Hot Takes: Fintech on Fire

Well, welcome to the spiciest session that is going to take place here. It also features the hottest sauce and the hottest participants. They paid me to say that just in case you're wondering. If you've seen the series "Hot Ones", you know exactly where this is going. Now, I wanna be perfectly clear: they're not faking it on what's going on up here. They also had to sign medical waivers so I am in the clear. It is also not a panel. We're gonna workshop some ideas, we're gonna throw some stuff out, we're gonna discuss, but it might not have a clean ending. So hopefully we evoke some emotions, maybe some sweat, maybe bleeding from the nose. We'll see where it goes. These are custom hot sauces. Some will be available later. We're gonna save time for Q and A. But just be warned, if you want to partake in a hot conversation, there's a price to pay.

Alright, with that, our first eater, Mary Wisnewski, longtime friend, editor-at-large at Cornerstone Advisors, longtime journalist in this space. Now Mary and I are both from the Upper Midwest, which means we are at a severe disadvantage here for many reasons. And I asked Mary, I'm like, tell me like your engagement with spice. She goes, my family didn't use salt. Like what? She's like, Yeah, I ate cookies. That was like what I thought the flavor profile. When I went to college, my world was changed when I discovered salt. Mary's a natural here. It'll be great.

Now, contrast that with Neff Hudson joining us recently retired from USAA. You've seen him on the stage before, now has started a consulting firm, Castle Hill Partners. Now Neff, being with USAA has resided in San Antonio for over 20 years, which it then surprised me. He goes, I'm doing this with some trepidation. He goes, 'cause what I've learned in my time in Texas, there are three stages of spice. The first one really hits the mouth, the nose and the eyes, right? Then the stage two hits the stomach. And, well, stage three doesn't develop for a day or two, depending on the digestive system. So I'm a little bit nervous about this. It'll be fine. You'll be on a plane before it happens.

Alright. And last but not least, the iron stomach himself, Wes Hummel. Now this is a little bit unfair. Not only is Wes the CTO of MX, prior to that he was at PayPal. When Jessica and Tom said we have the perfect participant 'cause it turns out, by the way, Jim Magats hates wings and hates hot sauce. So they're like, Wes will do it. Wes is from New Mexico. Yeah, not fair. And so as he describes it, he goes, they start you on spice at an early age, including the rumor they put green chili in your baby bottle. So look for this guy not to sweat at all.

Alright with that, let's get this party started if y'all wanna look on the far left here.

Hold on, hold on, hold on. Uh oh. This does not look hot enough. Does not look hot enough. I'm sorry guys. I'm really sorry. So I'm pleased to introduce you. I had a gin yesterday. Gin Magats. I'm building out my marketing presence. I now have my own hot sauce: Magats. That's spicy. Alright,

Is that stage one, stage two, or stage three spicy? We'll find out. Oh. Oh man.

Enjoy. Alright. Wow. Good luck. Thank you. Thank you. And, good luck to you all. We're in the audience afterwards, so thank you.

I kind of feel like that moment in like, wrestling when suddenly outta the audience, someone runs down to take you by surprise. I'm like, oh, wasn't expecting that. As everyone drinks/reaches for beverages.

Well, why don't we start with the Insights on Fire Hot Sauce, which is on the lower caliber here.

So we're using these bibs or not?

Well, they're gonna cover your mic, so maybe dab it.

Okay. Just wanna make sure, you know.

Cool. It was the tension between over ear/how do you eat a wing with how do you protect your nice white shirt.

Got it. Okay. Alright. White shirt's going down. Got it.

So, I mean, maybe this is a little bit spicy on the AI side, but I'll start us off and then take a bite of this. Generative AI burst onto the scene. And suddenly all of the deals we were seeing were like, we're AI for this, we're AI for that. We're the AI of Uber and the Uber of AI. What? I don't understand it? But then it like, suddenly everyone went from generative AI is used for everything to like, kind of disappeared. Not disappeared entirely. There's still good stuff happening. But is this a flash in the pan? Call it like the hot burst that goes away? Or is it just gonna take longer to mature: Wes?

