to spend all, every last penny

that I earn.

Matt VanHouten - Contributor, Fintech Confidential: I didn't, I haven't heard

about their, that program in

Tedd Huff- Host, Fintech Confidential: So, so they, they've just reduced all

of the, the special things that you get, you know, to, to get to that top tier.

When I first got the card, I could spend, um, an amount, uh, I think, I

think it was, uh, a hundred thousand dollars a year, and I went all the

way up to the top tier at Delta.

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: to do it, you have to spend nearly $500,000

Matt VanHouten - Contributor, Fintech Confidential: Wow.

Tedd Huff- Host, Fintech Confidential: on the card to get to that tier.

Not only that, but used to get all these benefits by having the card

and paying them $500 a year for the privilege of having the card.

And now if you add up the cost of all the things that they've taken

away, it's no longer worth the $500.

And, and you know, the, the, the thing behind that is that our expenses

and everything is going up, so we have to cover ourselves somehow some

way, but they continue to increase the interchange at the same time.

So I'm really starting to question is it really that's going on, or are

they trying to increase their margins?

And if the interchange gets capped,

That's only gonna get much worse, which is going to force people to,

to look for alternative methods

Matt VanHouten - Contributor, Fintech Confidential: Yep.

Tedd Huff- Host, Fintech Confidential: for them as a consumer because the

consumer behavior is about how much,

how well can I be treated during the time of acquiring a product or service

and how easy is it for me,

Matt VanHouten - Contributor, Fintech Confidential: Yeah.

And I, I,

Tedd Huff- Host, Fintech Confidential: and service, I

Matt VanHouten - Contributor, Fintech Confidential: right.

right.

And I, I, um, you.

I don't know that many people seem to quite get this connection

between what's being sold as like a,

Hey, we're trying to help small businesses by reduced interchange

and you know, merchant acceptance fees are, are, are unsustainable.

Right?

Like that's the, that's like the headline story beyond

credit card Competition Act.

And, And, and, you get people saying, yeah, I I I agree Mom

and pops should be protected.

Tedd Huff- Host, Fintech Confidential: that

isn't who's gonna get protected.

Matt VanHouten - Contributor, Fintech Confidential: those same Yeah, I know.

And those, but those same people who are, who are, who are uh,

you know, showing their support,

I think don't realize they're, you know, one and a half percent cash back

or their, their, their, their airline miles or whatever, whatever benefits

they're seeing for their card are, are funded from that, that, that, that fee.

Right.

and and I did, I did an analysis, if you're interested in nerding

out on this, anybody that like wants to go look at my, um,

Tedd Huff- Host, Fintech Confidential: We'll, we'll put the

links in the show

notes.

We'll put the link in the show notes.

Matt VanHouten - Contributor, Fintech Confidential: Yeah.

Yeah.

So there's a, I did, I did an example transaction just to try to show like

who's, who's actually getting what.

When you swipe a card, you know, if you look at the total amount that's being

paid by the merchant, who gets, who gets what piece of it overwhelmingly

for most, for, if you're using a credit card as an example, not a debit card.

' cause they don't often, they sometimes have rewards, but it's not, not really

. So a credit card with the rewards program, overwhelmingly the majority of

the fees that are deducted from what the merchant's getting go to the card holder.

The, the second, the second highest number goes to the issuing bank.

The third highest goes to the acquiring entity that processes the

payment on behalf of the merchant.

And the very bottom goes to the network, which is Visa or MasterCard.

So we all like to point to the network and say, they're getting

all this money, they're controlling all this, you know, these fees.

And they, they do set the prices, but.

If you break down

Tedd Huff- Host, Fintech Confidential: Do they really?

Matt VanHouten - Contributor, Fintech Confidential: what they do?

Tedd Huff- Host, Fintech Confidential: You don't, you don't think it's

the, the issuing banks that are, are lobbying for them to

Matt VanHouten - Contributor, Fintech Confidential: Well, there's, they're pushing.

Yes.

Tedd Huff- Host, Fintech Confidential: rewards and they can cover their losses.

And, um, by the way, if you don't do this, I will switch to this network.

Who will do it for me?

Like,

Matt VanHouten - Contributor, Fintech Confidential: yeah, That's true.

Tedd Huff- Host, Fintech Confidential: Costco.

I mean Costco, the main reason they switched over from, from, Amex to Visa

from my understanding

was because Visa was going to cut them a killer deal on their interchange across

the board, but still allow them to give all the benefits to their cardholders.

So they basically were taken on both sides of the table and Visa

wanted it so bad they were willing to lose money on that portfolio just

to say they took it away from Amex.

That's the story that I've gotten.

Matt VanHouten - Contributor, Fintech Confidential: this is one of those

things I cannot comment on.

Um.

I, I would say that's an interesting story and I think, I think

there's, it makes a lot of sense.

