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LendIt Fintech USA is Just Two Weeks Away

The biggest fintech event of the year to date will feature the industry's best networking, a cutting edge agenda, a startup contest and more. Save $200 if you register by Friday.

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The fintech world will be gathering online on April 27-29 for the ninth annual LendIt Fintech USA event. We have upped the ante on last year’s successful online event and will be broadcasting live from the production studio at the Javits Center in New York City. This will be an online event unlike anything you have ever attended.

So, what can you expect at LendIt Fintech USA? Here is a run down of the different components of the show.

Networking

We had multiple people say after our event last year that virtual networking is better and more efficient than in-person networking. The functionality offered by our networking partner, Brella, continues to improve so you can expect an even better experience this year. We always put a huge effort into networking so we have multiple ways for you to connect with your fellow attendees from the comfort of your home or office.

  • One-on-One meetings – Pre-schedule one-on-one meetings and view the complete attendee list using Brella’s world-class networking technology.
  • Networking Roulette – Let our algorithm match you for a series of spontaneous one-on-one meetings each day. These are short six-minute meetings that mimic bumping into people at an in-person event.
  • Women in Fintech Power Hour – Connect with impressive and interesting women during the lunch break on Day One. This is always one of the most anticipated and appreciated networking events of the year.
  • Post Game Show – Join us in the 1 Fintech room on Clubhouse for an audio-only discussion with your peers to close each day.

Solutions Showcase

Find the answers to your latest challenges in our Solutions Showcase featuring almost 100 sponsors and exhibitors with great ideas to propel your business. At each virtual booth you can gather product information, chat with company reps, engage in in-depth discussions, view videos and more.

Content

We are absolutely delighted with the way our agenda has come together this year. Our virtual keynote stage has some of the biggest names in fintech, companies that are rewriting the rules in financial services. In our afternoon breakout tracks we go more in-depth into the most important fintech topics of the day. There is something for everyone here so check out the full agenda here.

Back to the keynotes. While every keynote session I expect to be great here are the five that are most hotly anticipated:

  • Mike Cagney – CEO of Figure
    There is no one in fintech who has the combination of vision, creativity and ability to execute quite like Mike Cagney. He is bringing his unique skills now in tackling the inequality that has been caused by existing financial products. We know new approaches are needed and you will want to hear Mike’s vision for what this future can look like.
  • Nick Molnar – CEO of Afterpay
    Probably the hottest area of fintech this past year has been the buy-now-pay-later space. Part of the reason for its popularity is the shift that is happening as consumers choose debit options over credit. Afterpay CEO sees this as a structural shift that will have a profound impact on economies going forward.
  • Colin Walsh – CEO of Varo Bank
    Varo Bank has broken new ground as they became the first digital retail bank to be approved for a national bank charter. Now, the company is shifting its attention to creating a bank that is fair for all. CEO Colin Walsh has spent his entire career in banking, he knows what is wrong and more importantly how to build a better bank that is more equitable for everyone.
  • Henrique Dubugras – CEO of Brex
    The financial options for businesses have never been better. Part of the reason for this is because of companies like Brex that are creating financial products that are resonating with startups. But there is much more work to be done here and Brex CEO Henrique Dubugras will share what the future of business banking can look like.
  • Jennifer Tescher – CEO of Financial Health Network
    It is no longer good enough to just talk about the importance of financial health. As an industry we need to take action, measurable action. This will be the key going forward. How do we know our products are really benefiting our customers? By measuring their actual impact. Jennifer Tescher will provide us with a framework to do just that.

You can see a trend here just in these five keynotes. Interest in financial equality and using fintech as a force for change has never been stronger. You will see this reflected throughout our agenda during the three days of the event. This is what we, as an industry, need to be working on right now.

PitchIt @ LendIt

Our startup competition is bank with a whole new batch of promising fintech companies. In the morning of day three you will be able to watch pitches from eight finalists in PitchIt @ LendIt. Our panel of venture capital investors will decide who is the most promising fintech company of 2021.

Discounted Pricing Ends Friday

Discounted pricing for LendIt Fintech USA ends at midnight on Friday. At that time the price goes up $200. But don’t forget that Lend Academy readers always get the best deal, so you can use the code LENDACADEMYVIP to receive 15% off the already discounted price. So register now.

See you online

This is an important time for fintech and LendIt Fintech USA is the event for this moment. Never before has finance been through such changes in a 12-month period. But we are just getting started. Come see what the future will look like at the largest fintech event of the year to date.

I look forward to seeing you online at the end of this month.

Top 10 Fintech News Stories for the Week Ending April 10, 2021

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Some big fintech funding rounds, of course, the stunning Q1 metrics from Coinbase,  Jamie Dimon continues to be concerned with fintech and we now know what Walmart’s fintech initiative will be called. Here are what I consider to be the top 10 most important fintech news stories of the past week.

Plaid raises $425M Series D from Altimeter as it charts a post-Visa future from TechCrunch – Breaking up with Visa is the best to happen to Plaid shareholders as the company is now worth $13.4 billion after their Series D raise.

SoftBank to Invest $500 Million in Mortgage Startup Better from The Wall Street Journal – Upping the ante on Plaid is mortgage platform Better with the biggest round of the week, a $500m round led by SoftBank, that values the company at around $6 billion.