So it's not a flash in the pan. I mean, it is here to stay. But we have to get it to, from being basically a parlor trick today. Which is what I was using it for, like chat GPT, check this out, what I had chat GPT do, to something that's super powerful. But the way we get there is by solving a lot of the challenges and problems we have today around the data that goes into it, indirect and direct prompt injection. There's a lot of things that have to be fixed and solved for this to be incredibly useful. And this could be a long journey before we get there. So I think it's here to stay, but the reason it kind of blew up is because it was like nobody knew what to do with it except for punch a bunch of cool stuff in there and read it out to somebody or use it for their essays for school, which they should not be doing. So don't let your kids do that.

Or their emails or their emails to clients.

Or their emails to clients.

Mary, build on that 'cause you've been covering this extensively for Cornerstone.

Well, I guess I don't think it's disappeared at all. In terms of companies marketing it, it's definitely like, yes, we wanna talk about this, we wanna push this out. But to your point, yeah, definitely. I mean, the speaker earlier, the academic person was talking about how we're only in baby stages. So I think that's where we are. But I only expect to see evermore of it.

I think evermore, but I'm still...the flash I'm struggling with the really cool AI stuff we were seeing, like the power of some of the chatbots and what people were doing before the flash still seems to have the most actual business impact as opposed to the GPT for everything, right? Maybe it's because you ended up with a bunch of posers where everyone got in? Like Neff, USAA, you guys have been playing around with AI and chat and AI intersecting chat forever.

Yeah, my former employer is still busily working on that. But you know we've deployed our first chat bot probably 10 years back and problem was, it's a dumb chatbot and it's physically scripted, right? Everything has to be entered in by some poor analyst who went through reams of data to get there. But there was actually, I would disagree sort of on the premise that there's been a lull because there was a sneak attack, a signal flame, a signal of fire that went out about two weeks ago that I don't think anyone's talked about. I don't usually name names at a conference, but Intuit announced Gen OS and announced that they have, built an intelligent assistant that works across all their products and that should scare the absolute crap out of everybody in this room because those guys are a really well-run, well-funded, technology scale that runs, you know, with a hundred million or so customers I think across the landscape. And imagine never having to do your taxes again because you've got this TurboTax assistant running underneath, compiling everything that you need as the year goes on. Imagine the same power being on Mint. Imagine the same power being on Credit Karma and you'll see the predicament that that we're in. And that was a real, act of will by Intuit. They fired a thousand people two years ago and hired nothing but data engineers and people that literally rewrote the code base. So they're working on their own operating system that is now a smart operating system. Alright. And I don't know that there's anyone in this audience that has it and my former employer was in the stages of building that, but it's gonna take a while, I think for the industry to catch up with that. These guys have laid down a marker that other people should be, that we should be paying attention to.

I don't know who's gonna wanna jump in. I'm gonna throw out the question then. I'm trying the Magats: That's spicy and you can all gauge whether I fall on the floor, whether you want open yours or not.

Those are really good, by the way. Not, spicy at all.

Yeah. The first one's kind of entry level. We wanted to make sure Mary doesn't flee the stage.

Okay.

Thank you. Jason.

I skipped lunch, so if I pig out, I'm sorry guys. It tastes really good.

Should We talk about AI really in the front end and the back office? Like, the things we were seeing being pitched us, it's like that, you know, ability to interface and see cash flows or to chat and do things or on the backend and it, if you have an LOS for using AI to reach, under reach consumers, don't send me your deal, I'm done. But where I'm curious from each of your perspectives, I think AI fundamentally changes how banks need to think, banks and all FIs need to think about their strategy, not just the interface, but the strategy. And so from the tactical level to the strategic level and let Neff finish his bite, Mary, we start with you, how does it impact strategy?

Well, I mean, everyone's just like learning how to use it and what to use it for. So I know maybe a handful of months ago I was talking to a credit union that was using a chatbot tool, presumably not to replace people, but saying that they wouldn't have been able to hire people. So it was like stepping in for that function. And, will that be the case going forward? I would say no, probably not. I would think that it would be replacing people. So I don't know Jason, I don't know how I feel about this all.

The Magats has a nice spice by the way. A little bit of glisten here, but well done.

Um, now build again for a second on what you were describing, because I think the idea of an OS that crosses everything you do really is a strategic decision because FIs have not historically done a great job of saying let's break down the silos.

