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The second of three episodes recorded in partnership with Banking Circle at Money20/20 USA, that took place in Las Vegas on 23rd to 26th October 2022. We recorded a series of interviews on the Banking Circle booth with a number of the speakers and attendees from the conference. Our guests for this second episode were:
1/ Matt Oppenheimer, Co-Founder & CEO, Remitly
2/ Leslie Gillin, Chief Growth Officer, Pagaya
3/ Dave Birch, Global Ambassador, Consult Hyperion
4/ Jess Houlgrave, Head of Crypto Strategy, Checkout.com
5/ Simon Taylor, Head of Strategy, Sardine
6/ Ginny Chappell, EVP, Product Marketing, Moov Financial
7/ Jan Altersten, CEO, Riverty
Russell Goldsmith is joined by Matt Oppenheimer, CEO, and Co-founder of Remitly.
Matt’s session talked about whether crypto and digital currencies will render the remittance business obsolete. Crypto is a space everyone should follow closely and it’s unlikely to make remittances obsolete. Key themes from the session were; what pain points their customers faced, what drives cost in remittances, and then figuring out how crypto can be applied to help drive down the costs as a partner to Remitly.
The main benefit of digital over traditional remittance is once you understand the costs of remittances, you see that a lot of costs are via physical brick-and-mortar cash in. With Remitly’s app and broader digital remittances, you can link a bank account or debit card across over 150 countries and send money back to customers within minutes. So much more of it is digitized which takes money out of the system. This creates a much more convenient and seamless experience for their customers.
Crypto is a space they followed since before founding the company when Bitcoin came out in 2008. Matt thinks it’s been a common refrain of crypto making remittances obsolete or disrupting remittances. There are areas where they can partner with some crypto companies, like Meta and their Novi product, Coinbase, and partnerships that can help accelerate digitization. But it’s unlikely to make remittances obsolete because there’s a lot of complexity, regulation, and trust. They’re not seeing the customer demand for it right now.
Remitly is sending money now through over 150 countries. Remittances are global, but customers are very local. They’ve designed their product across thousands of corridors. Each one of those corridors has different costs for them getting funds from customers, disbursing funds for customers, and the speed of that payment collection and disbursement varies. That has to be done on a very local level and the pricing, merchandising, and packaging is much more complex than meets the eye. On a global level, you’ve got to solve the risk, the compliance, the fraud, the fund’s disbursement, all the complexity that is inherent with international payments. What they’re proud of is not only have they solved some of those foundational elements, but then they’ve localized the product across the 150 countries that they serve.
Matt’s key takeaway from Money20/20 is that last year he saw a lot about Defi and about crypto. This year he feels like there’s a lot of focus on identity verification, a lot of focus on compliance.
Leslie Gillin, Chief Growth Officer at Pagaya, a B2B2C, fintech company. They’re a network between their institutional investors, bank partners, and lending partners. Their job is to bring capital to the table in their AI capability to be able to find more consumers, whether they’re deepening existing customer relationships with a partner like SoFi or Ally and bring 20% to 30% more people into the mainstream economy with the ability for them to choose the products that they’re looking for.
Financial inclusion is a big part of the mission of the company and helps the success of the business model because its about diversity and inclusion. When you have a more diverse company, you have a more profitable company. They are a for-profit company and started as an asset management company in 2016. They can bring more underserved people into the mainstream economy because they’re getting missed today with FICO scores and underwriting platforms that are old and not up to speed. Enabling Pagaya to find more people that are creditworthy and bring them into the mainstream economy. They are one of the few SPACs that made it across the finish line and went public.
They have all FCRA which is compliant data, bank complaint data, and FICO score. There are thousands of variables behind a FICO score. What Pagaya’s AI is able to do is have 20 years of production data instead of a bank or lending institution leveraging a FICO score, they have a lot more information in real-time to be able to find people who are getting missed. They have over 16 million data points in training and they’re able to work with their partners who are unable to approve them, and they send a decline through an API. And in milliseconds they can come back to them with a recommendation to approve and then give them the pricing that matches the pricing that the company was already marketing. Pagaya are a business-to-business company and so enable their partners to be able to say yes to their consumers and really allow them to have more choice and access to lending than they came to apply for in the first place.
