Should You Protect Customers From Themselves?
By Alex Johnson
3 Fintech News Stories
#1: Should You Protect Customers From Themselves?
NatWest is the latest big UK bank to introduce limits on its customers’ ability to purchase crypto:
The bank is putting a daily limit of £1000 and a 30-day payment limit of £5000 to crypto exchanges “to help protect customers from losing life changing sums of money”.
NatWest says that cryptocurrency scams cost Brits £329 million a year, noting that crypto is not protected by the UK’s Financial Services Compensation Scheme and most providers aren’t regulated by the FCA.
Stuart Skinner, head, fraud protection, NatWest, says: “We have seen an increase in the number of scams using cryptocurrency exchanges and we are acting to protect our customers.”
Earlier this month, HSBC and Nationwide Building Society put similar restrictions on customers buying cryptocurrency, citing regulator concerns about the practice. Santander made its move back in November.
Folks in the crypto industry hate this (for obvious reasons). They argue that it’s unethical and unbearably paternalistic for banks to tell customers what they can and can’t spend their money on.
I’m actually sympathetic to this argument, and I do think there is a little bit of “crypto is made up and a stupid thing to invest in” energy motivating these decisions by NatWest, HSBC, Nationwide, and Santander.
However, I also think we can’t have it both ways. We get mad at banks for refusing to reimburse customers for P2P or A2A scams, in which they authorized the payment by mistake (I excoriated banks for this in an essay last month). It’s hypocritical to both expect banks to seamlessly enable a customer’s every financial decision, no matter how risky, and reimburse them for losses when those decisions turn out to be mistakes.
When you visit a new city and hop in a cab to go explore, you expect your driver to warn you if the neighborhood you asked to go to is one where you are likely to get robbed. We are right to expect our banks to do the same.
#2: What’s Your Net Worth?
Credit Karma introduced a new product:
From the people who brought you credit monitoring services now comes Credit Karma Net Worth, a new product to help people know, grow and protect their wealth.
The overall goal of Net Worth is to guide members to grow and protect their wealth, but at product launch, it is focused first on helping members understand the various components of their net worth, including assets, loans, retirement savings and credit card debt, so that they can monitor it and track progress over time.
Here’s how it works: Members can link their financial accounts, such as a 401(k), brokerage account and outstanding liabilities, like a mortgage. All of those combined will give them some insights into their total net worth. From then on, members can see their transaction history and can monitor how money is coming in and going out each month, Ryan Steckler, general manager of Mint and Net Worth, said in an interview.
A few interesting things here.
First, it takes a while to build these types of products at big companies:
Steckler, who has been with Intuit for 17 years, joined the Credit Karma team six months ago when Intuit’s Mint business combined with Credit Karma to build Net Worth. Intuit acquired Credit Karma in 2021.
Intuit acquired Credit Karma in 2021 and Mint all the way back in 2009. I’m guessing this is probably one of the first Credit Karma – Mint combined offerings they wanted to launch. These things take a lot of time to build inside a behemoth like Intuit.
Second, this product is initially being rolled out to only a segment of Credit Karma’s customers:
Credit Karma has more than 120 million members in the U.S., but Net Worth is being rolled out to initially target U.S. consumers with a credit score of 720 or above, with the goal to expand to a larger population over time.
Makes sense, but I do wonder what FICO band this type of insight would be most valuable to. My gut tells me that there are a lot of untapped wealth-building opportunities hiding one rung down in the near-prime segment, but that’s purely a guess on my part.
Third, the TechCrunch article made no mention of what customers will do after seeing these net-worth insights, but I’d guess that it’ll involve referral fees. Credit Karma doesn’t currently help customers shop for wealth management or investing products, but I have to imagine that’s coming very soon.
#3: Making it Easier to Build Multi-bank Solutions
Treasury Prime introduced an interesting new service:
As enterprises mature, their growth can often outpace their Banking as a Service (BaaS) solution. Treasury Prime OneKey Banking is the answer to that problem; it eliminates the need to change providers due to deposit growth or feature access. Flexible by design, OneKey Banking allows companies of any size and on any growth trajectory to seamlessly manage deposits, transfer funds, send instant payments, mitigate risk, scale, and access features via an easy-to-use interface, eliminating many common headaches seen across the BaaS landscape.
If I’m understanding this right, OneKey is an interoperable layer built on top of Treasury Prime’s network of 15 banks, which will allow fintech companies building with Treasury Prime to more easily move from one bank to a different one or build multi-bank solutions from day 1.
This would (in theory) help fintech companies do things like: offer both deposit and lending products (a lot of BaaS banks don’t facilitate lending), offer a savings-focused deposit product that might overwhelm a single BaaS bank (a problem that HMBradley has been dealing with), or offer a product to a mix of lower-risk and higher-risk customers (BaaS banks all have different tolerance levels for reputational risk).
This is neat, and it fits, directionally, with the vision I spelled out in last week’s essay for a more robust and competitive BaaS ecosystem.
I do wonder how Treasury Prime’s current bank partners feel about it, given that this service (in theory) makes them more fungible.
2 Fintech Content Recommendations
#1: 4D Chess in Card Payments (by Nikil Konduru) 📚
Holy shit, is this a good essay.
Nikil works at Lithic and is insanely knowledgeable about everything relating to payment cards (he collaborated with me on this piece, which I wrote late last year on card issuing).
This essay is great. It explores the evolving competitive dynamics around least-cost routing in the debit card acquiring space, a topic that will have enormous consequences for Visa, Mastercard, Stripe, FIS, and Fiserv (among many others).
It’s also surprisingly funny, which is a hard thing to do when writing about fintech.
#2: LLMs are the new CPUs (by Nathan Baschez, Every) 📚
This one isn’t fintech per se, but it’s about large language models (LLMs), so it’s highly relevant for all of us.
Nathan does a great job in this piece exploring the similarities and differences between LLMs and CPUs and thoughtfully speculating on the forces that may shape the future of the LLM market (and what LLM providers like OpenAI can learn from Intel).
1 Question to Ponder
What are the components of the ideal banking-as-a-service tech stack?
A robust ledger is the obvious one. I think you’d also probably want some good compliance capabilities in there. What else?