Yeah. Um, I'm reflecting on something that, a Microsoft CTO said maybe three, four months ago. And the challenge that's facing the software industry is that they've built all these dumb applications they don't learn, right? The applications don't learn from the user inputs or whatever. And so the work of the work for the tech industry over the course of the next 10 years is to actually rewrite all these apps and make them smart, right? And what's really crazy is that's where generative AI is gonna have huge impact because it'll code for you. And I urge you all: try it if you haven't because it is incredibly powerful when you can instruct a machine to produce code as opposed to have to do the code yourself. It saves a ton of time. And so when you think about the advantages that you have or the disadvantages that we have in all our legacy architecture and the problems we've already had migrating to the cloud, I think less than 20% of the industry at this point is over 50% in the cloud. So, you know, the pace of innovation in the banking industry is glacial compared to the pace of innovation among our competitors. And I don't worry about the big four so much, I worry a lot about, you know, the big four tech companies, right? Because they have trust, which is the number one thing that you sell as a bank. And they're gonna develop safety, which is the second thing that you sell as a bank, right? And convenience, forget it. Convenience is gone, right? Convenience is already sort of out there. So the main reasons we had the main competitive advantages in the consumer market have already dissipated and they're gonna actually dissipate even more quickly because of what's going on.

Well, you bring up a really interesting point that I find personally interesting. If you look at the pace with which AI came onto the scene, particularly generative AI and LLMs, like each successive wave of these technologies we're adopting seems to be going faster and faster. And to your point about the glacial pace, it doesn't feel like our glacier is moving any faster.

Five-year backlog. How many people have a five-year backlog? I know I left a five-year backlog, so I think I heard it on another speech. That's, you know, that's the problem.

So Wes, how do you address it? And by the way, while you're doing that, I'm going to open the API can't even Hot Sauce.

So is it bad that I got a head start?

Nope.

Okay.

Yeah, I mean, I think you're gonna see a lot of disruption, because there are companies that are moving at glacial pace, and there are companies that will come out of nowhere and disrupt those companies. But I think we can't ignore the fact that the data is gonna be very challenging. This morning I woke up early and I decided to get on Chad GPT with a specific purpose in mind. So there's a there's a myth out there that the movie Singing in the Rain, that they used milk for the rain, okay? And it's a myth. It's been debunked that they didn't actually use milk, but I decided to ask chat GPT about that. And so I said, how did they make the rain show up in the film Singing in the Rain? And the reason they say there's milk in it, so you could see it, you could actually see it. So chat GPT says, in the movie Singing in the Rain, the rain was created on film using a mixture of water and milk to make the raindrops more visible on camera.

Yes, we have a ranch boy.

Very distracting.

You eat ranch?

Yeah

Matt. Matt. I'm in the middle of reading something. You mind?

Keep reading.

These sales guys, they always...anytime an engineer talks, a sales guy comes in,

I have something, I have something to add: some ranch.

I don't want any ranch.

Okay, so chat GPT. So here's chat GPT saying, and this is a benign thing, whether they used...I mean they didn't use milk. Chat GPT is saying they used milk. And what's important about that is Chat GPT is just basically taking inputs in the data and the prompts that it gets. If that data isn't correct, and Chat GPT is telling me they used milk, but they didn't, imagine making lending decisions. Imagine making any kind of decision you're gonna make in an automated way, that data better be good. And so there will be disruptors in this space, but the challenge is gonna be what do you do about data validation? What do you do about user validation? How do you ensure that the data is secure? And how do you ensure that the answers you're getting back are accurate?

Well, Mary and I talked about this as it relates to content, right? The idea of an LLM kind of gives you this reversion to the mean, so if you wanna churn out mediocre blog posts, but it's the next most expected phrase to come out, chat GPT and LLMs are great to use, but if you actually want insightful things, it still requires people like us, at least for the foreseeable future.

Yeah. But to that point, like Theo Lau told me that she had searched one of my old articles that I wrote and Chat GPT was claiming it wrote it, when it hadn't. So I find that really, really alarming.

She took that personally.

I took it personally, but yeah, right now there needs to be creative content people because everyone's ending up with like the same generic answers. Well, false answers.

One of the spicier pieces you've written lately is one of my favorites. Well, not about your dating life, that was also spicy in the LA Times, which I highly recommend.

Thank you.

Is it a bank

Yes.

Give us the too long couldn't chat GPT it later version of what it, what does it mean? What was your thesis around: Is it a bank

You mean the NPR?

Yeah.

