Fintech Grab Bag

The plan for today’s newsletter is for me to empty my notebook of all the idle observations, half-formed thoughts, dumb questions, and minor follow-ups that haven’t made it into the newsletter in the last few months.

I’ll also be answering a few questions that I’ve gotten from the Fintech Takes community.

Call it a Fintech Grab Bag.

My Apologies to Canada!

My Fintech 3-2-1 newsletter on Monday this week went out with the subject line “Come On Canada, This Is Embarrassing!” 

This was in reference to the slower-than-expected introduction of a regulatory framework for open banking, which was initially slated to happen this year but still hasn’t, a fact that Canadian fintech companies have been harping on recently.

Whew, boy! You’d think I insulted the King, given the feedback I received from my subscribers north of the border!

Among the many points that were (politely) made, one was especially important – last week, the Canadian Government released a policy statement on “Consumer-Driven Banking” (this is, apparently, Canadian English for Open Banking). This statement affirmed the government’s support for open banking and laid out a new deadline for implementing a governance framework for open banking by 2025.

Now, 2025 still feels pretty far away, and I’m not 100% sure I believe that deadline will be hit, but point taken – I missed this announcement in my initial analysis, and the government is indeed pushing forward on open banking.

Thank you to my Canadian subscribers for your passionate responses. I appreciate you!    

Apple Didn’t Fail. Goldman Sachs Did.

After the Wall Street Journal reported that Apple is going to officially exit its partnership with Goldman Sachs for the Apple Card (and other products), the response from a lot of fintech folks online was surprisingly negative (and a little schadenfreude-y) towards Apple. It was a lot of stuff like “Apple couldn’t make the Apple Card work” and “See! B2C fintech is really hard!”

This surprised me because, unless I’m missing something, Apple didn’t fail! The Apple Card has been a success. Maybe not on the order of a Chase Saphire Preferred or Delta SkyMiles card, but that was never Apple’s goal. The goal was to create a broadly accessible credit card that was tightly integrated into the Apple ecosystem and rewarding for Apple fans. That’s what Apple built!

The story here is the epic failure of Goldman Sachs in negotiating a “partnership” with Apple that gave Apple everything it wanted and left Goldman on the hook for literally every problem. Goldman has been trying to extricate itself from that mistake for a while now ( I wrote about earlier reporting from the WSJ on this back in July), and now it looks like they finally have.

This news is neither unexpected nor a sign that Apple can’t make the Apple Card work.  

How to Get a Job in Fintech

Every week, I feature a few open roles at fintech companies and banks at the bottom of my newsletter.

My goal in doing this is to help companies in the Fintech Takes community source good candidates and help individuals in this community find exciting opportunities.

I’d like to do more.

I want to write an entire newsletter focused on getting a job in fintech. In that newsletter, I’d like to share advice for candidates trying to find a new role and for hiring managers and recruiters trying to find and hire the best possible people.

I’d also like to do in-depth profiles on the 5-7 most interesting open roles in fintech/banking at the moment. I want the seniority and types of roles that I feature to vary, but the common denominator would be that they are all roles that would allow the person who fills them to do some of the most enjoyable and impactful work of their careers.

My asks of you:

• Do you have any good advice on finding a new role in fintech? Or getting hired for your dream role? Share it with me!
• Do you have good advice on sourcing great candidates? Or closing the deal with your dream candidate? Share it with me!
• Are you hiring for a role that you genuinely think is one of the 5-7 most interesting opportunities in fintech or banking right now? I’d love for you to sell me on why I should feature it in the newsletter!         

No One Is Ever Going to Trust Twitter With Their Money

Here’s an axiom that I would propose calling Musk’s Law – the richer and/or more famous you are, the less time you should spend on Twitter.

Elon spent years on the wrong side of this law before finally succumbing to temptation and buying the damn thing.

It has not gone well since, and his recent actions on the platform (and, even more recently, on stage with Jonathan Ross Sorkin) have, I think, permanently pushed major advertisers away.

This will likely accelerate the push to make Twitter a predominantly subscription business, which is fine (I’m a subscriber), but it comes with a cost – no one is going to place a meaningful amount of trust in this platform moving forward. Some of us will pay to use it casually (it was the source for all the OpenAI drama), but most people are not going to trust it for more important tasks like, for example, banking.

Financial services consumers, like advertising executives, are fundamentally conservative. They don’t like taking risks, and Elon Musk has made Twitter a very risky place. 

