Money20/20 Takeaways

1. Technology Trends and Observations:

• Shift from "blockchain-powered" to "AI-powered" company claims.

• Emphasis on AI, machine learning, and blockchain as tools, not business models. Their value depends on their application in products and economic models.

  • Ramp & Finix's AI application on analytics, reporting, and expense automation.

• Generative AI's potential in reducing labor costs and the challenge to differentiate genuine AI usage from PR hype.

  • Publicly available large models cannot satisfy the specific and refined needs of fintech institutions.
  • The financial sector resists the "black box" nature of previous AI generations and hasn't fully embraced them with the arrival of Gen AI.
  • Institutions should build their own mid-sized models using their data.
  • They should adopt Gen AI's interactive patterns to enhance the experience of existing products.
  • The current goal is to improve products rather than inventing new Gen AI products from nothing.

2. Industry Insights:

• Insights from Cannabis Banking Summit: Challenges and opportunities in cannabis banking. Engagement with cannabis leading banks and credit unions to enhance risk management and compliance.

  • "Too much cash in our community is a problem", which is inconvenient, expensive, and often dangerous.
  • Working in the challenging realm of cannabis banking fosters the development of robust compliance, governance, and risk management systems, a point underscored by several bankers who have leveraged this expertise to branch into similar high-risk sectors like online gaming and crypto.

• Pay-by-bank has emerged as a popular payment method that offers a convenient and secure way for customers to make online purchases directly from their bank accounts.

3. Political and Regulatory Influence:

• Regulatory processes in the U.S. are slow, with a prediction of a 3-5 year adjustment period for banks heavily involved in "banking as a service."
• The regulatory focus is mainly on the Bank Secrecy Act (BSA) and anti-money laundering (AML) concerns.
• The increasing cost of compliance in the "banking as a service" space and the challenged promise of middleware platforms to reduce these costs.
• Banks are signing up for FedNow, but they're mostly only signing up to receive payments, not to send them.

4. Banking as a Service (BaaS) and Open Banking:

• Rise in "banking as a service" discussions with a perception of it being problematic rather than positive.
• Open banking's proactive approach in educating policymakers contrasts with the lack of momentum for "banking as a service."
• Skepticism around the extent and impact of open banking, especially its ability to facilitate account switching.
• Debate around standard-setting bodies and the belief that Fintech companies haven't been involved enough in shaping these standards.

5. Compliance, Compliance, Compliance. Dodd-Frank Act Section 1033 – Consumer Access to Financial Records

• Financial Data Exchange (FDX) will become the standard-setting organization for open banking.
• Big tech firms like Apple face challenges with rules requiring data sharing for companies with over $10 billion in annual revenue.
• Anticipation of bi-directional data sharing between banks and fintechs leading to further debates.