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| Happy Monday, Fintech Takers! And Happy (belated) Father’s Day to all the fintech dads out there (including mine)! One of my favorite things to do, before talking fintech with the dads who work in this industry, is to talk parenting (Simon Taylor and I did this for a few minutes at the end of our upcoming Not Fintech Advice podcast). Seeing guys’ faces light up when they talk about their kids is such a cool thing to see! And now, with that parenting talk out of the way, let’s talk about fintech. - Alex Was this email forwarded to you?  The Avenue in Saint-Cloud Park, ca. 1908 by henri rousseau 3 FINTECH NEWS STORIES#1: Keeping PaceWhat happened?Fifth Third integrated AI into its mobile app:
And so did Mercury:
So what?I recently went on the Banking With Interest podcast with Rob Blackwell and he asked me a great question — If he and I were talking in 2030, and he asked me what’s the thing that banking leaders wish they had paid more attention to in 2026, what would I say? My answer was AI. Specifically, customer-focused applications of AI. The reason for this answer is that I think AI, as a user interface layer, will be extraordinarily disruptive in financial services, and yet, today, too many banks are thinking of AI solely as a technology for improving back-office operational efficiency. Given that, I’m heartened to see that two banks — Fifth Third and Mercury (conditional!) — are making strides on customer-facing implementations of AI. However, I do find the differences between Fifth Third’s implementation of AI versus Mercury’s implementation of AI to be quite telling. Fifth Third has created an AI tool to make it easier for customers to navigate its mobile app. This is, quite literally, the pitch that it makes in the press release:
A less charitable way to write that would be, “Our mobile app is so bloated and impossible to navigate that the first and most logical implementation of AI for us was as a navigation layer to help our mobile users find their way around.” Now, again, to be clear: I’m being unfair. Fifth Third is one of the most strategically and technologically sharp banks operating in the U.S. I haven’t used the bank’s mobile app, but I’m sure it’s reasonably intuitive, and, more importantly, this implementation of AI is just a step along the road to more impressive agentic capabilities, as the press release makes clear:
That’s great, but that compelling future state is, essentially, what Mercury just shipped: The ability for AI to run workflows, send payments, issue cards, and surface insights about a company’s finances (pulled from the mobile app!) into an AI chat. Right now, Mercury’s implementation is built around a human being in the loop, authorizing all actions before they are taken. However, one imagines that the company is actively working on even more fully autonomous agentic AI use cases for the near future. Mercury won’t always move this fast. It’s in the process of becoming a bank. It will go public at some point. It will slow down. However, what these two contrasting examples reinforce for me is that Fifth Third can’t speed up. This is as fast as the bank — which, to be clear, is among the most innovative big banks in the U.S. — can go. This is why Fifth Third partnered with Brex on corporate cards and expense management, and why Capital One later bought Brex for $5 billion. The big banks know that innovation, particularly product and customer-facing UX innovation, moves fast and is only getting faster, and they can’t build fast enough internally to keep pace. As such, I’d expect the volume of bank-led partnerships and acquisitions to increase over the next couple of years. #2: USD-backed Stablecoins vs. Interoperable CBDCsWhat happened?A new cross-border payments platform is getting ready to launch:
So what?This is more evidence in support of my observation (which I articulated more fully in Friday’s newsletter) that central bankers around the world have a very different view of blockchain-based payment systems than U.S. central bankers do. In the U.S., our apparent position is that U.S. dollar-backed stablecoins, issued by private companies, strike the best balance between privacy and preference for market-led solutions on the one hand (hence no U.S. central bank digital currency) and our ongoing desire for USD dominance (which is a very useful foreign policy tool) on the other. In many other countries, it’s almost the exact opposite. They prefer (for various reasons) to issue centralized CBDCs and their central policy goal is to degrade the efficacy of the U.S. dollar as a foreign policy tool. Cross-border payments sits at the center of this power struggle, which is what makes mBridge so interesting. Privately-issued stablecoins are natively cross border. As long as the assets backing them are U.S. dollars, U.S. policymakers seem (for the moment) to be content. CBDCs are not natively cross border. To make them work for cross-border payments, you need a shared model for interoperability. There are ways that this can be accomplished in a loosely coupled fashion (such as the Bank for International Settlements’ Project Nexus), or in a more tightly coupled fashion. mBridge is tightly coupled. Participating central banks issue their wholesale CBDCs onto one shared blockchain — the mBridge Ledger (mBL) — and transactions settle directly on that common rail. It's a shared distributed ledger platform that enables real-time, peer-to-peer cross-border payments and foreign exchange settlements directly between commercial banks, using wholesale CBDCs. This is, quite obviously, not a project that the U.S. is supportive of, which likely explains why China got more involved in it and why the BIS took a step back:
#3: The On-Chain Rewards Opportunity Isn’t What You ThinkWhat happened?Rain introduced a new capability:
So what?Here’s a relevant tweet from a few weeks ago:  First of all, as I tweeted in response, it’s genuinely fascinating watching crypto folks slowly discover how different parts of the financial services ecosystem works. Second, this question has a specific answer, which, I think, helps illustrate the true opportunity for Rain when it comes to rewards. In order to offer a rewards program that has “parity with trad credit cards,” you basically need three things:
The problem that crypto cards will have, in the long run, competing with TradFi credit cards from issuers like JPMorgan Chase and Capital One is the scale and economics. Chase is the largest credit card issuer in the U.S. It has nearly 60 million active credit card customers, many of whom use the product as their primary form of payment, and some of whom occasionally or routinely revolve a balance. That foundation — tens of millions of active customers and a mix of interchange and interest income — is very strong. It allows you to, for example, operate eight premium airport lounges, with two more in development. That’s going to be a tough game for anyone in crypto, even someone like Coinbase, to play. However, the other two things that you need are fairly straightforward, and Rain is providing them. For rewards redemption, this is how Rain describes its offering:
This is roughly what I would expect and I’ll be curious to see what other options, besides statement credits and travel, Rain eventually adds. It’s the ledger piece that’s the most interesting to me. Here’s Rain again:
That infrastructure was built, in part, through Rain’s acquisition of Uptop, which is an on-chain loyalty platform, which specializes in helping sports teams like the Detroit Pistons and Cleveland Cavaliers launch rewards programs for fans. What’s notable about those rewards programs is that they are card-linked rewards programs, meaning that fans could link any of their existing cards to the program and start earning rewards, rather than requiring fans to apply for and get cards issued by the teams. In other words, what Uptop created (and what Rain has presumably added to) is a product-agnostic platform for rewards, built on top of a blockchain-based ledger. That’s interesting to me because I think it would be appealing far beyond the confines of the crypto card space. For example, Dave Wasik of Second Order Solutions recently came on the Fintech Takes podcast and talked about the trend of merchants that have historically offered co-brand credit cards diversifying their product lineups. Airlines, for example, have begun to offer reward debit cards as a complement to their credit cards, recognizing that some portion of their customers either don’t want or can’t get a credit card, but may still want to align their spending with a specific airline in order to participate in its rewards program and earn miles. That’s smart! But it’s probably a nightmare to operate behind the scenes. In theory, Rain’s unified on-chain rewards platform — if it truly can operate agnostically across credit cards, debit cards, wallets, and other products, while ensuring atomic settlement of payment transactions and rewards earning and redemption — could be better infrastructure for the direction that merchant rewards programs are evolving. Sponsored by T-Mobile for Business Most financial institutions don't compete on network infrastructure. They compete on everything that sits on top of it. But high-performance products still require high-performance networks.  2 READING RECOMMENDATIONS#1: The Transfer Market (by Marc Rubinstein, Net Interest) 📚I love all of Marc’s stuff, but I especially enjoy his more fintech-focused content. Given how hot cross-border payments has been as a product category in fintech and crypto, this essay (which is excellent) certainly qualifies. #2: They Looked Like They Were Getting Rich on Polymarket—but None of It Was Real (Wall Street Journal) 📚This happened on the CFTC’s watch and was targeted at U.S. consumers. I look forward to seeing what Chair Selig does about it! 1 QUESTION FROM THE FINTECH TAKES NETWORKThere are a TON of interesting questions being asked in the Fintech Takes Network. I’ll share one question, sourced from the Network, each week. However, if you’d like to join the conversation, please apply to join the Fintech Takes Network. I’m digging into credit builder products again. Have you seen or heard anything interesting in this space that I should dig into? If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network! Thanks for the read! Let me know what you thought by replying back to this email. — Alex | |||||||||||
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