Okay. So I was on an NPR podcast with the premise of: is it a bank? And so, it's throwing out Starbucks, its throwing out..I don't think was Apple mentioned? I can't even remember. Yeah. But like the names you would think of, you know, the everyday consumer like thinking, is this a bank? But like, my premise is people don't think about it that way. Especially younger people. Like you have your money is put in something like Venmo and like you're not thinking, is this a bank? You're just like, oh, thank goodness I put something somewhere.

Well, I'm curious in the audience, how many of you care if it's actually a bank? As every bank raises its hand? I mean, Wes, Do you care? Like, walk us through kind of your stack.

You know, I don't, but I tend to be less risk-averse. I mean I won't put a bunch of money in something that isn't a bank but I'm willing to take a chance on things that aren't necessarily a bank. But I don't think that's necessarily the case. I mean our data shows that was like, something 64% of, individuals believe more than just the trust. They care more about the trust of the institution that they're banking with than any of the features and functionality that they get. So they really do care that it's a bank or an institution at this point because that's essentially the core of where people have their finances.

I guess personally who banks at Amazon a lot because of the number of returns we do, we probably have an average higher balance in Amazon than we do in our checking account. I do trust Amazon. Right? It's not just about the startup...and the heat is working up for now. I got a, I got a little bit ahead. So By the way, breaking the API. I can't, the API can't even, I definitely oversaw it. If anyone in the front row can see I'm steaming up my glasses at the moment. It's quite nice. My sinuses are clear.

True story, true story.

I'll hold off on the fourth though,

You know, but when we think about, you know, what is the value proposition of a bank, you know, and we need to become fast and easy. Well, guess who's fast and easy at things is Amazon, right? Go to the UPS store, go return something, shows up in my balance. I go respend the money a little bit later. You know, I think one of the biggest challenges I have is, as FIs, we think of the, the world in this lens of what it's meant to be an incumbent in the future, especially as we lean towards embeddedness fast and easy means the transaction is part of a bigger story.

Yeah, it is. I mean, and then, you know, cornerstone had research from Ron earlier this year that it was showing that a lot of the new checking accounts were being opened up on like Chime, PayPal, that sort of thing. And not at traditional banks.

Like at a pace of, I think 64% were skewing away from traditional FIs?

Something high. I don't remember the exact number.

I think it was 64. Yeah, it was high.

But then on the other hand you have the other side of people who signed up with an account because that was their parents' account or it was nearby their college, and then you just don't drop it. You just add on. You're like, here's this and then here's like seven more.

Neff in your new consultancy, you get a call from a big brand, trusted brand, solving for Wes' idea here. Would you advise them to become a bank?

I think we have to rethink what being a bank means. I remember 10 years ago it was very popular and provocative to say that, you know, banks were gonna become dumb pipes. Fast forward 10 years, we've made some progress on the data side, we're still sort of dumb pipes, right? And the vision seems to be to make the pipe smart. We're gonna compete 'cause we're gonna have smart pipes. Well, I think that reflects the regulatory overhang and the safety aspect that we bring to the table, which is: we ensure compliance, whether that be with federal laws, state laws, and we protect your assets, right? Those are different than just dumb pipes. And the threats that we're facing now in those two areas are very different than what a smart pipe would be able to accomplish. So I think the only thing that a bank is to a consumer is: is it insured or not? Does it have the FDIC coverage?

And I think that's more recent.

More recent especially. Yeah. Right.

And if you read the survey data, half of us are worried about the safety of our banks. 50%. That was the Gallup poll that I saw very similar to the 2000...I get my crisis years screwed up...2008.

Yeah,

Right around that same level. So your customers are very worried about the safety of their money. Right? And we all sort of, you know, poo-pooed the SVB collapse. That was the best bank in the business, guys, for small business and startups? Best bank in the business. Did they have any customer loyalty when they were getting kicked? What happened there? So we're thinking, okay, we got a whole bunch of granular deposits, you know, and we can't have a run like that because we've got such a broad consumer base. Whistling in the graveyard, guys. We have to really double down on safety. We have to double down on convenience, but more importantly, we gotta care about our customers more, right? And maybe care about our profits a little bit less. And that's why credit unions I think will probably compete pretty well in what I'm sure is gonna be another contraction in our market over the next five to ten years.