Um, what you've

Tedd Huff- Host, Fintech Confidential: enough.

And I, I don't know, I, I know during that time period you were, you were

at an entity that may or may not have made you privy to some information,

and I will disclose that.

I did not hear any of this information from Matt.

Um, but this is from, from others within the industry, so,

Matt VanHouten - Contributor, Fintech Confidential: but it, it does, it does point to kind

of coming back to this question of like, you know, using the Xerox story,

focusing on the big, the big players to the exclusion of everybody else.

You could argue in Visa's case, focusing on the US to the

exclusion of the rest of the world

Tedd Huff- Host, Fintech Confidential: oh,

yes.

Matt VanHouten - Contributor, Fintech Confidential: uh, is another example.

And while it's not quite fair, probably to say that I.

They only are focused on the us, they're inordinately focused on the us.

And if you compare MasterCard in exam, for example, in what

they've done in South America and

Latin America versus, you know, what Visa's done in, in the same

region, uh, or in Asia Pacific,

um, uh, I think the field, the playing field's a little more level in

Africa, but more complicated as well.

But look at ap, look at, look at Latin America, and, you know,

Visa's playing catch up there.

MasterCard has, has taken a much more, uh, aggressive position in doing partnerships

with companies that Visa probably thought were just too small and not

that interesting in, uh, at the moment.

And now, now you're seeing, you're starting to see some momentum

picking up outside of, uh, the US for, for other players.

Tedd Huff- Host, Fintech Confidential: Well, you know, that makes me think of a

project that I got to work with Visa on in India, which was Universal id, which

was leveraging the Visa network and a, and a, a prepaid card in the background,

for a lack of a better phrase, to basically test out whether

or not the country and and the citizens of India would be willing

to participate in a program like this, especially the rural folks.

And that was kind of the precursor to U P I, which I mean,

U P I is blowing up in India.

Everybody is using it.

Um, it is the primary source of all bill payments.

Most transactions fall into U P I.

Um, and the only one that's even doing any better than U P I is Pix outta Brazil.

Like it's, it's uncanny that these guys have done this and these are two

regions that, you know, the traditional card brands have struggled in.

They just, they couldn't get any hold.

And so like, do you think that because the credit debit card

culture was so far removed that

that's why these account to account transfer protocols have really taken off

unlike R T P and Fed now here in the us.

Matt VanHouten - Contributor, Fintech Confidential: Yeah.

Um, I think they, yeah, I think each country has its own ingredients that

drove that crazily rapid adoption of, of the, of the new frameworks.

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Matt VanHouten - Contributor, Fintech Confidential: I think in both cases, you saw I

countries that had relatively low penetration of, of cards per banked adult.

So if you looked at like, who, who, who in the country as an adult has a bank

account, first of all, so who's banked?

And then of those who are banked, who have a card, and then of those who.

Where is it a card that's issued by one of the two big brands?

Those numbers were pretty small in both, both India and in Brazil.

And, um, I think Brazil, it's, that's probably like the, the growth there

has just been astronomical with picks, um, unprecedented, frankly.

And, and one thing that I think is really fascinating, I, I just learned this

from another one of, uh, US payments and FinTech nerds very recently, um, is,

is who's done a lot of work down there.

And I, I didn't, I didn't know about this.

So this is fascinating kind of thinking about the eec.

It's a, it's an, it's a, it's an economic piece and it's a mandate piece, right?

And in the case of, and this is also true for India, the government has

taken a very heavy hand in pushing for participation with these schemes.

So the banks in Brazil, the banks in India, they're, they're required to

support the schemes and, um, the fees that they're allowed to charge are.

Either zero or very, very, very low.

Right?

And so there's a, there's a, there's a government mandate that,

that we don't have here, right?

First of all, we don't have the government insisting that banks participate, and

then we, we, we also don't have at least very little government oversight

of what the prices are, right?

So that's just not normal in the, in the US it's, it's, it's bedrock,

uh, in both of these places.

But even more than that, you could have something that's, you know, free.

Um, and, and, that the bank support, that doesn't necessarily mean that

people are gonna go use it when they're out in the world, right?

Um, if they have a better alternative.

And, and so something that, that, um, I, I was just unique, I think

to Brazil more so than India.

Is, this idea of paying with installments.

So you could say like Brazil was doing, you know, buy now,

pay later before buy now.

Pay later was cool, uh, but people would buy like, uh, uh,

a happy meal at McDonald's and pay for it in three installments.

And, and those, those installments came with a financing fee.

And so almost everything was being, that was being purchased using

a card was sort of automatically being billed at a, not just a card

interchange, kind of like level, but a three, four month installment window.

And so everything on the price, on the menu kind of reflected that cost.

And so now that you have this alternative, which is, which is picks.