Riding Bitcoin Surge, Coinbase Active Users Grew by 117% in Q1 2021; Revenue Tops $1.8B from Coindesk – The numbers Coinbase released this week for Q1 were insane reflecting the huge growth in the popularity of crypto. Probably the most impressive stat of all: profit for the quarter was between $730m and $800m. Get ready for a huge IPO this coming week.

JPMorgan Chase CEO Jamie Dimon: Fintech is an ‘enormous competitive’ threat to banks from CNBC – In 2015 in his annual letter to shareholders Jamie Dimon said that “Silicon Valley is coming” and in 2021 he now says that fintech is an “enormous competitive threat” to banks.

Walmart Files for Trademark for Fintech Unit: ‘Hazel by Walmart’ from Bloomberg – We now know the name of Walmart’s new fintech initiative, it will be called Hazel by Walmart as someone keeping a close eye on trademark filings discovered this week.

These 12 New Billionaires Are Riding Fintech’s Rising Tide from Forbes – Fintech has minted a dozen new billionaires recently, this is an impressive list led by David Velez, the co-founder of NuBank with a reported $5.2 billion net worth.

China Creates Its Own Digital Currency, a First for Major Economy from The Wall Street Journal – This is going to be the most important trend of the decade, the launch of sovereign digital currencies, and China has an impressive head start.

PayPal is building a ‘super app.’ Should banks be worried? from American Banker – Great in-depth piece by Kevin Wack on the fintech behemoth that PayPal has become with a vast array of banking services.

Afterpay, Adyen Team On Installment Payments from PYMNTS.com – Global payments platform Adyen has team up the Afterpay to offer their four installment payment option in the U.S., U.K, Canada, Australia and New Zealand.

Avant completes acquisition of Zero Financial from FinLedger – Avant is boosting their digital banking offerings with the acquisition of Zero Financial and their Level banking app.

Podcast 293: Atif Siddiqi of Branch

The CEO and founder of Branch discusses the burgeoning area of employer-led financial services for employees and how it can have a real impact on financial health

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The employer-employee relationship is undergoing a shift. We are moving away from the days where an employer provided a paycheck and just a handful of benefits like health insurance and retirement plans. Employers are starting to think more holistically about their employees’ financial health. There is a realization that employees who are not financially stressed are more effective and that employers can really be a driver for change in this area.

Our next guest on the Fintech One•On•One podcast is Atif Siddiqi, the founder and CEO of Branch. They are at the forefront in this movement of employer-led financial services for employees.

In this podcast you will learn:

  • The problems that Atif identified that led to the founding of Branch.
  • What hourly workers need most today.
  • How Branch’s earned wage access offering works.
  • How they are able to directly connect to employers.
  • The way Branch makes money while offering free earned wage access.
  • Why they have a holistic approach when working with employers.
  • How they are working with Domino’s franchisees.
  • Why employee reimbursement is a pain point for employers.
  • The bank partner and debit card issuer they are using.
  • How Atif sees embedded finance playing out.
  • What it will take to move from the traditional pay cycle to on-demand pay.
  • Atif’s view on the CFPB advisory opinion about earned wage access.
  • How they are approaching financial literacy and education.
  • Their thoughts on offering a credit product down the road.
  • Atif’s vision for the future of Branch.

This episode of the Fintech One on One Podcast is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking.

Download a PDF of the transcription of Podcast 293 – Atif Siddiqi.

Click to Read Podcast Transcription (Full Text Version) Below

Welcome to the Fintech One-on-One Podcast, formerly the Lend Academy Podcast, Episode No. 293. This is your host, Peter Renton, Co-Founder and Chairman of LendIt Fintech.

(music)

Today’s episode is brought to you by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th featuring many of the biggest names in fintech. We’ll have the CEOs of Afterpay, Figure, Brex, Varo, Dave, Finicity, just to name a few, as well as many leaders from traditional finance. LendIt’s 2020 event was also held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021, so join the fintech community at LendIt Fintech USA where you’ll meet the people who matter, learn from the experts and get business done. Sign-up today at lendit.com/usa

Peter Renton: Today on the show, I am delighted to welcome Atif Siddiqi, he is the Founder and CEO of Branch. Now, Branch is a really interesting company. I got to know them as an Earned Wage Access- type company, but they’re doing a lot more than that these days which we get into in some depth on the show. They’re really focused on employer to employee payments and everything that that might involve, including Earned Wage Access. 

There’s many other things, they have a digital wallet, a debit card and that sort of thing that really help with that employer/employee relationship and making it digital and helping people who don’t have a bank account and lots of things so we talk about that. We also talk about the whole payroll system that we have today and we talk about embedded finance, we talk about financial literacy, regulation and much more. It was a fascinating interview, we hope you enjoy the show.

Welcome to the podcast, Atif!

Atif Siddiqi: Thanks for having me.

Peter: My pleasure. So, let’s get started by giving the listeners a little bit of background. You’ve had an interesting career before Branch, why don’t you give the listeners some of the highlights.

Atif: Definitely. You know, I’ve worked in and out of startups and product base roles before Branch and I found myself as an Entrepreneur in Residence at Idealab. For the listeners who don’t know Idealab, it’s a technology incubator studio in Pasadena, California and that’s where Branch was started. I started Branch really just drawing from my own experiences working as an hourly worker many decades ago (Peter laughs), but the idea behind Branch was really how do we help hourly employees grow financially. 

And so when we set out to solve this problem, initially, we landed on a use case of helping them earn additional income by picking up available shifts at their employer. I think about, you know, halfway through that journey, we just kept on packing what’s the real problem our end users are facing and that’s when we discovered sort of a slew of financial challenges they were facing. You know, they were looking for more income because their income was very volatile, it was very variable each week as their hours fluctuated. 