Well, two things on that. One of the best quotes I've ever heard, former president of a bank went on to become CEO of a credit union. And this is how he described it. If you talk to the CEO of a credit union, they will not shut up about their members. If you talk to the CEO of a community bank, they will not shut up about their balance sheet. Which I think is actually pretty accurate in terms of how you think about community banks in particular, and by community, I mean very small, even up to the super regionals is they tend to be profit first in both what their shareholders, what their balance sheets are gonna look like. And I think that's gonna be a harder place, in a rising interest rate environment with compression of, you know, rate. Even though rates are higher, nim is getting compressed right now. They need to think about new ways to compete.

I just realized we should have toothpicks.

Next year: Toothpicks, you won't sit in the front row then.

Mm-hmm.

But randomly, one out of every 10 toothpicks has something really spicy on it.

A little bit of a Hunger Games thing.

That's right.

Well, Let me throw this out. Not to be debbie downer on it. Are we gonna face a mass extinction event of financial institutions?

4,000 today, 2000 in 10 years? That's the, you know, isn't that the Brett King prognosis? 50% drop? My math is better.

I think it's gonna happen faster.

Really?

Yeah.

But I think there's also...back to, is it a bank? I think what we're gonna need to see is banks are going to need to become very different things and become intentional about what they choose to be, right? So I can think of one bank has already chosen, they're not gonna be dumb pipes. They're gonna be smart pipes with really good compliance as a service on top of it, but they're not gonna be cut. Which one did you have?

I went to the final

The M Extreme.

Which one's the final? Which one?

The M Extreme.

Oh no,

Wait. Oh, I already had that one.

Well, Neff's glasses are fogging up

You're like, I already did the hardest.

You're going the wrong direction.

I didn't actually.

You can't just use bank as one size fits all in the same way that I think, you know, from a regulatory stance, we need to get away from saying FinTech when we mean like I do origination or I'm doing bas right? We just say it's FinTech or it's credit union or it's bank, right? So they're gonna be some banks that choose to be rails and service providers. There's going to be some that choose to be community banks, but redefine what it means. What's Ron's term about the community bank thing? The hot sauce taking over...the community, community-driven bank, something right? Where community doesn't mean geography. Yeah. Is there a special niche that I can serve? Right. So disclosure and investor totem is a bank for Native Americans. Why? Turns out, an astounding percentage of Native Americans don't access the benefits that they should be able to because their bank knows nothing about how do I actually go get a mortgage leveraging, you know, that service. Right? It just doesn't exist. Right? So there's those kinds of banks, if I think of the big banks, they're gonna become the Costco, Walmarts of the world, right? And someone's gonna have to choose what does it mean to be the Target of the banking world? Am I far off maybe?

Well, I challenge you on that because especially it happening faster. I mean, if you look at the piles and piles of regulation that happen, those don't just come from nowhere. Those come from, usually, events that occur where there was, something that was not regulated and the consumers ended up getting impacted because of that. And so if you strip away all of that, and, now, you can argue whether it's overregulated or not, but if you strip that all away and there aren't banks anymore, then you run and you, you're swinging the pendulum all the way to the other side and saying there's no consumer protection whatsoever.

So I think it just comes down to, as you said, how do you, what do you define as a bank? I think most people would say, how do you define a bank? Yeah. I mean, 'cause I know at PayPal the whole time we were like, should we be a bank? Should we not be a bank? And then everybody's like, no, we should not be a bank. Oh my gosh, are you crazy?

But that's the niche that I think some banks should-

And it's because of the regulation, right?

I think that's the niche that some banks should go choose, which is we're gonna be a bank that for any, for a PayPal of the world or a big brand, if you want to get in and provide banking services, we're really good at that compliance level. But we're done with actually being a commercial lender and having branches you walk into or anything consumer.

So you're saying a bank in the traditional form of like..okay, I gotcha.

Yeah.

The regulation's still there. Cause when I think of bank, I first think of, okay, like there's regulations, there's compliance aspects of it that will always have to be...

That will always be there. And I think if you get, if you say that is my unique competitive advantage instead of the my relationship with my customer, right? I'm really good at compliance, I'm gonna actually develop a new muscle.

Yeah.

Which is extending that compliance to others. No, the three of us are all sweating and narry glisten over with Wes.

Could be the lights.