If You’re Looking For Something to Read …

I thought you’d enjoy a glimpse into my current fintech reading list (which is perpetually 1,000 miles long):

• The Role of Fintech in Unsecured Consumer Lending to Low and Moderate-Income Individuals (the Federal Reserve Bank of New York). The New York Fed, using data supplied by TransUnion, dug into the expanded role that fintech lenders have played in recent years addressing the credit needs of low and moderate-income consumers and the impact that rising interest rates have had on this market.
• The Political Foundations of Scarce and Unstable Credit (Charles W. Calomiris). A recommendation from Kiah Haslett, Queen of the bank nerds, on the political roots of financial stability in various countries. There is an accompanying book on the same topic (“Fragile by Design”), which may be the first assignment for our fintech book club. Email me for details. 
• Material Loss Review of First Republic Bank (the Office of Inspector General, FDIC). Why did First Republic Bank fail, and what could the FDIC have done differently to prevent that outcome (or at least minimize the loss to the insurance fund)? These are good and important questions!
• When couples fight about money, what do they fight about? (Peetz, Meloff, and Royle). There are apparently eight primary reasons that couples fight about money, which can be mapped against two different axes – fairness and responsibility. I truly can’t wait to sink my teeth into this paper.  
• Same as Ever: A Guide to What Never Changes (Morgan Housel). This isn’t fintech, strictly speaking, but everyone in financial services should read everything Morgan Housel writes, IMHO.

Do You Listen to the Fintech Takes Podcast?

A couple of questions for you (which I would love candid responses to!):

• Were you aware that I publish a weekly podcast?
• Do you listen to the podcast? If so, how often, on average?
• I do three recurring shows on the Fintech Takes podcast feed – Fintech Recap, Bank Nerd Corner, and Not Fintech Investment Advice! Do you have any favorites among these three? Any ones that you specifically do not like?
• The fourth monthly podcast episode features a special guest. What do you think of these special guest episodes? Any recommendations on guests I should consider for the future?
• How would you like to see the Fintech Takes podcast change in 2024? Please share any and all ideas you have! 

Making It Easier to Share Payroll Data 

A small update from the exciting world of payroll data – providers are investing in passwordless data permissioning for consumers (through direct integrations with payroll system providers). According to Argyle and Pinwheel, which have both made recent product announcements on this front, this feature can deliver a 50% – 60% increase in conversion, which makes sense given the obvious problem that has always existed in this market – most consumers don’t know their payroll system login information.

Feels like this feature will become table stakes in this space very soon. 

What Questions Do You Have About Digital Identity?

One thing that we’re planning to do with Fintech Takes in 2024 is a series of deep dives – spanning 3-month increments – into important and under-explored topics in banking and fintech. The outputs of these deep dives will vary a bit, quarter by quarter, but will likely include essays, special podcast episodes/series, digital and in-person events, research reports, and educational courses.

For Q1, we’ve selected digital identity as our topic.

A couple of questions for you:

• What questions do you have about digital identity? What are you confused by? What do you wish you knew more about?
• Who should I speak to in order to learn more about this space?
• Which companies should we approach as sponsors for this topic? Who are the incumbent and up-and-coming players in this space?    

Ask Me Anything!

Let’s end by answering some questions that were submitted by the Fintech Takes community.

(If you have a question you’d like me to answer in an upcoming Fintech Grab Bag or Fintech Office Hours event, please send it to me!)  

Who should take over the Apple Card program? (type of institution and pick your favorite of that bunch!)

I think the two questions that will determine the answer to this one are:

• How much control does Apple want to exert over the product?
• How willing is Apple to use its own balance sheet to support the Apple Card?

If Apple is OK deferring a bit more to its next bank partner on some of the product details (underwriting, terms, servicing, etc.), then I could see it selecting a large, well-known issuer that it could trust to run the program flawlessly. My favorite here would be American Express, but I could also see JPMorgan Chase or Capital One.

If Apple wants to maintain the same level of rigorous control over the product that it had under Goldman Sachs, then it has two choices:

1. Pick out a large regional bank that has the balance sheet to accommodate the Apple Card portfolio and that is desperate enough to agree to the same general deal terms that drove Goldman crazy (Citizens? Or maybe Regions?).
2. Pick out a small bank that can issue the cards but is comfortable playing a much smaller role than Goldman did, and then use Apple’s own balance sheet to fund the lending (Apple is already doing this for its BNPL offering). A tech-forward BaaS bank like Lead Bank would probably be the favorite in this scenario. 

My guess is that Apple will opt to maintain absolute control over the product, which likely means Lead or a desperate regional bank. 