In addition to that, they had little or no access to credit, no savings and looking at our relationship we have with their employer, you know, we were connected to a lot of interesting employment data about these users that we felt that we could provide them more fairly priced, transparent financial services by leveraging that data and that’s where you find Branch today. It’s an employer-led financial services available to employees.

Peter: So then, I read somewhere that you actually started out as a messaging app, I mean, what was the thinking behind that?

Atif: Yeah. So, when you looked at this idea, again, what we initially sought out was to pick up additional shifts. A big part of that was coordinating shift swapping with other employees. There was a level of, you know, coordination that we needed to take place so we created Branch as a sort of workplace network where you can kind of negotiate these trades or swaps, if you will, with other employees. So, that’s where the whole messaging component came and we since then dropped messaging once we kind of made a movement to financial services.

Peter: Right, right. And we’ll get into… I know you’ve got a suite of offerings which we’ll get into in just a minute, but I want to maybe just set the stage for the conversation and talk about hourly workers. They obviously have more options than they’ve had in the past when it comes to technology and financial services, that sort of thing, but what do you say is the…what do they need most today?

Atif: Yeah. I think what workers are really looking for today is flexibility when it comes to their work and their financial lives and really just ways to find greater financial stability. You know, ultimately, they also wanted technology that’s focused on their needs and that was just really easy to use and so, at Branch, this allowed us to really focus on addressing their financial needs through wage tracking, through Earned Wage Access which I am sure we will get into and eventually, better financial services which included fee per banking and a debit card they can use.

Peter: Yeah. Let’s talk about Earned Wage Access because it seems like you made a name for yourself in that space, I know you’re doing a lot more so explain how your particular version of Earned Wage Access works.

Atif: Yeah. You know, part of the belief behind Earned Wage Access, you know, is that we can help accelerate payments to employees that have already earned as a way to help them grow financially so you’re not getting it fees all square. And so, the way we approach the solution is by working directly with their employer and by doing so, we can get their official time and attendance records so we know when they showed up to work. We can get the amount that they were supposed to get paid either on an hourly basis so we can calculate exactly how much was earned and with those two pieces of data we really can give up to about 50% of their wages that they’ve earned ahead of their pay cycle. 

And I think the important thing is that, you know, we’re able to do this, push those funds to these employees for free. In fact, we were the first provider in the space to do this for free because we really wanted to align our interest and our business model, quite frankly, to the interest of the user and so we push it all to the digital wallet where they can use the funds on our debit card or push it out to, you know, another institution. 

The other important piece to call out to is that, you know, the way we collect funds back, of anything that was advanced to the employee, is through a payroll deduction and so the employers simply make a deduction on employee’s paycheck, it’s very transparent to the employee and we get repaid that way.

Peter: Right, right, okay, So then, I presume you have like….you’ve got to have some sort of connection to the employer, right. Is it like a direct API access where it’s real-time or how does it work?

Atif: Yeah. Initially when we started off, it was a series of files that would get processed back and forth. But, recently, you know, we’ve announced the launch of our Employers Payment Platform and have really taken a platform approach to this. And so, have opened up our APIs so that we can hook directly into the systems of record to gather the information, also process deductions and …..you know, I think one of the things that’s unique is the way we’ve approached this through a platform is we that can also embed part of our offering into other applications. 

So, you know, say you’re an on-demand delivery company and you have the application that your workers interact with fairly frequently, they pick out shifts and they deliver items so we can set right there in that application if you wanted to access, for example, an advance, things like that. So, we can do that through open APIs and also, recently, we’ve created a very “low code no code” widget so if you don’t want to take a harder technical approach, you can also just embed it into the other applications using these widgets that we’ve created.

Peter: Right, interesting, that’s super interesting. So then, as far as Earned Wage Access, do you charge the employer then if you’re putting that program in place. Obviously, you said you’re not charging the employee at all, so what’s the revenue model for Earned Wage Access?

Atif: Yeah. So, the great thing about our solution and kind of what we’ve created with this digital wallet is it’s free to not only the employee, but also the employer. We make money anytime the employee uses our debit card, we make interchange revenue from the merchant so they go out and spend at Starbucks, Starbucks pays us a small fee as part of the interchange revenue. 

You know, in addition to that, we do also have a small fee if the employee does a debit card to debit card transfer, very similar to, you know, Venmo wallet or CashApp wallet, but we also provide an ACH option for free if they want to wait a couple of days to transfer to another external bank account.

Peter: Okay, okay, that’s interesting. So then, I’m curious, I’m looking at your website over here and you really lead with, you know, employer to employee payments and, obviously, that’s primarily wages, but it’s also going to be reimbursements, that sort of thing and then you talk about accelerating pay and digital banking to empower the workers. So, it seems to me that you go-to-market these days is this more broader digital banking/digital wallet offering, is that fair to say?

Atif: Yeah. I think, you know, we’ve really looked at, again, ways to help employees improve financially, rather holistically and, you know, one of the things we found were a lot of these employees were paying just all kinds of fees to their existing instant banking institutions, be it in the form of overdraft fees, monthly minimum fees, and so we felt that if we can eliminate that, that’s putting money back in the hands of the employees that they can use. 

And so, we’ve created…really at the core of the product is our wallet that is effectively a fee free checking account that comes with the debit card that they can use as a way to do that. The other thing I mentioned earlier with that, the great thing about the wallet is it allows us to push money to that wallet for free.