You can now discount.

So say, Hey, you, you, you pay with, you pay with picks

and we'll give you a discount.

And it's not a teeny discount.

It's not like it's 1%, 2%, it's like 10%, 20%.

Right.

It's, it's, it's a meaningful

Tedd Huff- Host, Fintech Confidential: I've, I've, I mean, 'cause when you look

at the parcels that that happened in, in Brazil, it was not unusual to see

20 to 30% increase in cost to do that

Matt VanHouten - Contributor, Fintech Confidential: right,

Tedd Huff- Host, Fintech Confidential: And, and the longer the turn,

the higher the percentage.

So you could get at double the price of the item if you extended the term

out far enough because they're, they're adjusting for the risk over long term.

Matt VanHouten - Contributor, Fintech Confidential: right, right.

Of, of not getting the full value paid back.

Tedd Huff- Host, Fintech Confidential: Exactly.

So the ability to, to be able to, and I think this, the other piece

in this too is that that discount for those who have the means,

um, it really does do that.

But that also starts to do the, the, the widening of the gap between

with means and without means.

And so what's going to tend to happen is that now that

everybody's, this is my perspective,

um, I'm speculating completely on this, but I think what you'll see is the, the,

the cost to those who have to use pars, uh, versus being able to use picks.

Matt VanHouten - Contributor, Fintech Confidential: Oh, even widening, you

think, you think you're getting bigger?

Tedd Huff- Host, Fintech Confidential: I I think, I think the cost for

those that are doing in installments is gonna continue to go up because

it's the lower end of the market.

Think subprime here in the us, if all you're doing is serving

subprime, think payday loans,

it's, it's gonna be extremely high cost.

Versus someone who's got a million bucks in the bank and wants to borrow

$50,000, they're gonna get it literally pretty close to no, no cost, um,

to

Matt VanHouten - Contributor, Fintech Confidential: makes it, it makes a lot,

the logic makes sense.

It's

regrettable.

Tedd Huff- Host, Fintech Confidential: that's a different story.

,who knows?

Matt VanHouten - Contributor, Fintech Confidential: Yeah.

Yeah.

I, I could see, I could see that being the case.

And I guess the other thing is like, you would hope as well that on the,

call it the micro payment, you know, a single, a single item at a convenience

store,

um, that, that these things would be within the reach

of, uh, of, of more people.

Um, but yeah, to the extent that you really need that additional

help, you maybe built the habit of always having time to kind of

like pay, pay for your purchases.

Yeah.

That, that could, yeah, that gap could widen.

Uh, and it'd be really unfortunate.

And I think, I think to sticking with Brazil for a sec, um, so Visa, I, I

do think in this case, visa has done something like, it's really, really smart.

And, and that is that they have entered into an agreement to

acquire a company called Pismo.

And so Pismo is, is headquartered in Sao Paulo.

Um, they have customers all around the world and . What Pismo is, and this is

sort of probably closer to what you've alluded to with, uh, MasterCard doing

with when they purchase Foca link,

um, is they, they've bought a technology company, or at least

they're assuming it closes, they will be purchasing a technology company.

And, and what Pismo does is, is build core banking, issuer processing, uh,

and, and pretty basic, but they do have some payments, uh, capabilities as well.

Um, they have secured a deal with Citi to replace c um, corporate

banking account backbone, which is honestly, I was stunned when I heard

that Citi would be partnering with a, what effectively is a startup, right?

I think it's like a seven or eight year old company.

It's, it's, it's not a, doesn't have a long track record.

Um, and so.

If, if here's . Here's the asterisk though.

If they allow Pismo to continue to do what they do, this is one case where I would

argue for buy the company and leave them alone and let them just do their thing.

Right.

That would be smart in this case because then they're incentivized

to continue to innovate.

They're incentivized to solve for client, um, problems first and

foremost, not how you support other existing like visa lines of business.

And, um, and, and then it gives Visa access to a whole bunch of

different revenue streams that are, that are not connected to any

particular way of moving money.

'cause it's in the core.

And, um, you know, history would suggest that the.

If you look at the way that many of the other acquisitions have been handled, that

they would be left to do their own thing.

Um, however, if you look at the, the fact that, uh, Pismo does have an issuer

processing capability and that Visa has very limited issuer processing services

that they offer outside of the us I am sure the temptation is that they would

continue, they would use the service primarily to feed their issuing business.

And I think that'd be a mistake.

So they have the potential to, to now participate in a lot of different

schemes in a lot of different countries if, if that deal goes through.

Uh, but will they, will they do the right thing with it?

I don't know.

I fear this is the time when they meddle, they meddle, with

it and then, uh, fuck it up.

Tedd Huff- Host, Fintech Confidential: Well, and I, I will say that, you

know, talking to the other card networks that are out there, they.

