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 Happy Wednesday, Fintech Listeners! A quick question for you before we get going. What piece of classical music gets you the most hyped? For me, it’s In the Hall of the Mountain King, composed by Edvard Grieg. It starts slow, ends at an absolutely frenetic pace, and has a slightly eerie undertone the whole way through. For a slightly different flavor, I like Lindsey Sterling’s rendition of Tchaikovsky’s Dance of the Sugar Plum Fairy. I’m building a playlist for the car to help get my daughter excited to go to preschool. Any suggestions would be enormously appreciated! — Alex Was this email forwarded to you? Sponsored by Rain The most interesting part of a stablecoin card sits behind the swipe. For MoneyGram, that's the newly launched MoneyGram Card, built on Rain's infrastructure. On the backend, settling in stablecoins (instead of prefunding cash) lets MoneyGram free up idle capital it would otherwise park to cover settlement lag across more than 200 countries and territories. The card is already live in Colombia, with more markets to follow. 3 BIG IDEAS FROM THE PODCAST .png?sig=5b726fad59aa3bf5398a56a7479ce4ca31c69a98a5457a6e61e703736fab76eb&size=email-body&dpr=2) Today’s episode is a real treat. That’s because we’re joined by Jas Shah, author of one of my favorite newsletters, Fintech: Under the Hood, and true to his newsletter’s name, he spends today’s episode taking products apart to show how they actually work, drawing upon his own history building products and designing workflows, and consulting for fintech companies and banks. Tune in for the full conversation here And read below for my three big ideas... #1: The Siren Song, RemixedPersonal financial management (PFM) is one of the most obvious needs consumers have, in any country. It's also one of the most hopeless products to build and monetize in consumer finance. I told Jas that PFM reminds me of The Odyssey, my favorite movie this year so far; an obvious product category that lures fintech sailors to their deaths. Jas, who loved the film too, picked up the thread. He recalled the scene where Matt Damon is asked what the sirens say. His answer: all the things you want it to be. I feel like that's the slogan that's on 99% of PFM companies’ homepages. Cue every PFM founder, tied to the mast, sobbing. That’s because the category is plagued by what I like to call the 15% problem. Maybe 5-15% of people, at most, want to proactively manage budgets. So the industry builds for those users, and then hits a wall. Jas explained why. The onus is on the consumer to connect their various accounts and recategorize all their transactions ("an absolute nightmare," says Jas, who has worked on multiple PFM apps). All for the summary at the end to tell them they're spending too much. The 15% will pay for that kind of process. The other 85% want to pay for outcomes. Jas got specific about how AI can finally address that gap. His example? An AI-powered app notices where you buy your expensive morning coffee and shows you there's a coffee place a block away with five-star reviews that's cheaper. Switch for two weeks and you'll save this much. Why not try it? Then it builds a plan for you and checks in daily (maybe not unlike a friend on whatsapp, though a relentless and single-minded one), turning what Jas calls "glorified pivot tables" into knowledge and wisdom. If you ask me, as far as speculative futures go, I think that one would be pretty cool. The 85% don’t want a better spreadsheet. They want someone else to make that spreadsheet for them, and with AI, we might just will a product like that into being, at last. #2: Don’t Spook the Baby DeerI've spent the last two weeks at several open banking conferences, so I'm in an open banking mindset. And one thing I've been shocked by, at least in the U.S., is that even banks and fintech companies that are bought into the value of open banking for use cases like cash flow underwriting get very nervous about putting permissioning and credentialing at the top of the waterfall. The friction of account connection, and of permissioned access to that account, is viewed as too much. I asked Jas whether from a product builder's perspective, putting that friction up front might actually be worth it (not least because the pre-populated data and the insights that come with it make everything downstream much easier). He wrestled with the tradeoff, which he calls a "tricky balance," a phrase he uses six times in his recent onboarding deep dive (I recommend both the phrase and the newsletter). Once you frontload an account connection, you're asking someone to hit connect, choose their bank, choose the account, authenticate, then come back - basically, you’re handing them four discrete moments to quit. And people do quit. Jas puts drop-off between screen one and screen two at 10 to 20%. So over the past 10 to 15 years, onboarding has converged around a different order. Grab the contact details first (they cost essentially nothing to collect and store), so dropouts can still be nurtured back through HubSpot or Salesforce. Open banking gets pushed further down instead, embedded right before the account opens, where it does the job of final eligibility and risk decisioning. Early in the funnel, prospects are flighty, and oftentimes they're exactly the customers you want, so you coax them out gently, like a baby deer in the woods. Commitment buys tolerance. Ask for the data. Just don't ask before you've earned it. #3: Whoever You Trust More Than WashingtonEvery time I open an account somewhere new, I go through the same routine. A photo of my driver's license, a selfie to prove I'm a real person, and a fresh round of questions I've already answered a hundred times, at a hundred other institutions. Jas's alternative model is Google sign-in. “I always think about the way that Google OAuth has worked over the past 10 to 15 years,” he said. "It's sped up so many sign up flows." The equivalent in banking is reusable KYC. You create a single identity “blob”’ the first time you ever sign up somewhere, and every bank and fintech company after that, Bank of America, Citibank, Chime, sees the same consistent data instead of asking you to start over. Share it in one click, and you skip maybe the first five screens of onboarding. Technology isn't the obstacle. Trust is, and it has to hold in two directions at once. The first is bank-to-bank. Google sign-in clears a much lower bar than bank KYC, and U.S. regulators have been torn about letting one institution rely on another's verification work. It's silly that we require everyone to reinvent the wheel every time they sign up for a new account. But the moment we let banks start cheating off each other's homework, the risk is they won’t do their homework carefully, and risk creeps into the system. The second is citizen-to-government, and it's the one Americans won't tolerate. Jas noted that reusable identity only looks futuristic from the West. Saudi Arabia and India are already moving toward centralized identity stores (where the government controls verification), even if they're not fully digital yet. Since I live in Montana, Jas had just described our privacy nightmare, the kind we'd never sign up for in a million years. So we'll likely get a reusable identity anyway, just built by private companies instead of Washington, and be more fractured for it. We're cool with that. If the government held the key, we wouldn't be. That distinction is a little silly, honestly. But it tells you exactly where the identity layer will end up; with whoever we trust more than the state. 🎬 DIRECTOR'S COMMENTARY I have complained before about tech founders raiding Tolkien for startup names, and eventually escalated the complaint into an entire Tolkien Fintech Naming Guide. So naturally, Jas and I spent the end of the episode comparing notes on additions to the canon. Jas came prepared: Mithril for fraud or financial protection, because it’s the lightweight armor that saves Frodo from getting skewered in Moria; Arkenstone for core banking, because the “Heart of the Mountain” sits at the center of everything; and Khazad-dûm for cross-border payments; its halls and bridges connecting distant places through one network. Sponsored by Lithic "We apologize for the inconvenience" is not a business strategy. WHAT I'M LISTENING TO #1: Let’s Get Serious About AI (Breaking Banks) 🎧It’s always interesting hearing about how a specific large bank or credit union (BECU, in this case) is thinking about AI. Especially when the discussion is moderated by Jason Henrichs. #2: The Truth About Mississippi's Education "Miracle" (Plain English) 🎧There’s been a lot of talk in tech/VC circles about education recently (much of which is causing me to slam my hand against my desk in frustration), so I was relieved to find a podcast about an actual large-scale success story in education reform, presented by an expert in the field. Thanks for the read! Let me know what you thought by replying back to this email. — Alex | |||||||||
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