27 November 2023 |

Come On Canada, This is Embarrassing!

By Alex Johnson

Church at Montigny-sur-Loing (1898) by Paul Cézanne.

3 FINTECH NEWS STORIES

#1: Open Banking Comes to Apple Wallet 

What happened?

iPhone users in the UK got a new financial services feature:

Apple Pay users across the UK can now take advantage of a new feature that taps into the open banking framework to let them connect cards and view their account balance from within the Wallet app.

Soft launched in September, the feature is now live for all Brits, letting them see their up-to-date debit card balance in Wallet and when they’re checking out with Apple Pay online or in-apps.

Users are also able to view their debit card account details, as well as debit and credit card spending history, payments, deposits, and withdrawals, conveniently in one place in Wallet.

So what?

My aunt, who is a lovely person and a very good pinochle player, recently asked me for a recommendation for a new payment card. She currently uses a debit card from her community bank, which she’s not thrilled with, from both a fraud liability perspective and a rewards perspective. However, the thing she likes about her debit card, from a financial management perspective, is the ability to see her bank account balance and payment transactions in the same place so that she can avoid spending money that she doesn’t have.

Ideally, what she wants is a no-annual-fee rewards credit card that provides an integrated real-time view of her payment transactions and checking account balance.

This is weirdly difficult to find. Credit builder cards are kinda close, but A.) I’m never recommending those products to friends or family, and B.) they don’t offer much in the way of rewards. Standard rewards credit cards from the big issuers don’t provide an integrated personal financial management interface that brings in deposit account information because it’s not in the issuers’ best interests to make it easy for customers to avoid revolving a balance.

Apple doesn’t have that same incentive. I’ve always been very impressed with the customer-friendly UI that Apple wrapped around the Apple Card, which was clearly designed to help customers avoid accidentally revolving a balance and paying interest. I’ve been less impressed with Apple Wallet, but it seems that the company is working on making it better and more useful as a financial management hub (with the help of open banking). Good stuff!     

#2: Come On Canada, This is Embarrassing!

What happened?

Canadian fintech companies are pissed:

Dozens of technology leaders have signed a letter to Canada’s finance minister calling for a clear roadmap for the delivery of a long-awaited open banking framework.

Following a three year investigation into whether the country should follow the UK in making it easier for people to let third party financial services providers access their banking data, the government has been inching towards the creation of an open banking framework.

However, having promised to enact regulation by the beginning of 2023, the government has yet to do so, leaving the fintech sector increasingly frustrated.

In a letter coordinated by the Council of Canadian Innovators (CCI), dozens of signatories say: “It’s time for Canada to catch up with the European Union, the United States and the UK to ensure we have affordable and innovative open banking.” 

So what?

During the 2021 federal election, the Liberal Party of Canada promised to enact regulations to bring open banking to Canada and promised that the initial implementation would take place in January of this year.

That didn’t happen. And there is little evidence that any serious progress has been made since 2021.

That’s very bad.

As of 2022, Canada’s big six banks – TD Bank, Royal Bank of Canada, Bank of Montreal, CIBC, Scotiabank, and the National Bank of Canada – held about 93% of all banking assets in the country. And like their cousins in the U.S., UK, and around the world, these big banks get up to lots of shady shit.

They could use some competition!

The problem, from my vantage point, is that Canada’s financial industry has the worst attributes of the U.S. and UK industries, with none of their advantages. The UK financial industry is extremely concentrated (like Canada), but it has a regulator singularly dedicated to protecting consumers and promoting competition. The U.S. financial industry has arguably had a bit more regulatory capture (like Canada), but that has been balanced out by a much more diffused and competitive ecosystem (community banks helped build the U.S. fintech ecosystem via BaaS) and much less trusting consumers (Canadian consumers are weirdly trusting of big banks). 

But come on Canada! The CFPB has proposed formal rules for open banking in the U.S. and looks to be on track for finalizing them within the next 12 months. When you’re getting lapped by U.S. financial services regulators, it’s time to take a hard look in the mirror. 

#3: It’s Fine to Cater to Rich People, Just Don’t Be Stupid About It.

What happened?

Citizens Bank, which has had a bit of a rough year, is investing in the same business that sunk First Republic Bank:

Regional lender Citizens Financial Group opened a new private bank for wealthy customers last month. Its inspiration: First Republic Bank, which collapsed earlier this year in the second-largest bank failure in history. 

Citizens, based in Providence, R.I., is spending tens of millions of dollars hiring former First Republic staffers. It hopes the strategy will help it crack a market it has long coveted.

“We scooped up the very best talent,” Citizens consumer banking head Brendan Coughlin said. “Our goal is going to be to build the pre-eminent private bank in the United States for high-net-worth individuals.” 

So what?

It’s worth reading this whole Wall Street Journal article just to get a sense of how different it is banking very wealthy people. Here’s just one funny example:

There are some parts of First Republic that Citizens plans to leave in the past, such as 1% mortgages in a higher-rate world. The bank is, however, considering bringing back the fresh-baked chocolate-chip cookies and high-end umbrellas that First Republic was known for.   

Umbrellas! Apparently, these were a real thing that customers really valued. One customer said that carrying his around “makes me feel like a proper Englishman.”

Great stuff.

And probably a smart strategy for Citizens, assuming it has the stomach to see the investment through to the end. Despite the Wall Street Journal’s headline – First Republic Crashed and Burned. This Bank Wants to Copy Its Business – banking rich people isn’t an inherently bad business. As long as you manage your concentration risk carefully.


2 FINTECH CONTENT RECOMMENDATIONS

#1: OCC Ex-Fintech Chief’s Fake Resume, DUIs Raise Fresh Questions (by Jason Mikula, Fintech Business Weekly) 📚

Other reporters and publications have been digging into this story recently, but credit where credit is due – Mr. Mikula got to this story first and has been doing some terrific reporting on it.

It’s honestly one of the craziest things that has happened this year, and it does raise significant doubts about the basic competency of the OCC in interfacing with the tech industry moving forward. 

#2: The Bond villain compliance strategy (by Patrick McKenzie, Bits About Money) 📚

My favorite patio11 writing is anything he writes about crypto. This story on Binance is worth a read. 


1 QUESTION TO PONDER

What are the most interesting open roles in fintech right now? And, crucially, why are they interesting?

I’m going to be writing a newsletter focused on fintech career advice in the coming weeks, and I’d love to feature some really cool jobs!