Yeah. Well, I mean, I wanna leave time for Q and A. So why don't we go to Spiciest take for everyone and I'm gonna upgrade. I just finished the, these data are hot, which I highly recommend it's the right level of hot without overwhelming. I think the API was actually hotter and I'm dreading the M Extreme a little bit.

It's, not bad at all.

It's pretty tasty actually.

Is it okay?

Yeah. Not too bad.

Um, Mary, you wanna start, since you just got to wash down the spice, what's the spices take you want to leave people with before some Q and A?

I'm changing my mind right now. The themes of this conference to me standing out, financial health, empathy, and you know, also there's always a focus on getting the younger customer. But I think, you know, I blog on this a a little bit ago, but I think older adults are a next gen type of customer. And a lot of banks, credit unions have them as customers, but there's even a new neobank called Charlie that's focused on the over 62. And I find it super interesting as an idea and it's very early stage. So not all the features are quite there yet, but like, you know, a lot of older people are like overdrafting to pay for their like prescriptions. And so it's just like this massive problem, which means there's a massive opportunity.

Yeah, I think we're...I think as an industry we're in a lot of trouble. And I think that I've suffered from some PTSD 'cause I was a journalist in a previous life and yeah, I thought I would wind up as a columnist somewhere, right? Like we all did. And thank God I got interested in technology when I did. Cause it led to a much more interesting and great career. But that said, there are some similarities. When the first thing that really hit the the newspaper industry was the loss of classified ad revenue. And that was enough to really wipe out the profit margin for most of the industry right off the bat. And so that was followed by predictable rounds of cost-cutting and, reinvention. And then it became fodder for private equity. And you know, essentially, as journalists we all thought that we were indispensable, that people, that our information was critical, that people would always pay for it. And that there was nothing more reliable than a newspaper hitting your doorstep. Okay, so how many of us are still banking on that tradition? And if you were gonna start a bank today, would you start it with the apparatus that you have, with the infrastructure that you have, with the organizations that you have? Really, we're in the risk management business and the amount of risk that we're managing is shrinking, right? Payments. That pool of risk that we're shrinking is shrinking there. The loans, lending and loans are gonna be probably a really hard, hard target for a lot of folks. So banks will have an advantage there for a while, but I can see centers of gravity starting to disappear in this industry. And when you lose two or three of them, okay, then you got real problems. So I really hope, and I hope to be part of a change that you know, continues this incredible banking tradition we have in the US which I think has been a cornerstone, you know, to our ability to develop as a nation. And when I think of small business being, you know, the kind of entities that typically bring us out of really poor economic times, you know, I think there's a real opportunity to double down on that in the banking industry, we've neglected the small business segment, you know, brutally over the years. That should be completely digital at this point for those guys. And who's closest to providing that solution? The guys I talked about at the beginning, Intuit, right?

So, um, there's an awful lot and if we're just gonna make money off credit cards and we're just gonna make money off loaning money to rich people, okay, there's not gonna be many of us, right? And credit cards, what? That's all about points and spend. So what's great about this conference and I'll wrap is there's a deeper philosophy here. Ryan Caldwell probably one of the best examples of that. Brandon Dewitt, who I still think about pretty much every week, who challenged us all to eliminate the number one stress in people's lives. So go back and do that. And you're gonna find value that you didn't think, you know, didn't even dream of. You couldn't brainstorm it, right? Cause you're connecting with your customers on an intimate level and you're building for them. But watch the tech companies. Don't watch the other banks 'cause those are the guys that are coming for your lunch.

Alright, So I want to build on that. Wes, you're gonna bring us home before Q and A because I might be choking by then, although I agree with you. The M Extreme was maybe my favorite of the group. Alex Johnson published something this week where he said, you know, maybe doing nothing is the safest strategy, which I think ties into what you were just saying, Neff, and he and I are gonna be debating this next week. I think doing nothing is the most profitable strategy if you don't plan to be an ongoing entity. Right? Right. It's profitable right up until it's not and drive off the cliff and it ends dramatically. And I contrast that with a bank conversation I had. And not a small institution, not a community bank, but someone you consider further on the chain. I had mentioned I was so excited headed to money experience mx. They're like, that's some cutting edge stuff. And I'm like, not that MX doesn't do cutting edge stuff, but if I think back to the long history I have with MX, MX is becoming, whether it's with MX or you know, someone else, this is table stakes to be playing in data and personalization and insights. Like, this is not cutting edge.