They look at how the Visa Europe Visa US coming together and how

that all turned out outside the us The overarching fear that they're

going to be able to pick up in other regions of the world, um, is nascent.

It, it's, it's one of those things where like, okay, that's cool.

Um, they're more worried about the, the treasury capabilities that Visa is

picking up, um, with that acquisition.

The ability to do that.

Matt VanHouten - Contributor, Fintech Confidential: With Pismo, you mean?

Tedd Huff- Host, Fintech Confidential: Yes.

Matt VanHouten - Contributor, Fintech Confidential: Yeah, well, they should because I think,

I think I, this is a super smart purchase.

If it, if it goes through, um, I've looked very closely at the capabilities

that the, that the platform has and, and the team that, uh, is there.

Um, this, this, is a shrewd one.

It's a good one.

It, but.

It's only going to stay that way if it's allowed to.

And that's where I fear is maybe the wrong word, but that's why I

think there's the, there's going to be a temptation to try to use it.

Like everyone's gonna wanna get their pause on it.

And, uh,

Tedd Huff- Host, Fintech Confidential: yeah.

Matt VanHouten - Contributor, Fintech Confidential: you know, uh, you know, every region and

Visa is a very territorial organization, region by region, country by country,

product team, by product team.

Uh, it'll be, you'll, you can learn a lot from what's likely to happen

based on like where, like when the announcement goes through, how much

regional, um, influence is there versus global platform kind of play.

and and sort of like where it lands within the product organization

I think is gonna tell you a lot around, um, what you can expect from

the, the deal after it's closed.

Tedd Huff- Host, Fintech Confidential: Yeah.

And you know, I start to look at that, that direction and it, it makes

me think of a lot of the other cross border plays that had been going on.

Uh, folks and I, I'll bring it up, but like, folks like Ripple, um, have

had, had started the cross border quick, quick piece that's leveraging

a, a tokenized asset, uh, to move the value that that has a solid value.

It's not, it's not a stable coin, but it has a solid value.

Um, they've, they've started to, they've expanded across the globe and now that

they've come out of, or coming out of, I should say, coming out of the

s e c Hell hole, um, legal battle,

um, they're, they're gonna be picking up some additional steam.

Then you start to look at other organizations that are trying to figure

out how can we also leverage this.

And as you and I have talked about, um, previous to, to recording today, you know,

there are other financial institutions and one that's been very public about

this has been JP Morgan with the JP M coin and using that and they've made

payments to other countries cross border and have skipped over all the

swift fees and skipped over the FX conversions and all these fun things.

I, I think that they're gonna be a lot of different things

that could play in that space.

And if Visa can figure out how to tie those two together, they'll be

extremely successful in that space.

And they may just make that leap to the next Generation payments company.

Matt VanHouten - Contributor, Fintech Confidential: right?

Yeah.

I, I, I came to the same conclusion, um, after, after being there for five years,

which is that cross border is, is likely to be the future for, for a company like

Visa and even to some extent for, for, for any large, um, Financial institution.

Uh, it's, it's, it's the world.

The world, you know, it sounds like a cliche.

The world is becoming more interconnected, right?

Like, um, but it's also true, uh, . Some cliches are cliches because they're real.

Uh, and, and, and I think in this case, commerce is more connected.

People are want to be more connected.

Um, there's, there's just a, the movement of, of value, both, both,

um, entertainment and commercial and financial around the world with

less and less friction, uh, is, is is only gonna increase, right?

The demand for that is, is, is only, is only increasing.

And, and so I, I definitely see this as the, where I would argue Visa today has

actually even a better, uh, starting point than they do with their domestic business.

And, um, And, and what I mean by that is that Visa is a, if you just

look at the assets that the company has, um, they can, they can, they can

settle in more than 200 countries.

Um, something like 30 currencies that are kind of like primary

settlement currencies.

And then they, they, they, have this sort of, if you ever

wanna talk about settlement

in

Tedd Huff- Host, Fintech Confidential: Uh,

Matt VanHouten - Contributor, Fintech Confidential: there, there's some details in

there that are pretty interesting.

Um, and, and, and that I think could be an opportunity for, for some, uh,

innovators in, in, in to go, especially after the long tail of, uh, of currencies.

But just setting that aside for a second, you have Currency Cloud, you

have the earth port acquisition that got integrated into Visa Direct, which

is the business that I, that I, that I managed, uh, the product that I managed.

I didn't manage the whole business.

Um, and, um, the core business, right, the card card business for purchases like

People when they travel.

The easiest way to make sure that you're gonna be able to buy stuff

when you leave your home country is to take your card with you that has

a Visa or MasterCard logo on it.

You usually do that now, and you don't think about it.

You don't wonder, oh, am I gonna need to get local currency?

You just kind of like, you just trust that everyone's gone and put the terminals

in place and it's gonna work, you know?