Having over 260 researchers means the company has a lot of data points that they’re paying attention to daily. They pay attention to trends and making sure they can find everyone who deserves credit. But they’re also managing the risk because they owe the investors who are on the other side of their network a return on assets. Their technology is using the data, understanding that consumer who was declined by that institution and they’re able to bring pre-funded capital. Additionally they have institutional investors, pension funds, and private bank clients. They pre-fund the investor meaning their technology is solving for a return on asset for their investors and then helping their partners say yes to consumers and increasing on average 25% to 30% incremental originations for auto loans, personal loans, credit card buy now, pay later.
Leslie finds there’s so much technology that can help with social change, whether it’s health care or whether it’s financial services and enabling people to get seen more and just being able to leverage that data. If you think about all these institutions and new fintech companies, there’s so much lending opportunity out there. What she finds exciting is that everything that’s happening today is further enabling people to have choices and access. As she has spent 31 years working for financial institutions, she made the switch over to fintech because of the excitement of the model. Stating the backend infrastructure and acquisitions really see a complete customer and that is where they’re missing the mark. They’re finding one out of four people who are good creditworthy customers that are getting missed.
Leslie’s key takeaway from Money20/20 is that everyone is hungry for business, there’s so much opportunity and a lot of challenges that come with that.
Dave Birch, Global Ambassador for Consult Hyperion was our next guest.
Consult Hyperion is a specialist electronic transactions consultancy, advising some of the larger players on how to use new technologies.
Dave’s session at Money20/20 explored the digital identity crisis, looking at gambling, adult services, and cannabis to look at what opportunities were there, but also to look at what innovations are coming from that direction.
Within digital and verification infrastructure we should be moving away from using people’s personally identifiable information as part of transactions in the wider economy. Verifiable credentials are the idea that using modern cryptographic techniques to prove things about data but not share the data. And in some of those more sensitive areas, you can see why that’s important.
If banks don’t confront the digital identity crisis other big players could step into the market and consumers would feel more comfortable if it was a regulated financial institution that was storing personal information safely. Dave does have a fervent hope that eventually banks will get their act together and cooperate to solve this.
With less and less cash being used daily, will there become a point where cash is no longer used?
Being fond of the saying “a cashless society isn’t a society in which there’s literally no cash” Dave explains cash will always be around but a cashless society will be seen as cash is irrelevant.
Jokingly Dave wants to rename Money20/20 to Identity20/20. Due to all the stands and businesses dealing with the real problem. That problem is identity.
Jess Houlgrave is Head of Crypto strategy at Checkout.com.
Jess’ session at Money20/20 focused on the growth of crypto within payments. On the panel, they discussed crypto acceptance and paying for goods and services with cryptocurrency. Crypto has long been promised as something that can support payments. Even within the Bitcoin whitepaper, they had the notion of peer-to-peer payment transactions. Checkout.com have a nascent Stablecoin settlement product so they can settle merchants using Stablecoins. She is especially excited about crypto pay-outs for creators, gig economy workers, and cross-border transactions.
With recent volatility within the crypto space, Jess always sees these things come and go. There is a difference in crypto winter that the institutions are more sophisticated than they have been previously. Before they had a lot of conversations between crypto as an asset and as an investable asset versus the technology that underlies it. And today those conversations are really focused on the technology use cases. Meaning that even though it is crypto winter, everybody still thinks about what they can build.
Having a breadth of collaboration within the industry is something that’s going to persist through 2023, meaning people can focus on what they’re good at and partner with people to support their innovation. On the payment side Checkout.com are going to see more crypto products in the market. Jess is optimistic for 2023 and she thinks there is going to be more regulatory clarity on some aspects next year, and that will help innovation too.
