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 Happy Wednesday, Fintech Listeners! Our Fintech Co-working Day (Toronto Edition!) is underway and it’s lovely. Just a bunch of banking and fintech nerds sitting around talking and (occasionally) working. Already, we’ve covered stablecoins and dollarization, the future of personal finance, cultural attitudes toward debt, and the latest in U.S. and Canadian politics. And the day isn’t over! My thanks to my partner-in-crime Kiah Haslett and to Tarique Khan and the Fintech North crew for their hospitality and organizational excellence. — Alex P.S. Too much friction, and you lose customers. Too little, and you open the door to fraud and negative selection. That's the bet you're already making, instinctively, in every field you kept or cut. On 9/30, Tomás Campos (CEO, Spinwheel) has the data to actually answer it, and I want to put it to the test on air. Was this email forwarded to you? Sponsored by C&R Software Every AI pitch in collections makes the same promise: replace the collector. The busywork in collections is what it is, from matching payments, updating account records, and logging every compliance step to flagging accounts that are past due. None of that requires judgment. What AI can't do is have the conversation. When a borrower explains a job loss, or asks for a payment plan that bends without breaking, that call has to be made by a person. C&R Software's Debt Manager clears the noise so collectors can focus on using their judgement for better outcomes. 3 BIG IDEAS FROM THE PODCAST  Diehard listeners may remember my first and second audiobook experiments. And now, listeners, I bring you my third. I’ve turned a recent deep dive essay, “A Crisis of Confidence,” into an audio essay for your listening pleasure. I wrote the essay you're about to hear back in May, right after I attended Emerge, the Financial Health Network's annual event. A few conversations there left me wondering whether the U.S. ever had a strong economy and a pessimistic population before. Turns out, we have. And once I started digging, I couldn't stop. Tune in for the full conversation here And read below for my three big ideas... #1: Saving is the CasualtyThe strange thing about the 1970s is that Americans did the responsible thing. They saved. The personal savings rate averaged 12.2% across the decade and peaked at 17.3% in May 1975. Unfortunately, that impulse to save didn’t deliver the results that many consumers expected. The Federal Reserve’s Regulation Q capped the interest rate that banks could pay on savings deposits at 5.25%. Inflation in the 1970s ran between 9% and 13%, which meant that the responsible American household was losing 48% of the real value of their savings every year. The harder they saved, the more money they lost. There were ways around this savings paradox, but they favored households that (surprise, not surprise) already had money. Treasury bills paid market rate but required a $10,000 minimum (roughly $50,000 today). Money market mutual funds, launched in 1971, often required $1,000 to $5,000 minimums, too. In 1980, Edward Kane wrote (in a working paper for the National Bureau of Economic Research) that small savers with poor access to credit were “simply victimized.” The 2020s have almost the reverse problem. Consumers today have access to high-yield savings options aplenty, from T-bills, to money market funds, which all currently pay 4-5% with no meaningful minimum. The escape hatch is open. But there often isn’t much money available to send through it. Today’s savings rate is near 4%, roughly half its 20-year average, and only 47% of Americans say they could cover a $1,000 emergency from savings. The high cost of living alongside every other high expense prevents savings from accruing in the first place. In other words, the squeeze has moved from the return on capital (the 1970s problem) to the availability of capital (the 2020s problem). That changes the product question for financial services. For years, banks and fintech companies have optimized the savings stack for people who already have something to save: Higher APYs, automatic transfers, round-ups, cleaner interfaces, easier access to investment products. Every one of those tools solves an allocation problem, but none of them solve an origination problem; which is essentially how do you build a savings product for a household that can’t spare the extra buck? 