Peter: Right, right. So then, you said a basically free checking account, does that mean employees can actually get their pay into a branch wallet directly? 

Atif: Yeah. And I would say, you know, one of the growing use cases we see from employers is the need to remove paper checks, right. 

Peter: Right.

Atif: Imagine, in some of the industries we work in like quick service restaurants and retail, there’s still a significant portion of their employee population that’s still receiving paper checks and then they go to a Walmart or a Kroger and spend money to go deposit it. And so what we do is we can remove that cost from the employer, but also a way better experience for the employee by getting their direct deposit directly into a Branch account. 

In addition to that too, you know, just looking outside of Earned Wage Access you can track deposits, but, you know, a growing use case for us is it’s also been digital tips. You know, one the things that we saw, probably I would say post pandemic, is that there just was not a lot of cash at the end of the day to tip out employees and so employees were having to wait for their paychecks to receive those tips or you would have managers scrambling to an ATM after the shift to get ….

Peter: Oh, Jeez.

Atif: ….it’s actually what happens so, you know, we actually started working with a lot of Domino’s franchisees to launch this solution where they provide us the data, how much the employee needed to tip out and we can push that instantly to their branch wallet as soon as that shift is complete and have access to that money instantly.

Peter: Right, right, that’s interesting. I can see that cash-based businesses are……you know, there’s a lot of resistance to that kind of thing now and it makes sense to have it digitally, that’s for sure. So, are there other kinds of services for employers that you haven’t mentioned yet that you’re also offering?

Atif: Yeah. In addition to the tips, there’s also reimbursement of expenses, you know, especially if you’re a delivery driver, you’re getting reimbursed for your mileage expenses, we can push that. You know, going back to this idea of paper check replacement, one of the areas we’ve seen, the wallet and our banking offering is really strong too, is really just offering an alternative to fee laden pay cards so kind of the solution…if they are sending a paper check for like an unbanked employees that they are providing them a Pay Card and these Pay Cards they’re tied into the payroll system, but, typically they have all sorts of fees, not just for the employer but also for the employee. And so, we’re able to walk-into an employer, really offer Branches as an alternative that really just provides their employees with this modern banking solution that really consumers have come to expect.

Peter: So, the Pay Card…like you’re talking about your own debit card and digital wallet, right, as a replacement for their Pay Card?

Atif: That’s correct, yeah. You know, some of the unique things that we’ve done with our employer payment platform is have the seamlessly integrated into their payroll system. So, you know, one of the recent payroll companies we announced we’re working with is Rippling, fast growing payroll company and they have this need, their customer were demanding, you know, Pay Cards solve so they turned to our solution and because we can embed our offering directly into the payroll administrator’s interface in the Rippling platform so that when an employee joins first day, they don’t have a bank account, they can spin up a Branch bank account from the Rippling interface, give the employee a card and know that their direct deposit will be deposited in as soon as their first payroll runs.

Peter: Right, that’s a great service. I can see that from the people who don’t have a bank account. So then, how are you managing this? Obviously, you must be working with bank partners to do this, can you just share a little bit about how you’ve gone about that?

Atif: Yeah. You know, our bank partner is evolving in Evolve Bank & Trust, great partners for us and, yeah, it’s a typical banking relationship like most fintechs have. In addition to that, our debit card issuer is Marqeta; they both have been great partners for us.

Peter: Okay. So then, I want to go back and talk a little bit about the…..you mentioned Domino’s and I want to talk about this sort of embedded finance piece that I find just endlessly fascinating. Clearly, you are sort of on the cutting edge here, what do you see as….I mean, is this sort of the way of the future where you’re not going to have like this full stack kind of partnership with an employer that might just take little bits and pieces and bolting it into their own offerings. I mean, maybe talk about how you see that playing out.

Atif: Yeah. You know, it’s definitely what you said where they’re looking for a payments capabilities, but maybe core to their DNA is not a payments company and so they are looking for partners like Branch that are able to take our offering and embedded it into their solutions, especially if it’s…more of the things we’re seeing in the trend is they already have an application that their employees interact with frequently, it makes a lot of sense. 

It’s a very frictionless, seamless experience for the employee, you know, you get good adoption in the use case or problem that you’re trying to solve. So, we see this a lot, especially in 1099 companies or companies in sort of the on-demand, space where, you know, they have an application that their workers are already interacting with and they want to unlock capabilities like providing faster payments, Earned Wage Access and so they want this idea of a wallet embedded into their own solution where they can seamlessly push that money for free to the employee, you know, right after they complete a job or a gig.

Peter: Right, right. So, do you think……I mean, I’ve asked this previous guests and I would love to get your take on…..I mean, we seem to be in this transition period where for the last decades, many, many decades, we’ve always been on this fixed pay cycle, whether it’s every two weeks, twice a month or monthly or weekly, and that has been fixed and that’s the way you get paid. 

We’ve seen it in the gig economy, I know that there are Uber drivers out there that are getting paid multiple times a day and it just seems to me that anybody should be able to choose when they get paid. I mean, it feels like the software to do that is pretty trivial, relatively speaking, so to make it happen on-demand, what are your thoughts on this? It seems that we’re almost there to be able to say everyone gets paid on-demand, how do you see that playing out?