This is what you need to be doing if you want to be an ongoing entity. And so I worry the those who look at the safest thing to do is to do nothing is what's gonna drive that mass extinction event.

Yeah. I think it's nuts. And I think some of it comes from probably you, you have to make some big, big bets sometimes. And if you make the wrong big bets, I think that's where that's coming from is like, well, we don't know where the industry's gonna go, but I'm, I'm with you. I think if you're not like figuring out and actually making some moves, and that goes back to our conversation about the glacial pace of some institutions. Like speed is gonna matter a ton.

Speed and agility, right? Speed is the velocity with which you go in a direction. Agility is the speed with which you change direction.

Yeah, A hundred percent. And so companies have to be in a position to be able to pivot, to move, to move the yardstick, to actually move the north star on a whim. And so I think that the companies that are entrenched with a lot of legacy tech debt, legacy code, et cetera, like they're gonna be at a huge disadvantage because there are going to be the companies that come out of nowhere, couple folks in a garage come up with a great solution that can move much, much faster. And even if the institutions have tens or hundreds of millions of dollars to go put behind that, they still can't move at the pace they need to.

All right. So if you agree with us, disagree with us when I ask a question, make a point the microphone is hot. Yeah. Change my mind. The hot sauce is yours. We have some fresh wings coming out. Woohoo. Any takers? Samir, I'm looking right at you. Right? Dead center.

Come on up. What kind of sauce would you like Jillian?

Um, gimme the hottest one.

All right. You guys agree API can't even was I think the spiciest?

When you talk about the downward spiral or distinction, future elimination of banks, do you see banking as a service being a means or way for banks to thrive with those tech companies that need the banks to back them behind the scenes like Goldman Sachs with Apple, for example?

Profitable pipes, but you lose the consumer relationship, right?

Respond.

You wanna go ahead.

Well, I mean, banking as a service is a great way to think of a new revenue source, right? And we've talked about it. My former employer talked about it quite a bit, but you know, I think it's much easier said than done. I mean, it puts you in a different, kind of business where you're managing external relationships instead of managing your customers, right? The relationship with your customers. So it's a whole new industry. And I thought in general we were lousy at being a tech company. I think we were really good at being a customer-centric financial services company, but the regulators make it really difficult to be an integrated financial services company. So if I was starting a play from scratch, I'd go over the top and I'd look for the banks to provide the regulatory and compliance kind of piece, through bank as a service, but that's just gonna be, you know, that's just sort of biding your time. Yeah. I don't know that that's reinventing yourself.

Get get over there for him.

Hey, disagree. It's, you know, it's supposed to be hot, so hopefully I'm wrong.

Which sauce am I getting?

The API can't even.

Okay, that's, the perfect one.

So what I'm struggling with here is the regulators, right? It feels like especially in the last two years, the regulators have become more anti-crypto for sure and maybe anti-FinTech as well. And the regulatory burden on banks has just continued to increase and this has probably also increased. So I'm like, well if we don't get new bank charters and existing banks

kind of are forced to increase their compliance load and stick closer to their netting, how do we get from here to there? Because it feels obvious. Like we're going to get to that future world where everything is FinTech and with or without a charter. But I just don't see how we get from here to there.

Yeah, I mean it's a great point. And as we talked about you know, about banking as a service, I think if there is a way for fintechs to specialize in certain areas and for the compliance to narrow down into like specific areas and specific fintechs versus being super broad and banks having to cover so much, there might be a chance there, but I think you're right. I mean, that's what I said earlier. I think, you know, saying it's gonna happen fast. I don't believe it. I think we should try to make it happen fast, but I don't think it's going to happen fast because there's so much entrenched in that. How do you pull yourself out of that? And then how do you move beyond that? And to me, the only way you can really do that is to start to narrow down focuses of companies that have solutions. But then when you do that, you run into the risk of like, you don't, want the few big ones to control all of it. And so I think it's just a, a conundrum that you have to, like, how do you address that? And I don't know how you can do that without just starting from scratch on the compliance fund, which will never happen.

So I want to double-click on that. How do you see open banking or open data playing a role in creating that distributed experiences across Institutions, Fintechs, you name the party.

Yeah, he's a hot, he's a hot wing.

I got it.

An extra hot wing - Jason needs that.

He's from San Antonio - give him something hot.