Um, and that, that is, that is took 60 years and massive

amounts of investment and,

and I think is, if you talk about a moat for a business model,

that is an incredible moat.

Now,

Tedd Huff- Host, Fintech Confidential: huge.

Matt VanHouten - Contributor, Fintech Confidential: the, the domestic use of those same

cards is, is, is very, very different.

And so if you look at a country like France that has like an alternative for

local purchases with card bon care, then.

That is, that is very common.

You'll see a local player that's, uh, that's used in country, uh,

interact, for example, in Canada.

But if you, if you take the same card, it's gotta have a co-brand or coba, right?

Which is one of the other networks.

So that when the, the, the same person leaves the country, they can

still use the card, but they're not riding on interact at that point.

They're using one of the, you know, the other, the other big guys.

And so that, that is, uh, I think that is a really compelling and if f is

still there and I would just say like, double down, triple down, quadruple

down, dominate, dominate, cross border, that would be, that'd, that'd be,

that'd be my recommendations, you know, one, two, and three.

Tedd Huff- Host, Fintech Confidential: So we've covered a bunch of stuff today,

but I'm super curious, uh, to understand what you are looking forward to.

Talking about seeing, finding, uh, new things while at money 2020 next week.

What is it you're looking for when you, when you head out there?

Matt VanHouten - Contributor, Fintech Confidential: Yeah, so I think my, I, I've had

this hypothesis that's been stewing in, in my brain for like the

last call it year, which is about the era of FinTech versus banks

and whether, whether that's a useful framing for, for the industry.

Uh, and, and you know, I, my, my gut kind of tells me, you know,

every bank wants to be a FinTech, every FinTech wants to be a bank.

Eventually, you know, if you carry them out to the logical conclusion and

you see, you see increasing, uh, um, concerns, I would say from a regulatory

perspective about how some banks are sponsoring certain technology companies.

Perhaps with sufficient oversight, uh, as well as technology companies

who want to offer banking services, finding it very difficult to obtain

licenses, uh, and have, uh, a path to be able to, to operate services

that makes sense for their customers.

And so I'm, I'm really interested to see is like, is is this the year

where this us versus them framing is, is it, is it still, is it still

feeling like that because I, I, I feel like it's time to move past it.

I think it's time to, to start looking at problem solving and who,

who and how is the ist, you know,

who's in the best position to solve a problem?

How, and looking at ways to better work, uh, with customers at the core, uh,

versus, you know, your own companies.

Best interests as you see them in, in the short term.

Uh, I, I, I just, I saw that a lot at Visa as not, not to

beat up on Visa too much, um,

Tedd Huff- Host, Fintech Confidential: I was

Matt VanHouten - Contributor, Fintech Confidential: focused on

Tedd Huff- Host, Fintech Confidential: we're, we're, we're, we're.

We'll have to pick on, pick somebody else next episode because we, we've, we've,

uh, we've, we've unfortunately had had a little bit of a, a beat down on Visa.

They're not all bad.

It's just

Matt VanHouten - Contributor, Fintech Confidential: not all bad.

Tedd Huff- Host, Fintech Confidential: bunch of, we found a bunch of

things that just kind of coalesced together in, into a, we think they

could do better in these areas.

But you brought up a bunch of things that they did well with, with the cross-border

stuff, with, with the treasury management.

It's just, it's in places that don't get a lot of exposure, um, in the world.

And I think a lot of that has to do with what you were just talking about

is like the FinTech versus the bank.

Um, you know, a lot of the products that you were talking about that they've

had success with are traditionally seen as a banking function.

Matt VanHouten - Contributor, Fintech Confidential: Right.

Tedd Huff- Host, Fintech Confidential: And the places that we hear most about them

are on the Fintechy side of the house.

And

so

Matt VanHouten - Contributor, Fintech Confidential: where, where, where anybody

is like trying to like take, take accounts payable, right.

As a, as an area B two B receivables.

Right.

These, these are things that have traditionally been supported by

banks and, um, you know, technology companies have, have not been very

interested in, in, um, in, in solving.

I, I, it is that is, I think that is shifting.

So I'll be very interested to see like, you know, does B two B take a

bigger, uh, portion of the collective consciousness at this year's money?

2020, um, 2020.

It's, it's, is, is, is, is are we moving past like the consumer, um,

as the darling of, of kind of like where we're trying to solve problems?

Not like we exclude, forget about consumers, but I, I do think

businesses, you know, setting aside like commercial card, which is a.

Pretty well trodden space.

Um, but businesses, especially small businesses, medium sized businesses,

haven't really had any, any, any significant investment in technology

to try to solve their problems.

And, and I think that's an opportunity, right?

There's a, there's a lot there to be solved, and I'll be very interested to

see is that, is it gonna be, you know, something that we're hearing about.