Demystifying Crypto is a report that Checkout.com released earlier this year that surveyed 30,000 consumers, and 3,000 different merchants to just get a general feel for how they were thinking about crypto and NFTs. It was broad and comprehensive. Jess picked up on that a lot of merchants had a sophisticated understanding of crypto and what it could do for their business, with 67% of CFOs saying it was going to drastically transform their business model. Her favourite stat from a future survey, yet to be released, and as a preview is that in the US in February, about 20% of the consumers that they surveyed said that they would be interested in being paid their salary in crypto, and in this latest survey, it’s 46%.
At Checkout.com, they process for crypto exchanges. Allowing those merchants to accept card and alternative payment methods. So just like when a consumer, goes into a store and buys shoes you could buy this with crypto. In a normal settlement flow, what happens is that they aggregate all those funds from Visa and MasterCard, and other payment providers, and then settle them to the merchant every day using a bank transfer. Stablecoin settlement looks at that leg of the transaction and instead of making a bank transfer, they send Stablecoins.
This is impactful for two reasons:
They can do this on weekends and not be constrained by 9 to 5 on weekdays.
On the operational side, it removes this leg of operations that you must do to change fiat into crypto to put it back into your business model.
Jess’ key takeaway from Money20/20 is that people are taking crypto very seriously now. She has had lots of companies who want to learn more about how they can use crypto and is delighted to see that companies have teams in-house with plans for crypto within their business. Jess has a lot of energy from this week and seeing the excitement around crypto has intensified that.
Simon Taylor is Head of Content Strategy at Sardine. He was part of a session with former president of FTX, Brett Harrison, discussing the future of crypto and Web3.
FTX is a very large crypto exchange that’s been acquiring lots of other companies. Simon found it interesting to get Brett’s perspective on:
The Crypto market going down.
People being less excited about web3 and the hype dying away.
Why he left and what’s next for him.
Brett stated “when everyone else is fearful, be greedy. And when everyone is greedy, be fearful.” The tourists have gone so now is a great time to look at this space. The session covered everything from compliance to regulation, to the future of the industry, DeFi, Stablecoins, and a wide range of interesting topics.
Depending on what the value proposition is, consumers may or may not be ready for crypto. Reddit launched its NFT collection and there are over 3 million users of that NFT collection. It’s an incredible adoption but the average price is about $10 therefore what they’re starting to see now is they’re flipping from the speculative games bubbles phase into this utility phase.
Simon states the goal should never be to replace traditional financial institutions. As the mobile phone hasn’t replaced telcos, it just changed their business dramatically. Now we all use Zoom and so the telco companies are there in the background and they’ve had to upgrade their infrastructure to be able to be a part of that and they continue to be very successful businesses. The same is true for banks as the goal is not to replace them, it’s to build a new infrastructure that can solve problems for the world in a different way. A topic spoken about to Brett was Stablecoins, and to some regulators, this is a ‘bad word’, but if you’re in the global south, there is the ability to hold and transact in dollars is powerful. And they can move money in and out so that they see this being another avenue for remittances and cross-border trade at the consumer level for low-value payments.
Simon said that Sardine is the world’s best fraud team you hire as an API. Customers would include FTX, Brex, Moon pay, Wire and Metamask. They provide all the software solutions that allow somebody to be able to accept a digital identity. They’ll check for fraud in digital identity and then, once the customer’s onboarded, they look for things like account funding fraud. A neo-bank that’s launched a new account and put money into it needs to make sure that’s coming from a legitimate source and so that’s available to their internal fraud teams. When someone is spending at the point of sale, they look at the card issuing fraud. Looking at everything from device, user behaviour, and signals to pull together the best fraud prevention and detection in the world.
The second part of the business is the instant fiat to crypto or NFT checkout. ACH has a two-day delay however Sardine will allow their users to instantly send money from their bank account via ACH to receive crypto immediately. With ACH and their fraud prevention technology, they’re able to get a 95% approval rate. That’s why they’re seeing a lot of energy and excitement around the product.
Simon also featured on the Deciphered podcast that was recorded at the event, and they talked about everything about the macro environment and how that’s going to impact consumer fintech. Also delving into how that changed the market and how interest rates have risen. Previously, that meant that the banks are doing well as their net interest margins have raised the amount, they’re paying savers versus the amount they were charging in loans has changed. But it’s not that simple, they’re not signing as many mortgages as they used to. Therefore, fewer customers are coming through the door for lending products. On the consumer fintech side, there are big valuations and multiples that they sold and are harder to justify in this market. Meaning they’ll have to start thinking about unit economics, which should have always been the case but now starting to really come back to reality.