Yeah, I mean, I can start. I think the great thing about open banking is it gives consumers the power and the ability to take their data wherever they want with them. And it ensures that you don't have the really large banks kind of holding that and using that for their own purposes. And so I think it actually creates a lot of extra flexibility and innovation and puts the power in the consumer's hands.

Doug.

Okay, so, uh, let's spin this the other way around. What's the FinTech extinction event that we should all be looking at?

Nobody's gonna get funded this year. It's brutal out there. It's brutal out there. No one gets funded.

Yes.

Nobody's series B's run outta cash. No revenue. Good luck.

Well, I'm going drill one step deeper unit economics. Who knew that unit economics mattered?

Because it was growth, right? It was growth at all costs. And then there's the pivot, right? 'cause we hit the cash crunch. But you're gonna see a lot of good companies go for just bargain basement prices. So if you've got an M and A unit, get 'em fired up. M and A is really hard, because they're a lot, the people that you're gonna acquire are a lot smarter than a lot of your folks. But they don't have any idea how to, you know, be compliant probably or follow regs. So there's gonna be a culture clash Half of all acquisitions fail, right? But, I think it's a big opportunity for folks to leap forward here on some of these companies that are gonna run out of fuel. Cause there's a hundred billion dollars that was invested in FinTech in the US alone over 10 years. 50 billion in Bitcoin, in distributed ledger technologies, right? What happened to that? I mean, best minds of a generation working on that stuff. So at some point, there's some real interesting, distributed networks that have been built underneath there, probably some interesting identity stuff that's underneath the covers there, but, could be a really good time if you've got some money in your pocket.

See, I think the problem was the bull market actually masked a lot of opportunity to go actually solve really hard stuff because it was that growth at all costs. I mean, Samir made this point at FinTech devcon, we were doing a panel on Neobank. He and I were the OG is the old guard versus the Neobank. And Samir made the point is like, you know, perks route is 2010. You were what? 2011, right? And he's like, so we can get our paycheck two days faster. Like that's what we've come up with, you know, in all this time period? But it was growth at all costs. Is there another question out there?

Did I see anyone Stacy, uh, oh, Minnesotan, where's the ranch for her?

Ranch is a must. So fast forward five years, will we still be talking about fintechs or do you think this is all going to meld together. Fast banks, FinTech? Cause I think as we go through this down cycle, the fintechs and yeah, a lot of good businesses are gonna be gone. They're gonna get snapped up by maybe larger fintechs or banks. So will, will we say FinTech in five years?

I think so. I think so because remember like five years ago people were like, when will we just drop FinTech? It's just banking. Um, and we're still definitely like team FinTech, team bank. And I think that will, that will stick because it's also sort of like entrepreneur versus tried and true, the stereotype.

I think someone will invent some kind of new clever buzzword, something awesome, you know? But I think FinTech will still be here 'cause of RegTech. I think RegTech is our hidden salvation underneath there. And that's actually a pretty interesting, you know, little vertical. That'll persist I think. And that might be really the vision of the dumb pipe, smart pipe kind of vision there. But you know, the whole reason to build these open APIs and to adopt this and you know, which we didn't really get over the, we haven't crossed that final threshold in my, at my former employer. The whole reason to do that was that we could keep pace with the innovation outside of our walls, right? It wasn't necessarily to expose, it was to be able to sell on the edge, to be able to actually meet our customers where they are. That's, that's where that vision was going. And that's not a vision that drives people back to a website. Alright? Maybe do that to give 'em some documentation. My daughters are 24 and 27, I should know this, right? They've been in a bank lobby twice in their life and I worked in the banking industry. Boy did I do a lousy job of that, right? I should have. We don't have a lot of branches in fairness. But they don't have any sense of physical presence to a bank. And you know, go ahead and do your own survey. Check with the cool kids. See how many of them actually go into banks and think of banks as places. It's really just a service. And that service should be wherever they want it.

All right, so we are at time. If you are one of those walking in late, this will be rebroadcast on breaking banks. There's also going to be an ongoing MX-driven series of hot takes with a number of the speakers here. If you'd like to be one of those after trying some of this delicious sauce, you know, uh, hit us up. But thank you guys for enduring the hot sauce. Nobody died. I'll see you all in the back buying Pepto Bismol right after this. And thank you for being part of a different format. Thank you.