🎬 DIRECTOR'S COMMENTARY When I originally wrote this essay in May, gas prices were a 1970s artifact I was using to explain someone else's decade. Since then, Iran happened, and gas prices became a 2026 problem again too. I was hoping the parallel would stay historical. #2: Consumer Credit is the Emergency FundWhen saving stops working, people borrow instead. Both the 1970s and 2020s built entirely new categories of legal credit to make that possible. There’s a 1978 Supreme Court decision called Marquette National Bank of Minneapolis v. First of Omaha Service Corp. that almost no one outside banking law (or named Kiah Haslett) has heard of. It created the modern consumer credit industry. The Court ruled that a national bank could charge whatever interest rate was legal in its home state, regardless of where the borrower lived. South Dakota and Delaware immediately abolished their usury caps to attract bank business. Citibank moved its credit card operations to South Dakota in 1980 for exactly that reason. The average American household carried $78 in revolving credit in 1970. By the late 1980s, that figure was in the thousands. Today it sits around $8,000. The 2020s version enacts an identical play without the courtroom. Buy Now, Pay Later structures itself as four installments, no interest, which sidesteps the Truth in Lending Act (TILA) disclosure while producing a similar economic effect as a credit card. Earned wage access calls itself a non-recourse advance instead of a loan, which pushes it outside lending law entirely. Tip-based apps like Dave and Brigit collect fees through "voluntary" tips (which I have screamed bloody murder about in the newsletter for years) and monthly subscriptions instead of interest, sometimes producing effective APRs north of 300% while disclosing a rate of 0%. All these examples are a Marquette-style evasion, no courtroom needed. Find the edge of the legal definition, then build a product that sits one step outside it. But look at what these products actually fund; gas before payday, groceries split into four, a $200 loan that rolls over monthly. That's not discretionary spending. It's an emergency fund, rebuilt out of credit instead of savings, and it raises a question for anyone underwriting these products: Are you financing a purchase, or are you financing the absence of a safety net? #3: Protection Is the ExceptionThe financial landscape of the 1970s largely rhymes with the 2020s, but there’s one place they don’t. And it’s the regulatory response. In the 1970s, the government loosened consumer finance's market structure: It phased out Regulation Q and accepted what Marquette did to state usury caps. At the same time, it built a floor, and I mean that literally. It was a specific stack of laws that set a minimum standard of protection no lender could go below. That led to eight statutes in a single decade:
Back then, the theory was that more competition required more protection. Today, the deregulation half of that equation looks the same. Crypto and stablecoins have gained federal legitimacy, sports betting has spread state by state, and prediction markets operate with the CFTC’s blessing nationwide (which means sports betting is also available nationwide. Yay!). BNPL and earned wage access still sit in regulatory limbo. These aspects rhyme perfectly with the 1970s. The floor doesn't. The CFPB, the agency built to enforce most of the 1970s statutes, has gone from roughly 1,700 staff toward a stated target of 556, with its funding cap cut in half. Nearly 70 of its rules and guidance documents have been rescinded. The credit card late fee rule was vacated by a federal court. The overdraft fee rule was overturned by Congress. The Open Banking Rule (Section 1033) is stalled. And the CFPB finalized a rule that eliminates disparate impact analysis from enforcement of the Equal Credit Opportunity Act; a pillar of fair lending since 1974. The 1970s Congress that passed eight consumer protection laws in ten years has no equivalent now. States are trying to fill the gap, unevenly, and they face federal preemption fights as they do so. Last time, the floor got built while the deregulation happened. This time, only the deregulation did. Sponsored by Persona Right now, a founder is emailing her co-founder for a certificate of incorporation that sits in a public registry. WHAT I'M LISTENING TO #1: Brooking’s Aaron Klein on Faster Payments, Consumer Credit & the Fed (Fintech Business Weekly) 🎧This is a combination that you just have to listen to. #2: Inside Treasury's Push to Reset Bank Regulation (Banking With Interest) 🎧Correct me if I’m wrong, but I think this is the first interview that Jonathan McKernan has done since he left his post at Treasury. And even if that’s not technically true, I guarantee you that this is the best interview he’s done since leaving Treasury. Rob is an outstanding interviewer. Thanks for the read! Let me know what you thought by replying back to this email. — Alex | |||||||||
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