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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.