Atif: Yeah. I think there’s a couple of components to this like what would accelerate I guess adoption, if you will, of on-demand pay. One is just, you know, we work for the employers, a lot of what we do is educating them on how the system works or how it does not change their payroll process, right, it’s a big concern that might come up. 

The other is how it’s actually beneficial for employees. You know, oftentimes employers might think that it’ll put them in a worse financial situation, if you will, by receiving their pay on a daily basis as opposed to waiting maybe a week or two weeks, and what we found is that it is actually empowering workers and it allows them to make better decisions financially so they don’t have to decide between, you know, paying a late fee on a bill or juggling another fee like an overdraft fee on one end and so there is that component to it too. 

There’s also this idea I think of really making…. kind of along the same lines of, you know, not changing the payroll process is really just making it easy, it goes back to the embedding, easy to consume and embed into the existing applications and so things like having open APIs, these widgets that I just discussed all make that a reality to not change a whole lot and just create a frictionless experience.

Peter: Do you think then we’re still going to stick with this fixed kind of pay period where everything kind of gets processed and taxes go out and 401k’s and what have you, but people still take their net pay and they will be able to earn that whenever?

Atif: Yeah. I do think there is a lot of sort of related infrastructure in place even beyond pay, you mentioned taxes and some of the other…and so, you know, ultimately, if there’s something easy to consume doesn’t change up a lot of the process that, you know, it can offer a good….solve their…would accelerate their move to an on-demand payroll.

Peter: Right, right, okay. So, I’d love to get your take on the regulatory landscape, shall we say. I mean, there was some movement around Earned Wage Access last year, I mean, it sounds like the CFPB basically issued, I’m not exactly sure what they call it, a ruling or whatever that…..an employer-based approach to Earned Wage Access is really the right way to go, it sounds like that’s what your approach is well, but tell us a little bit about how you’re engaging in Washington and what are you seeing there that’s really impacting your business.

Atif: Yeah. You know, we’re engaging with regulators including the CFPB there to ensure the products that we’re creating are working to the interest of our users, first and foremost. Yeah, with regards to the advisory opinion, I think we’re excited that it aligns well within our model which, you know, we had established well a year before the opinion was published. And, quite frankly, it brings a lot of like clarity to the Earned Wage Access space, in particular, how employer-based advances are interpreted from a legal perspective so we welcome clarity from regulators like that. 

You know, I think one of the things that align well with our ethos here at Branch was the call out for the fee-free approach to Early Wage Access, you know, not having employees pay to just access their own wages. The other is the employer-based model and also using deductions to facilitate the repayment and making sure that, you know, the calculations are based upon time actually worked to ensure providing just wages there. But, yeah, I think the move for regulators to take an interest to the positive for the space and hopefully, just brings more clarity so employers are debating if they should offer this given some more guidance.

Peter: Right, right, right. And I want to talk about financial literacy and education. You know, I think I read somewhere that you have some programs on that. It’s a hard space because what most people don’t want to learn about is finance, they want to be financially stable, but they don’t really want to learn about finance so how are you approaching that?

Atif: Yeah. I think for us, first and foremost, it’s just making it clear on fees that employees are receiving at other financial services that they might be using and just being transparent about that. You know, the other part is providing content to our users that they’re interested in and so some of the content that’s been really resonating with our users is around building credit. 

You know, as I mentioned earlier, most of these users have little or no access to credit so they want to figure out ways they can build traditional credit to get access to other mainstream financial products. The others are debt reduction, I mean, always looking for ways for this and finally, boosting savings or putting money aside and getting into the habit of that. You know, we look at some of our content too as a way to inform our product road map, you know, the content that they’re reading and that’s resonating really informs about other products and services around financial wellness that we’re looking to offer.

Peter:  Right, right. You mentioned credit there and obviously, Earned Wage Access is not really a credit product because it’s accessing your own receivable basically, are you thinking about offering a credit product or what are your thoughts on… the population that is using Branch obviously have credit needs. So, how are you thinking about that?

Atif: Yeah. We do know some of these population too, is just credit invisible, right, they don’t have a credit score, be it a new employee entering the workforce for the first time, an immigrant that, you know, maybe recently migrated to the United States and doesn’t have credit years. So, it’s very top of mind for us, not so much about the capital that they may need for credit, but what credit actually is important for them, getting access to other mainstream products. 

I mean, you know, credit scores is the difference between putting three months of rent deposit down as opposed to nothing, right, when you’re renting, but it’s about having to front a big deposit for your cell phone plan. So, we understand the need there and so we’re figuring out ways to do that in a secure and responsible way, right, that, again, is aligned with the interest of our users and doesn’t put them into any bad financial situation there.

Peter: Right, right, yeah, okay, that makes sense. So, when I look at your company it feels like to me you’re really a B2B company, but obviously a strong relationship with your end users, your consumers here, how are you getting the word out? Is this really…..are you focusing on B2B as a way to expand the business?

Atif: Yeah, we are. And, you know, what we’ve been able to do to get in front of the employers is really leverage the amazing partners we work with. I mentioned, we work with Rippling as a payroll partner, but others that we work with are like UKG, Servant Systems which is a big point-of-sales, credit service restaurants, ProPoint Solutions which is a salon point-of-sales system, Einstein HR, a payroll company, but really our partners are doing a lot of the education to their own customer base, it’s delivering a lot of additional value to their customers. So, it’s been a nice way to, yeah, get in front of the employers without a lot of lift done on our end individually.