Right.

Um, and then global payments, I think is the other piece,

uh, global, um, money movement.

Um, I, I would love to, I'd love to, you know, ripple is probably

a, a a a, you mentioned them, um, earlier, you know, tokenization and,

and just new ways of facilitating,

uh, money movement that don't necessarily rely on the correspondent

bank, Noss, Ostro and all of the infrastructure that goes around with it.

Like, it, it does, it does a job.

It, there, there are aspects of what it does that I think are . Essential.

Um, but it's good to see experimentation and so I'll be very interested to see if

there are any, any, any kind of like new models kind of coming out that are worthy

of, uh, you know, further exploration.

Tedd Huff- Host, Fintech Confidential: Well, and I, you know,

it's really interesting.

So next week there's a bank FinTech fusion conference here in Phoenix,

and I'll be attending that from the 18th to the 20th, just in time to

head up to, to Vegas for money 2020.

And, and I'm, I'm really looking forward to seeing how the context of, of the

banks fussing with FinTech comes out of that event and, and contrasting

or comparing it to the discussions at Money 2020 because, like yourself, I,

I believe these things are starting to come together.

And I'm not meaning to put words into your, into your mouth,

but, but I I believe what you're

saying is that these two worlds are coming together and, you know, with,

with My, my company, Voalyre, we spend a lot of time, most of my week,

is spent educating fintechs on the expectations of the regulators, of

the banking partners, of these things, of what they're gonna be expected

to do, how they're expected to act.

The, the protocols and procedures are expected to have the liabilities that

they fall into, explaining that to them.

But then I have to hop to the other side of the table and sit with the

bank and say, here's how you can excite these financial technology

companies to want to work with you under these very strict guidelines.

And so I spend a lot of time going back and forth, so I totally agree

that you're going to, you're going to see emerging in some cases, but even

in some cases where you completely see them separated depending on the types of

data and or the function they provide.

If you're just looking at like a An app that tells you your spending habits.

Yeah.

I, I think that's gonna stay, that's gonna stay completely separated and

just benefit from access to data.

Leveraging something like a, a, Platt or authenticity or an MX or one of

those players in the marketplace,

Matt VanHouten - Contributor, Fintech Confidential: Mm-hmm.

Tedd Huff- Host, Fintech Confidential: um, that, that may be one of

the ways that they do that.

But when you start to get into moving in the money custody, um, the, the

interest fees, anything that, that, that truly generates revenue off of

the holding or movement of money,

I think you're gonna see that leaning a lot heavier into the banking institutions.

That's

Matt VanHouten - Contributor, Fintech Confidential: makes a lot, I think.

I think, um, yeah, and I think I would, I would generally agree.

I would say, however, that banks increasingly are offering access

to some of those same like insight.

Capabilities within their own customer experience, right?

They're not necessarily building them themselves.

I think this is the piece that, that where, where I think it's like, is a bank

gonna build its own, uh, plaid, right?

No, probably not.

Um, I mean, a lot of them do use Yodlee, for example.

Uh, even, even, uh, so they do actually pull in, so they wanna get

a view of all of your accounts from inside of, let's say chase.com.

Um, there are, there are some banks that do that.

Uh, and, and so in the case of like, you know, making recommendations around

spending habits and whatnot, like banks, banks are, but like I, I'd say it's close

to that check the box exercise, right?

They just, they just, they do just enough to show that they have a capability.

But are they the ones that are really driving the thinking and the change?

No, they're not.

And, and so I think there's an opportunity to really push that and

then sell it to the banks, right?

And so it's like banks should be a channel.

Is my, is my, when I talk to customers of, of, uh, of, of my consulting

practice, I, I do say like, banks should, they're hard to sell to, right?

They're a long sales cycle.

Um, but that doesn't mean you should exclude them from your,

from your thinking and try to go direct to consumer on everything.

I think they, the direct to consumer strategy is it's, it's

very difficult to, um, to succeed.

And so having the ability to sell through a channel that already has

the customer in it is, is I think, you know, it's one that, uh, makes a lot of

sense for, for companies to think about.

And then for the banks, I think what you mentioned is brilliant around helping

them look attractive to the financial technology company, but that's already

Assuming that that bank wants them as a customer, right?

And so I think there's a ton of opportunity for banks to

just simply decide, we wanna bank technology companies.

And, and some you'll see that more and more, like you said, Jamie Diamond after,

uh, you know, the SS v B collapse and then the acquisition of First Republic.

I think it was mostly what happened with First Republic.

Um, this is another one

Tedd Huff- Host, Fintech Confidential: a ton of bonds in First Republic

right before that happened.

So

Matt VanHouten - Contributor, Fintech Confidential: well, yeah, so, so, so let's

set, I'll set that aside.

