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Happy Friday, Fintech Takers!

Phew, long week! 

As is eternally the case here at Fintech Takes, I am deeply grateful for my wife. She is the glue that holds our household together (especially when I am traveling for work). Her stamina and organizational skills would easily qualify her for her own show on HGTV, but she’s also far too smart to want to be a reality TV star. She’s beautiful, a wonderful mother, and just the right amount of sassy.

Marrying her is, by far, my greatest accomplishment.

- Alex

P.S. — There’s still time to register for our upcoming virtual event (Cash Flow Lending: From Roadmap to Reality) with Nova Credit. I’ve been doing the prep for it this week, and trust me — it will be a really fun session!

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Earlier this week, I attended an event put on by The Urban Institute, titled “The Future of Fintech: How Emerging Technologies Are Shaping Our Financial Lives”. 

I had the pleasure of participating in a panel, moderated by Urban’s Thea Garon, and featuring Jonathan Cohen (Sports Betting Policy Lead, American Institute for Boys and Men), Delicia Reynolds Hand (Senior Director, Digital Marketplace, Consumer Reports), and Adrienne Harris (Former Superintendent, New York State Department of Financial Services).

The panel, and the event overall, were excellent; tons of great research, conversations, and ideas. My notebook was full at the end of two hours, and I thought it would make sense for today’s newsletter to share five thoughts (sourced from my notes) about the future of fintech.

My apologies if they are a little rough around the edges. I’m still processing everything I heard.

Here’s an alarming stat, courtesy of a consumer survey conducted by The Urban Institute: Of the 11% of U.S. adults who said that they placed a sports bet in the last 12 months (And BTW, this percentage is probably being underreported by consumers), 10% listed “relieve boredom” as one of the top three reasons for why they placed their bet(s).

Now, to be clear, that wasn’t one of the top five reasons that consumers gave for betting on sports. The top five reasons — to try to win money, fun or excitement, to socialize with friends and family, promotional credits, and enjoyment of competition — are all interesting/troubling in their own ways (especially “promotional credits” … that’s such a bad reason to place a bet!)

However, “relieve boredom” stood out to me because, when I look around the financial services industry, one of the impulses that I see most clearly in consumer fintech is the impulse to try to win the war for consumers’ attention.

It shows up in all kinds of different places. The use of monthly active users (MAU) as a key performance indicator for companies. The silly (and currently broken) web game that Cash App created as a marketing promotion. The partnership between Kalshi and DriveWealth, which I excoriated in a newsletter last week. MrBeast buying Step, which was the subject of two podcasts I’ve recorded recently with Carlos Caro.

It’s a battle to relieve consumers’ boredom, all the way down!

And while I understand the larger forces that have incentivized financial services companies to embrace attention as a KPI, it is my strong belief that financial products and services, when they work well for consumers, should be pretty boring. If you care about a customer reaching their long-term financial goals, you don’t really want them logging into their brokerage app constantly.

We need to stop optimizing for consumers’ attention in financial services, or the jobs that we are supposed to be doing for them will get lost in the shuffle. 

It seems fairly obvious to me that AI will increasingly be used to manipulate consumers’ decisions. And while we tend to talk about this risk a lot when it comes to fraudsters and scammers, we don’t talk nearly enough about the risks of AI being used by legitimate companies to influence their customers’ decisions and behaviors in ways that benefit the companies’ bottom lines.

There are many different forms that this influence could take. 

Anthropic pointed one out in its series of anti-Open AI commercials about paid ads in AI chatbots (this one, about a small business owner, is particularly relevant for financial services). Obviously, another version of this same incentive misalignment could exist if a company with a large base of established users, like Amazon or Walmart, built its own AI chatbot or agentic commerce service (those companies would never send a user to a competitor, even if that competitor had the best product).

Another form of AI-assisted manipulation, which we are already seeing signs of, is algorithmic pricing, also known as surveillance pricing, in which companies use AI to parse personal, real-time data — such as location, browsing history, and device type — and set individualized, dynamic prices based on a consumer's estimated willingness to pay. Consumer Reports conducted an incredible investigation into Instacart’s AI-enabled experiments with algorithmic pricing, finding that some grocery prices differed by as much as 23% per item from one Instacart customer to the next due to these experiments.   

That’s obviously bad, but the most pernicious part of it is how difficult it is to identify. How do you know that you’re being discriminated against, based on your willingness to pay, when it happens in real-time through digital channels that can be tailored algorithmically to you?

The answer is that you can’t really know whether you are being discriminated against or not, but given the incentives that companies have to leverage AI in this fashion, you’d be naive to assume that it’s not happening.

So, what can consumers do about it?

One potential answer, ironically, is agentic commerce. Imagine if a consumer had an AI agent that was able to mask all of the signals that a company employing algorithmic pricing uses to determine willingness to pay. For the company, it would be like playing poker in a completely dark room. There would be no “body language” for them to assess. 

In fact, the AI agent could go out of its way to send deceptive signals to the company about its principal’s intentions. I could tell my AI agent, “I really need you to book me a flight to New Orleans on this date. Do it as soon as possible. Price is no object.” However, instead of following that instruction in the most direct (and therefore desperate) way possible, my AI agent could search for flights to New Orleans in a wishy-washy, “I’m just browsing” type of way, to secure the flights I asked for at a better price than I would have gotten directly.