Peter: What’s the process Like because, obviously, you’re also going to have people who move from employer to employer and say, I had my Branch deal with my last employer, I want the same deal, can you make sure you could get that? What’s involved in a new employer coming on?

Atif: Yeah. Well, yeah, that is, hopefully, a goal one day when we have enough employees out there in the world that they’re demanding Branch from their employer, but, yeah, in terms of the process for employers, if they’re interested, you know, there’s a consultation with our sales team and then really honing in on the problem they’re trying to solve, right. From there, it’s looking up into the data points that we need to solve that problem, be it a payroll system, a work force standard system, a point-of-sales system.

Peter: Okay, fair enough. So then, can you give us some sense of the scale you guys are at today, I mean, how long have you been going and where are you at today?

Atif: Yeah. I would say we launched our financial services back in 2019,  on the platform today hundreds of thousands of employees, several hundred companies and then really probably over the last year or so been expanding our partners from that footprint considerably. So, now we have exciting partners that are signing on, but the industries that we’re strong in are quick service restaurants, manufacturing, call centers, we work for the large call centers and continue to work on global solutions and also expanding into health care, as I mentioned, on-demand sort of 1099 companies.

Peter: Right, right, interesting, okay. So then, last question before we wrap, you’ve got this really solid base, it feels like to me, a core set of offerings that are really helpful, but what’s your vision for Branch. I mean, where do you hope to kind of take this company?

Atif: Hey, you know, when we look at sort of our B2B focus, we look to ourselves to become a leader in employer-based financial services and probably more important, create a product that our customers want and our customers include the employees, you know, employers, includes partners and to do that I think it’s consistently innovating and delivering value to all these constituents.

Peter: Okay. Well, Atif, we’ll have to leave it there. I really appreciate your coming on the show today and best of luck to you.

Atif: Thank you, Peter, thanks for having me.

Peter: Okay. See you.

You know, the way I see it, Branch is taking advantage of this trend. I believe this is a real secular trend that we’re seeing here in finance, that is, employers taking more responsibility for their employees’ financial health. A primary way to do that is to offer a suite of services that really help, like what we just talked about in this interview, not just providing maybe health insurance and retirement planning and obviously on pay, but providing more ways to sort of manage your finances. Obviously, the Earned Wage Access is one piece, but there’s many other things and I think we’re going to see ….really this decade, we’re going to go from having it be just sort of a peripheral thing to being absolute table stakes where every single major employer is going to have a suite of financial wellness kind of products and options for employees that will help them in their financial lives. 

I think there’s all sorts of studies that have been done that are….you know, a financially health employee is a more productive one, when people aren’t stressing about money, they can more focus on their work. I think employers now realize the responsibility they have is far more than just providing a pay check, it’s really providing the tools to help people with their financial lives.

Anyway on that note, I will sign off. I very much appreciate your listening and I’ll catch you next time. Bye.

(music)

Today’s episode was brought to you by Lendit Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th featuring many of the biggest names in fintech We will have the CEOs of Afterpay, Figure, Brex, Varo, Dave, Finicity, just to name a few, as well as many leaders from traditional finance. After a successful virtual event in 2020, LendIt is setting the bar even higher in 2021. So, join the fintech community at LendIt Fintech USA where you will meet the people who matter, learn from the experts and get business done. Sign up today at lendit.com/usa.

You can subscribe to the Fintech One on One Podcast via iTunes or Stitcher. To listen to this podcast episode there is an audio player directly below or you can download the MP3 file here.

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Caring Consumer Collections Policies Gain Traction

Economic woes tied to pandemic, brutal weather events shift thinking to model advocated two decades ago

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[Editor’s note: This is a guest post from Shaun O’Neill, President of Concord Servicing Corporation. Founded in 1988, Concord is a world-class financial technology company, delivering innovative, flexible, and scalable portfolio servicing solutions to meet the demands of loan originators and capital providers (and their customers) in multiple asset classes.]

A recommendation that collections and customer service “should be two sides of the same coin” is currently gaining momentum in the pandemic era. But this approach was advocated fully two decades ago by none other than LendIt’s own Peter Renton.

In a previous life he owned a printing company that sold products to credit departments and he had long advocated the need for consummate customer service. His key recommendations tied to bill-collection policies appeared in a January 2001 article in the prestigious Editor & Publisher magazine.

In part, his bylined article states: “In this dark morass actually lies a wonderful opportunity to turn debt collection into a customer-relationship-building program…this opens up the potential to generate some unexpected goodwill.”

The article continues: “…there’s a big payoff, literally and figuratively, for debt collectors who view themselves as customer-service representatives…Instead of a typical collection call, take the initiative to be empathic.”

To drive home the point about win-win, Renton suggests a discussion that asks the question: “What can we come up with together that will satisfy both of our cash-flow concerns? While you have the customer’s attention, attempt to extract a commitment from the customer to a mutually agreeable future payment framework.”

In a nutshell, this is how debt collection strategies are evolving now. Renton’s advice 20 years ago is spot on, and more important than ever.

A combination of economic woes triggered by the pandemic, and exacerbated by weather-related catastrophes, makes kinder, gentler, more understanding collection policies good for portfolio performance. They’re likely to generate more revenue than a hardline approach, plus there’s the benefit of building longevity and loyalty with customers who like, trust and respect their “bill collectors” instead of abhorring them.

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Top 10 Fintech News Stories for the Week Ending April 3, 2021

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We lead the news this week with announcements from both PayPal and Visa which will bring crypto closer to becoming a real payments tool. There are more digital banks launching, Plaid is close to a new round of financing and Affirm is getting into vacation financing. Here are what I consider to be the top 10 most important fintech news stories of the past week.