I don't know, I don't know much about that.

But what I can tell you is that JP Morgan's been very impressed with what

they acquired when they got the people and the clients of First Republic.

And, and, and partly what that means, they did, first Republic

had a lot of technology.

Um, Founders, like successful founders ended up, they would kind of graduate.

They, they maybe would be an S B V client and many of them would

move to First Republic 'cause their service was like incredible.

And, um, and so what they've now seen is like, oh, there's

actually really good quality here.

And, and so you're seeing, you're seeing now they want startups as clients,

which is a, which is a change for them.

They haven't really been like that in the past.

And so I think there's a, there's a window of opportunity here for forward-thinking.

Me medium, even small-ish, but like, you know, well-capitalized banks to

lean in and say like, we actually want technology companies as customers.

And then once they've . I've gotten that far.

I think they'll be open to some of the things that you're probably working

to help them understand around.

Okay.

How do you make yourself appealing to them?

How do you attract them?

How do you keep them as clients?

How do you make sure you can operate at a, at a pace that's tolerable?

, I'm not gonna say it's like meets the technology companies expectations,

but at least isn't so slow and cumbersome that they just go elsewhere.

Tedd Huff- Host, Fintech Confidential: Yeah.

Well, and it's funny you mentioned the size because the, the inquiries that we

are getting right now are banks that are like at the one and a half billion dollar

and, and and tier one out level assets, um, up to about seven.

Those are the ones that are like, Hey, we're doing really good with, with

X, y, and Z products in our market.

We've been able to build to the size without acquisition.

Now we're ready to start to look at how can we magnify, how can we

multiply this to another level?

How do we.

How do we get to a $30 billion bank?

How do we get to a $50 billion bank?

How do we get to this place?

And they're coming well, and they're coming to us to say, how do we set up

Matt VanHouten - Contributor, Fintech Confidential: Hmm.

Tedd Huff- Host, Fintech Confidential: our organization?

Who do we need to hire?

Or what do we need to do for policies?

How do we make sure that we get through the re regulatory side of the house?

How do we make sure that we don't make the same missteps as name a bank that's

done a misstep in the last couple years?

Right.

Matt VanHouten - Contributor, Fintech Confidential: Yeah.

Not

Tedd Huff- Host, Fintech Confidential: And

Matt VanHouten - Contributor, Fintech Confidential: to find one.

Tedd Huff- Host, Fintech Confidential: Right.

That's why I said just name one.

Um,

Matt VanHouten - Contributor, Fintech Confidential: Uhhuh.

Tedd Huff- Host, Fintech Confidential: and, and so they're really looking

into those things and coming to us for that, which has been really cool

to see that the interest is there,

that people see that this is a short-term blip on the radar of

the things that have happened.

And, and I will just say this, really the F T X snafu.

Or the snafu that is F T X, they're realizing that that

was a blip on the radar.

That isn't everybody, that's not every company, and they realize

that they can really support the overarching ecosystem of technology,

even if it is just for deposits.

There's a lot that can be done in that space too.

So we're seeing a lot of that, and I'm really excited to start seeing

that happen because it was pretty dead for the last 12 to 18 months.

Um, well, almost 24 months now.

Wow.

Um, that, that it, they got really strict on it.

But that's the piece that I, I then seeing, seeing that desire to figure

out how do we support them, and then after we figured out how to

support them, how do we draw them in?

Those have, those have been really, really interesting things to see.

And they're not wanting to build the technology.

None of 'em want to build this tech.

They,

Matt VanHouten - Contributor, Fintech Confidential: know.

Yeah.

they know they can't.

Tedd Huff- Host, Fintech Confidential: If they wanna partner.

And, and I had a recent, uh, guest that I had on FinTech Confidentials

one-on-one interview series.

I had Landon Glenn on, who's the founder of aa.

And their whole plan is to build basically an app store for,

for local and community banks.

Local community banks, sorry, not and, but local community banks so

that they can plug and play products and services without having to worry

about have these guys been vetted?

Do I share this information with them?

What do we like?

They provide that architecture.

And I've just been blown away with the, the level of sophistication

that the banks are willing to accept, um, with a product like that.

And I think you're gonna see more of that actually happening where it's

coco like co-opetition, uh, type stuff

going on.

Matt VanHouten - Contributor, Fintech Confidential: Yeah, yeah, yeah, That's,

that's like the name of,

I

don't know.

I, I only know the financial services space, uh, at, at, to the extent that I

can say that co-opetition is like that, it's, that is our daily life, right?

Like you,

you know, banks, even huge banks that compete on one side also support each

other in terms of, you know, in interbank settlement and, and setting rules and

policies and like, so that you, you have to be able to both on one hand

just go compete for customers and on the other hand, work with those other I.

Members of the community that are like collectively kind of like delivering

what, what, what people need.