This idea, which some in the space are referring to as a “guardian agent,” sounds great. The question is: Who is going to build it?

As previously stated, Amazon and Walmart aren’t going to. Google or OpenAI could, but then we run into the same ad-driven incentive problem that Anthropic pointed out. At this point, the most realistic answers are Anthropic or, perhaps, a bank or fintech company that decides to prioritize customer trust in commerce over maximizing short-term GMV.

On an appearance on TBPN, Patrick Collison (CEO of Stripe) proposed a radical shift in the way that we think about software development.

Rather than the traditional model, in which companies build industrial-scale software products at huge upfront costs and then monetize infinitely at near-zero marginal cost, AI will enable us to move to a more bespoke model, in which software can be created, in Collison’s words, “like pizza… cooked right then and there at the moment of use.”

Patrick Collison has forgotten more about software development than I’ll ever know, so I won’t opine on his take. Instead, I’ll accept his premise and ask a follow-up question: What would financial products look like in this future world of bespoke software?

After all, financial products are just software. That may not be how most banks think about them, but it is true. It’s all just 1s and 0s (with the occasional physical payment card or printed statement sent out in the mail).

What would it mean for a financial product to be manufactured, on demand, for the specific customer who orders it?

It’s an intriguing question.

To use consumer lending as an example, imagine being able to manufacture a bespoke product, where the lender can mitigate the risk posed by the individual borrower through both pricing and product structure. That would be enormously appealing to credit risk executives. However, it would also be a nightmare for regulators to supervise, given that almost all of the regulations in financial services are based around defined and relatively static product constructs.

This may very well be the world we are heading into, so it’s worth thinking about.

I love the idea of the CFPB. I have been frustrated, for years, with how the CFPB has been run. And I am currently in a deep state of sadness over what Russ Vought has been doing to the CFPB.

As such, I spend a lot of my time thinking about how consumer protection in financial services should be done, and how a future version of the CFPB could theoretically work to implement it.

One topic that I keep coming back to is data. Financial services has, for decades, run on data. And the importance of data in financial services is about to be supercharged, thanks to AI.

And yet, the ways in which government regulators gather data are arcane. They rely on mechanisms like quarterly Call Reports, complaints submitted by consumers, and industry research informed by third-party data sources and voluntarily-submitted data from market participants. These are valuable resources, but they are fundamentally static, delayed, and incomplete views of a system that actually runs on real-time data.

It’s always a bit of a fool’s errand to talk about big leaps forward in regulatory infrastructure. However, if you’ll suspend your sense of disbelief for one second, allow me to pitch you an idea.

Imagine if, when you signed up for a financial product, there was a second opt-in box — right next to the usual “help improve this product by sharing anonymized data” prompt — that allowed consumers to share tightly scoped, de-identified usage data with the CFPB to help make the product safer. Instead of relying primarily on complaints, quarterly reports, and one-off research projects, regulators could analyze real-world product outcomes from consenting users and detect emerging harms much earlier. It would push the CFPB closer to Elizabeth Warren’s original vision: a financial product safety commission that uses data to identify dangerous features before they scale.

I know this is a crazy idea that will never happen. However, given the dire current state of consumer protection regulation at a federal level, I think we need to be a bit bolder in our imaginings.

One idea that came up a couple of times at the Urban Institute event was the notion that there are specific windows of time in which the dynamics of a particular market are not yet set, and can thus be influenced in any number of different directions.

Jonathan identified January of 2025 as one such window in the sports betting world, before the prediction markets had gone all-in on sports betting, where intervention in some form (regulation, public opinion, competitive pressure, etc.) could have potentially steered the market in a different, healthier direction.

The work that Consumer Reports did on Instacart’s experiments with algorithmic pricing is another good example. After CR published that research and it was picked up by the New York Times and other publications, it generated a massive and very public backlash that led Instacart to back away from its experiments, despite (I assume) seeing promising initial results.

Why is this important?

I think it’s a reminder that even though it often feels as if everything that happens in our industry (especially the bad stuff) is destined to happen, that’s not true. The founders, executives, investors, and regulators who shape the financial services industry can be persuaded, at critical moments, to choose Door B instead of Door A, even if Door A is easier and/or more profitable.

The trick, of course, is identifying when we are in one of those critical moments and having the courage to say what you think is the right choice, even when you know that doing so will make you unpopular.

I have faith in all of us to play this role in the next set of critical moments that are surely around the corner.

MORE QUESTIONS TO PONDER TOGETHER

Big news for the endlessly curious (yes, you): I’m collecting your fintech questions on a rolling basis. 

What’s keeping you up at night? What great mysteries in financial services beg to be unraveled? Think of it this way, if a stranger is a friend you just haven't met yet, your question is a Fintech Takes conversation waiting to happen. 

One that could headline a Friday newsletter or be answered in an upcoming Fintech Office Hours event.

Drop your question here, whenever inspiration strikes!

Thanks for the read! Let me know what you thought by replying back to this email.

— Alex  

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