“When everybody else is fearful, be greedy”. This would be Simons’ key takeaway from Money20/20 and he has never been so excited by young fintech companies. America’s Got Access, organized by the Money20/20 team had businesses building to compete with payday lenders, and businesses building to sustainably lend to the subprime sector. Lending is easy, but getting paid back is hard.
Ginny Chappell is EVP of product marketing at Moov Financial. In her session at Money20/20, she interviewed Christopher Waller from the Federal Reserve, which she said was a top honour of her career to be able to meet and talk to him, with it being his first Money20/20 and the fact he doesn’t usually do interviews.
Ginny summarised her talk with Christopher Waller. She said the Federal Reserve is coming out with a service that is going to enable real-time payments in the US. They’ve struggled over the last several years to get a ubiquitous network in place. For all the fintech’s and the financial institutions out there that have been investing in different technologies to modernize their payments infrastructure. She said the Fed is uniquely positioned now to make that available and create a whole host of new capabilities and use cases that are going to empower small businesses and consumers in exciting ways. Christopher spoke about that and shared they came out of a white paper which Ginny encourages everyone to read.
Moov’s statement on their website states “every company will become a fintech.” Ginny said that there is a massive shift being seen in growth for software companies that are looking to really embed and make invisible payments in the commerce experience. Lots of companies are looking at how to make this easier. Commerce is unavoidable now and they’re all in mobile apps and online. She thinks that there’s a shift in growth that payments need to catch up to.
Ginny jokes that Money20/20 is like the Superbowl for payment nerds! A key theme she has been seeing is getting rid of the check, something she has been trying to do for years. But she understands that we’re not there yet. Along with this it has been exciting for her to see all of the new technology and the new emergence, of better tools for compliance, fraud, and risk management.
Our final guest of this episode was Jan Altersten, CEO of Riverty.
Riverty is a fintech focusing on the consumer where they take on the accountability for the entire transactional cycle around the consumers. This could be from credit checks into whatever payment method, like buy now pay later. Jan assumes when someone thinks of a fintech, they might think of a small start-up, but Riverty have a 40-year-old history and 5,000 employees active in 13 countries.
They provide services for merchants like ASOS, car provider Lynk & Co, and many more. They decided to focus, not just under one umbrella, but on the one brand showing who they are and where they’re headed with this consumer-centric approach.
Buy now Pay later is a big part of their business, but it’s not the only part of the business. Debt collection is also something they do and don’t talk enough about. They have said to be a good BNPL provider, you cannot shy away from that topic, and you need to take on full accountability for the entire transactional cycle around the consumer. Talking about sustainable finance being human-centric, to help people back into the ecosystems that matter to them and make sure this is within your control. They have a lot of consumers facing difficult times and see Buy now, Pay later as a tool in many ways.
Jan shared some interesting case studies on embedded finance like working with Lynk & Co car manufacturer that sells a service. You do not buy your car up front, you buy a subscription on a car, which is a modern business model. They also concluded that this is not enough to build a truly sustainable business model. So, they added a marketplace where those subscribers can offer the car, they are subscribing to other consumers to not only reduce the cost but also increase the usage of that car. Most of the cars are standing still 90% of the time so the question arose of why not offer it to other people.
Within mobility where they’re going quite heavily into the automatic number plate recognition connected to the payment, which means you as a consumer, do not need to produce an app or swipe your card in a machine. You simply drive into a garage with no bars and then you drive out and they will aggregate those transactions, connect that to your car via the number plate and invoice you by the end of the month. That’s another embedded finance activity they’re enthusiastic about.
Jan’s key takeaway from Money20/20 this year has been the sustainable finance conversations and also how big E-Identification ensures that you know who you’re doing business with. There is such an array of companies trying to solve that problem and that’s another big topic this year. The last reflection is put simply by Jan: Crypto is not as popular as it used to be.