And I, and I think, I think yeah, you hit it right on the head.

The, the, the bank that comes to mind, I, I, I love as an example of, of a

bank that's kind of been doing this for a long time, like well before it

was cool, is, um, is KeyBank right?

I I look at Key Bank and they're a bit bigger than some of the ones that you

mentioned, but they're, you know, a very, very capable Midwest, um, Ohio

based bank that, that had a, you don't think of them, at least historically.

They, they were, they were as boring as you could think of as a

bank to be, you know, uh, they do take deposits, they make loans.

Like it's very, very normal.

Kind of

Tedd Huff- Host, Fintech Confidential: They even got out of acquiring

for a number of years, and I remember being at Heartland Payment

Systems when KeyBank said, yeah, we're getting out of acquiring.

And

you're like,

Matt VanHouten - Contributor, Fintech Confidential: risky.

Yeah.

You're like,

what?

Okay,

Tedd Huff- Host, Fintech Confidential: yeah.

Matt VanHouten - Contributor, Fintech Confidential: so so for them.

Yeah.

And they, they, they, they took on a, a very different approach,

uh, about 10 ish years ago,

maybe a little bit less even where they said to your point like, we, we can't

compete with JP Morgan City B of a wells on the amount of money that we can

invest in building our own technology.

And yet we do wanna make sure that our customers, in their case, in

this case, their corporate customers had access to like best in class

services, whether it's for payables, receivables, liquidity, whatever.

Right?

Like fraud.

And so they started to, to, to take on this whole campaign around.

We are gonna give the experience to those customers that they might

otherwise only be able to see from a much larger institution by being

really clever about who we work with.

And so we're gonna bring in partners that are, um, actually integrated

with the bank's core, but then offer customer facing experience.

That's, um, like, uh, AVID exchange I think is one of their

initial big investments that they made for like a payables, um, integration.

And they've done, they've done a number of really smart deals, either

buying equity in some of those partners or commercial relationships

and a couple of acquisitions.

And I think, I think you could, you could take that same playbook.

And now the technology as you, as you've mentioned, is, is even more, I'm not

gonna say plug and play necessarily, but it's more self-serve, right?

Yeah.

Tedd Huff- Host, Fintech Confidential: Well, and know what's interesting is you

bring up Key Bank and, um, I've had a longstanding relationship with, with the

folks at Key Bank and with the pivot over and realizing there's opportunity there.

The one thing that they, they, they didn't do, at least from my perspective, is

they didn't expect it to be successful.

And because they didn't expect it to be successful, they hoped

it would be successful, but they didn't expect it to be.

So now what has happened is they've got more business than they can handle

and they've got this huge backlog.

To get clients alive.

So if, if you're wanting something in less than in three

months or six months, good luck.

If you're wanting

something that's in 12 months to 18 months, yeah, you've

got a pretty good chance.

And so, and, and that they're

Matt VanHouten - Contributor, Fintech Confidential: say it's a good problem to have.

The only one who says it's a good problem to have is someone

who's never had that problem.

'cause there's, to me, there's like nothing worse than having clients

ready to go and you can't support them.

Right.

It's, it is, is

Tedd Huff- Host, Fintech Confidential: That's the fastest way to lose clients.

Matt VanHouten - Contributor, Fintech Confidential: customer.

Yeah.

Yeah.

It's a really, it's a really, really rough place to be.

Tedd Huff- Host, Fintech Confidential: existing and new clients.

You're gonna lose both of 'em because you can't support your existing

clients the way they were used to.

So they're gonna get fed up and they're gonna find someone

who will support 'em that way.

Then these new clients are like, you're taking forever.

The implementation was crappy.

The, the you're, you have, like, everybody's doing 50 different jobs.

I can't get done what I need to get done.

I'm gonna go find somebody else.

And so now you've just utilized all these resources and you end

up with less money in your pocket.

And that's one of the things that we talk to the banks a lot about is

be prepared for a fast acceleration.

Because once you prove you can do it, once you prove you can do it and you can

do it well, then you it, it is a build it and they will come type scenario.

But you have to build it, show that it works, show that you

can support it and it will come.

But you have to be ready for when it'll come.

Matt VanHouten - Contributor, Fintech Confidential: What, what, what do you, what

do you attribute the backlog coming from in their case?

Is it, is it the partners that they selected?

You know, they're too dependent on the third parties.

Is it actually showing that the, the model is, uh, has some risk in it?

Or like, what, what's, what's, what's behind the delays?

Tedd Huff- Host, Fintech Confidential: Typically speaking, it's the internal

processes and procedures around risk assessment around IM and implementation.

So it gets stuck in there and no matter

Matt VanHouten - Contributor, Fintech Confidential: that doesn't scale very quickly.

Yeah, that's like a very, it takes a lot of time.