As FinTechs grow, they must evolve along with the payments marketplace. The timeframe of a new versus an established FinTech may seem relatively short, but in terms of technological time, six months to a year can seem like a lot more. Because there’s no time to waste, especially given how the COVID-19 pandemic has accelerated the already existing trends in cashless payments.
For example, a recent Forbes article claims that in 2021, 82 percent of Americans used some form of digital payment. And venture funds have been taking notice: As Tech Crunch reported last year, more than 20 percent of venture dollars went toward FinTech startups.
For FIs, this landscape seems to be shifting beneath their feet, but the nimbleness of FinTechs serves as an advantage. They can evolve along with what customers and members want and need. Evolution also means finding new ways to work with established financial institutions and integrate with their existing systems and future plans.
At the NEACH 2021 Future of Payments Conference, several leaders at area FinTechs shared their experiences with integration with Joe Casali, AAP, APRP, NCP, NEACH Executive Vice President, during a virtual roundtable:
- Colby Ross, CEO of Project Finance. The company partners with banks and credit unions to deliver seamless, personalized and rewarding digital banking experiences specifically designed to achieve customers’ unique financial goals.
- Greg Woolf, Founder of FiVerity, which provides financial institutions with digital fraud defense to combat fraud and cyber-attacks via machine learning and the expertise of each institution’s fraud analysts.
- Chelsea Albers, Regional Sales Manager at Posh Technologies, a conversational artificial intelligence company that transforms how FI connect with customers/members and automate contact center workflow. (Check out this recent post for a deeper dive on Posh.)
Casali: Let’s talk about when you partnered with a financial institution. As you were working through what happened next, was there friction in thinking about requirements the FI was trying to put on you in terms of compliance, that maybe you hadn’t thought of until then?
Ross: We came out of the DCU Fintech Innovation Center, and we can’t thank them enough for that. One of the biggest things that was helpful was all the people we got to meet, daily. There are natural collisions with people in the industry, and you get really valuable feedback. When we first started, though, it really was like drinking from the firehose. We began as a consumer app that allows you to manage your expenses, and that’s like a small shell of the problems we’re asked to solve now. It can be challenging to get your arms around it and understand requirements and what’s being asked, but the colleagues we’ve met through DCU continue to be a resource.
Woolf: We were one of the early AI companies coming into DCU; we previously did investment management and research, but ended up getting more into things like fraud, identity theft, and synthetic identity theft through our time at DCU. With this use case, the challenges include integration and data privacy—which will always be challenges.
Albers: We needed to wrap our heads around data management and security. Banks obviously take that very seriously, so it moved us to do our type 2 compliance. We needed to figure out all the things that FIs find important and then build our AI solutions around those.
Casali: FIs have needs, but those needs may vary. What do you need to know from them when supporting a more custom request?
Ross: I would say, make sure—as much as you can be sure—to get as complete and robust requirements as possible, or make you totally understand the problem that needs to be solved. Forcing both the FinTech and the FI to be really super-specific about requirements is key. We want to be really methodical about building the requirements. It’s like: Measure three times and cut once.
Woolf: Even though we may be on the mature side of startup, we’re still a startup. That means our strength and capability is flexibility. It’s our currency, our competitive advantage. Our biggest lesson to learn is listening and approaching new relationships with our customers, who we see as our partners. We have opportunities to learn about customers’ pain and how we can solve it. We focus on how we can help the customer: That helps streamline the onboarding process and ability to work with larger FI. We want our partners to be vocal and explain the pain points clearly.
Albers: Because I am customer-facing for Posh, I find it helpful when customers can tell us what they want from our AI. They need to know what’s important or what they are trying to solve for their customers or members.
Ross: Being a startup, you are constantly invited to pitch product. Usually, it ends up being very one-sided: Here is what we do, and so on. But it’s good to get the opportunity to listen and hear what the audience is looking for. Even for demos, I try to send a questionnaire in advance and learn more about what they’re looking for.
Casali: Each of you are at different stages in your journeys and lifespan as FinTechs. But all of you have many learnings along the way—what of those have been the most valuable to you?
Albers: Being able to integrate with a lot of people has helped us go far. Our ability to be flexible to customers and their existing systems has helped our team leverage that and solve for those issues and getting the functionality they are looking for. I think that’s been a big asset on our end to fit ourselves into this puzzle. We can plug into them.
Woolf: Our skill is listening. Customers can drive product evolution. For example, we recently had a client previously focused on investment research, and we did a hard pivot for them into a different sector and different product: We built an algorithm to determine when a person applying for a loan wasn’t a real person. That’s something we built with the help of our customers. Literally identifying millions of dollars of risk.
Ross: We had a massive business change going from a consumer-facing app to working with big FI. We learned to set expectation on when and what is being delivered. Also: overcommunicating.
Casali: What do you see as the biggest opportunity for FIs serving their customers and members today?
Woolf: Just like our mandate is to listen to FIs, their mandate should be listening to their customers and members. Lots of initiatives out there exist in terms of service offerings and products to end customers. There is a lot of challenge to incumbents from challenger banks offering comparable products. That’s an area where we see a lot of growth. At the end of the day, it all comes down to the fact that banking and healthcare are both deeply personal assets. There’s a significant amount of paranoia in the world these days: Making customers feel comfortable and safe on one hand is a burden and challenge, but it’s also an opportunity, allowing the FI a differentiator.
Albers: This is maybe controversial, but the biggest opportunity is Coinbase. They had 2.7 billion in profit in 2021, so maybe there is a huge opportunity in digital currency. When you think about what a bank does, they are a custodian, intermediary, and lender. Crypto is coming after all of that: There’s no intermediary.
Casali: Crytpocurrency, stablecoins, and Central Bank Digital Currency (CBDC) are certainly getting a lot of play lately, having caught the eye of the Biden administration. And more details are expected very soon from the administration. How does regulation fit into this? What do you see for regulation as relates to your evolution as FinTechs?
Ross: I try not to figure out what our government is going to do. There is a defined box of regulation and there are two strategies: One, you can live on the edge and hope that box doesn’t shrink. Or two, you can live a few standard deviations from the edge and know we’ll be compliant and in a good spot. I choose the more conservative approach and I think that’s the nature of this industry.
Woolf: Regarding regulation, there is an extreme willingness to do something around these problems. We have a number of great tech discussions on how regulations could be changed to modernize. Like the bank secrecy act and anti-money laundering acts are 50 years old. FINCEN is currently contemplating modernizing some of those rules. I’d like to see banks be more proactive and bring in new technologies and like bringing in AI. Back in the day, sending money took three days—because that’s how long the mail took.
For more information about these and other FinTechs from the NEACH 2021 Future of Payments Conference, please visit NEACH online learning.
AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.