PayPal launches crypto checkout service from CNBC – The big knock on bitcoin has been that it never caught on as a form of payment. Now, PayPal is allowing its millions of U.S. consumers to use their crypto holdings to pay at any merchant that accepts PayPal.

Visa moves to allow payment settlements using cryptocurrency from Reuters – More good news for crypto enthusiasts as Visa said it will allow the use of cryptocurrency stable coin USD Coin to settle transactions on its network.

Where Goldman, Citi, JPMorgan are putting fintech investment dollars from American Banker – Interesting analysis from Penny Crosman that shows where the big banks are focusing their fintech equity investments.

Plaid Is Said Close to Financing at About $13 Billion Valuation from Bloomberg – We have heard this funding round was coming but there are more details on it now. It will be led by Altimeter Capital and will value Plaid at around $13 billion.

Walgreens to launch digital bank accounts this year from Banking Dive – Another big retailer is getting into digital banking with Walgreens announcing this week they will be launching bank accounts that will be available both online and in store through a partnership with MetaBank.

Laurel Road launches digital bank for doctors from Finextra – Laurel Road, now part of KeyBank, have launched a digital bank targeted at doctors as the verticalization of digital banking continues.

Fintech Uprising Will Define Post-Covid Banking from Bloomberg – The big fintech companies have been growing rapidly during the pandemic with quality mobile-first user experiences leaving banks in catch up mode.

Affirm Teams With Vacation Platform Vrbo from PYMNTS.com – Affirm is bringing its popular buy-now-pay-later model to vacations with a zero-interest financing offer valid for travel plans booked through April 11.

CFPB poised to reinstate tough stance on payday lenders from American Banker – We knew this was coming but even before a new CFPB chief is confirmed we see the acting Director saying they want to revert to the 2017 “ability to repay” rule for small dollar lenders.

2021 Google Search Trends in Digital Banking, Payments & Fintech from The Financial Brand – Fascinating research on trends in Google search. While it is no surprise that the term fintech is growing dramatically as a search term it was interesting that SoFi is the most searched for digital bank (ahead of Chime and Varo).

 

Podcast 292: Ken Rees of Covered Care

The CEO and co-founder of Covered Care talks about the challenges facing the non-prime consumer, what to do about it and why he wrote a book giving this population a voice

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The underserved are having a moment. And it is about time. There are more fintech companies targeting the non-prime community than ever before with better and less expensive products. The revolution in technology and data access is enabling fintech companies to go deeper into the underserved population than ever before.

Our next guest on the Fintech One•On•One podcast is Ken Rees, the co-founder and CEO of Covered Care, a patient financing provider for the non-prime. Ken has spent the past two decades focused on this population and he has gathered his thoughts in the new book, Teetering. His insights paint a clear picture of the challenges of those living paycheck to paycheck and what we can do about it. Ken was last on the show back in 2017 when we was CEO of Elevate.

In this podcast you will learn:

  • Why Ken decided to leave Elevate.
  • The founding story of Covered Care.
  • What the options are for non-prime consumers seeking medical loans.
  • Why they decided on a b-to-b approach.
  • The different types of technologies they are using.
  • The four different healthcare verticals they work in today.
  • The typical loan terms they offer.
  • How they are able to serve non-prime customers and top out at a 20% APR.
  • How they are getting the word out to the healthcare providers.
  • Why Ken decided to write his new book.
  • Who are the “tightropers” that are featured the book.
  • Why the middle class has been hollowed out in the this country.
  • What it will take to create a killer app for this population.
  • What the shift from debt to equity means.
  • The areas the government should be focused on to help these people.
  • Ken’s views on whether we will make a dent in this problem this decade.

This episode of the Fintech One on One Podcast is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking.

Download a PDF of the transcription of Podcast 292 – Ken Rees.

Click to Read Podcast Transcription (Full Text Version) Below

FINTECH ONE-ON-ONE PODCAST 292-KEN REES

Welcome to the Fintech One-on-One Podcast, formerly the Lend Academy Podcast, Episode No. 292. This is your host, Peter Renton, Chairman and Co-Founder of LendIt Fintech.

(music)

Today’s episode is brought to you by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th featuring many of the biggest names in fintech. We’ll have the CEOs of Afterpay, Figure, Brex, Varo, Dave, Finicity, just to name a few as well as many leaders from traditional finance. LendIt’s 2020 event was also held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021, so join the fintech community at LendIt Fintech USA where you’ll meet the people who matter, learn from the experts and get business done. Sign-up today at lendit.com/usa

Peter Renton: Today on the show, I’m delighted to welcome back Ken Rees, he is the CEO and Co-Founder of Covered Care and he’s also the author of the new book “Teetering” which we get into in some depth. We also talk about his new company, Covered Care, which is really providing financing for elective medical through the medical provider, really interesting company, got some very interesting ways of underwriting and operating which we talk about. 

We also get Ken’s perspective on this underserved population that he calls “tightropers,” that’s from his book and we talk about their challenges and what really can be done to help them. It was a really fascinating episode, hope you enjoy the show.

Welcome back to the podcast, Ken!

Ken Rees: Thanks, Peter.

Peter: So, let’s just kick things off. When we had you last on the show when you were the CEO of Elevate and so we’d love to get the listeners caught up, you know, what you’ve been doing the last few years.