Any insights into where all the engineers, PMs, and designers laid off from fintech companies are going? Are they joining banks or leaving the industry?

Great question. I really don’t know.

My guess is that the highest performers are being scooped up by other, more established fintech companies (a bunch of the engineers and data scientists from Fast ended up at Affirm, for example).

The rest are probably either going to banks (and the card networks) or leaving the industry.

For all the crypto banks still standing, how can they leverage their tech and team members to pivot into something more risk-averse yet innovative? Should they pivot? Or is it a healthier balance of diversification?

Depends on the type of crypto bank we’re talking about.  If it’s a bank providing back-end banking services to crypto companies (a la Silvergate), I would strongly consider pivoting out of crypto entirely or, at a minimum, heavily diversifying. My recommendation would be to look at BaaS opportunities in other high-risk segments (cannabis, online gaming, adult entertainment, etc.)

If it’s a bank that is offering crypto investing services directly to their retail and commercial customers, I would just get out (as SoFi is doing). The regulatory headache won’t be worth the marginal value add that crypto investing presents in non-ZIRP times.

How should someone in banking think about moving into fintech?

I’ll answer this question more comprehensively when I write my “How to Get a Job in Fintech” piece, but the short answer is to make sure you’re ready for a culture change.

Fintech companies need people with banking knowledge and experience (and they are more aware they need it today than they were a few years ago), but they are also very protective of their culture and focus on shipping code fast. They need to know that you will be an accelerant to whatever team they add you to. If that’s you, go out of your way to demonstrate it to them during the hiring process. 

One of your past articles talks about ‘Happiness’ and the relationship with money being a fundamental problem within financial services. Do you see that changing? 

I think it’s going to become an even more important problem in the future as our industry becomes increasingly saturated with fintech apps that all do roughly the same thing.

People want help to develop a healthier relationship between money and happiness. There is a big opportunity to build solutions in this space rather than just building another generic neobank.

But be warned – this is a very nuanced and difficult-to-parse problem. You can’t just tell customers to spend less money than they make and then call it a day. And if you’re going to survey consumers about their feelings on money and happiness, take care not to ask questions that will make Ron Shevlin want to kill you.

Has anyone tried to quantify something like the “net additional value creation of fintech”? This would be an estimate of the cumulative impact (in dollars) of all fintech companies launched since the Great Recession.

I do not know of anyone who has done this, and I think it would be pretty tricky, but if you know of someone who has, let me know. There’s a certain market researcher I know who would be happy to buy them a beer and learn all about it.

What trends do you see for embedded lending in 2024?

Well, I think BNPL is poised for a bit of a bounce back, given the continued deterioration of consumer credit quality (especially now that student loan repayments have resumed) and private credit investors’ seemingly inexhaustible appetite for non-bank lending. These two trends will likely intersect at some point and cause a slowdown in BNPL (and non-bank lending more broadly), but that may not happen until 2025.

More broadly, I see the most potential for growth in verticalized B2B lending. The owners of dentist offices and law firms don’t want to deal with bankers to get loans. Vertical software for these verticals is finally achieving significant enough penetration that the opportunity to exploit them as distribution channels for commercial loans will start to be viable, at scale, in 2024. Exciting stuff!

Is there any fintech CEO with the brilliance and long-term focus of digital OGs like Bezos, Hastings, Musk, etc.? If not, why not? Or if you put Dorsey, Velez, or Storonsky in that league, what makes them less or more effective in eventually causing real disruption to incumbents?

This is a great one to end on.

First, it’s a bit early in the history of modern fintech to say for sure. Amazon, Netflix, and PayPal were all founded in the late 1990s.

That said, we have seen enough modern fintech history at this point to intelligently speculate.

The names that jump to mind for me are David Velez, Patrick Collison, Max Levchin, and Eric Glyman. 

Velez’s impact has probably been the biggest so far, and in reading about him and how why founded Nubank, I definitely get early Bezos vibes from him (his rationale for founding Nubank – “What’s the biggest industry in Brazil? Banking. And what’s the most profitable? Banking” – is very similar to why Bezos started with books for Amazon).

Collison takes a very intellectually rigorous approach to company building and seems to think over very long time horizons. Levchin is obsessively focused on the customer problem (credit cards are too dangerous for consumers). And Glyman has been very successful at recruiting great people and getting them to ship fast. 
If I’d been asked this question a couple of months ago, I would have included Dorsey, but the recent reporting about in-fighting at Block disturbed me. TBD.