Ken: Well, you know, I took Elevate public in 2017 and that I think would be a great example of be careful what you ask for. Being a CEO of a public company is a very different thing from the fast-paced entrepreneurial world that I was used to before, you know, always been an innovator and boy, you start to slow things down quite a bit as a public company CEO. So, I stepped down with the recognition that there’s more innovation needed in the space, in particular, the space than I’m passionate about which is serving non-prime consumers in the US and nationally as well.

Peter: So then, maybe we could talk about the genesis of your new venture, it’s called Covered Care, what was the founding story there, why did you decide to start it?

Ken: So, we all know that non-prime Americans still suffer from four options, you know. The fintech community and the world of fintech innovation has been tremendously productive to provide better and better solutions for prime customers, but it really hasn’t had the big impact on the broader US, you know, sort of economic situation which is defined by income instability and lack of savings. So, as I began to understand or think about what I want to do next, it was really…I knew it was going to be about providing a new and better solution for Americans and get them the credit they need and what we identified. 

The big, obvious opportunity was around patient financing so consumers that need healthcare, whether it’s elective healthcare like lasik or getting their teeth straightened or general dentistry. What we realized was there’s great prime solutions, you have bank companies Care Credit and Affirm or an Ally, but then you’ve also got fintechs like Affirm and GreenSky that have really like come in and provided great patient financing solutions. 

But, if you don’t have at least a 640 credit score, they’ll typically decline you. And so, over half the people that need patient financing don’t get it and the numbers are fantastic. The numbers, you know, $400 Billion in out-of-pocket healthcare spend annually for Americans, obviously, a large percentage of that coming from financing and about half of that being difficult to provide because customers don’t have the credit scores that the prime finances are looking for. 

So, what we decided to do, let’s find a way to have low rates, let’s find a way to have an easy application process that fits in seamlessly with what the healthcare providers are doing in their offices and let’s make sure we approve almost everybody. So, that’s what we’ve done, growing very quickly right now, we’ve got a $100 Million line from Fortress, another $100 Million line that we just landed and we’re seeing terrific growth as we……you know, north of 85% approval rates on customers that everybody else is declining.

Peter: So, what are the options, like before you started Covered Care, for those…..if you’ve got a less than 640 FICO and you’ve got a dental emergency and it’s going to cost you $2,500, what have been the options for people?

Ken: Well, a lot of people are just told, sorry, you’re going to have to leave the office and come back when you found some money, you know, go find a payday loan or a title loan or something like that to get their teeth fixed. I mean, it’s really a pretty horrific situation. Some healthcare providers have stepped in and offered in-house patient financing, they just keep these loans on their books, but, you know, healthcare professionals don’t know how to underwrite, they’re not in the business of collecting on their customers so that was a bad situation for them. 

So, we’ve been really able to come in and in a lot of ways we’re providing to all of the three components here in my mind, the customers themselves because they can get approved right away with rates that are less than credit card rates and very flexible terms that are paid out over time. The healthcare providers don’t have to do any sort of in-house financing programs, they can get their customers approved and they can grow their businesses because at least one of our larger accounts generating about 30% of their overall traffic comes from our financing program so we are a big piece of their growth story. 

And then, we also work well with the prime providers because they, of course, get beaten up all the time, “why aren’t you approving more customers?” And by partnering with them, you know, like Care Credit and GreenSky and others, we can help them be able to make sure that there’s a full A to Z credit solution in the healthcare clients that they serve. So, it’s really been a nice product to sell because we’re not really competing against many people. Providers that are doing it aren’t, you know, using the kind of technology and analytics that we use, they’re not looking for the kind of high approval rate programs and oftentimes their APRs are quite a bit higher than ours.

Peter: Right, right. So then, how does it work? Is this a consumer-facing product, you’re going through the medical practices themselves or is there a combo?

Ken: Yeah. We work through the medical providers. So, in one case we have a….there’s a telehealth provider, actually a fantastic company called Bite, one of the fastest growing companies in the US and that just sold their business for a billion dollars. They send the customers directly to us from their call center, it only takes a couple of minutes to get approved by us, we take a small down payment, set the customer up, they sign an agreement and then we fund the healthcare provider directly so very seamlessly integrated into their offerings. We, of course, pay them back saying, yes, the customer is approved, you can go ahead with the service. And in branch locations there are similar situations where it’s interfaced directly from a branch system into ours.

Peter: So, you’re not …..like are you putting in technology into the practice themselves or is this just a web-based thing, I mean, it sounds like there’s, you know, a call center as well, what’s the technology you’re using?

Ken: One of the things in the healthcare world, there’s so many different variants of different types of technologies so we have everything from a full API integration offering and that’s what big telehealth providers do, they just ping us with the customer PII, sets up a pre-populated landing page, the customer basically pushes one button to say, I want this credit. They then give us a payment instrument or down payment and they e-sign the credit docs, we send back by API the authorization to fund that customer’s healthcare procedure so that’s all fully automated within branch locations.

Typically, we have a branch portal that the branch staff can use to do essentially the same thing, initiate that transaction. We then ping the customer directly with a text and email and they fill out the application and then, again, we send the authorization back to the healthcare practitioner. So, there’s no paperwork required, just takes a minute or two and it’s all integrated into the healthcare provider, either through API or through this branch portal.

Peter: Right. And then, are you also working with like the high deductible crowd where they’ve got a procedure, like just get the name of a doctor, are you working with that as well or is it really more of the dental elective type place?

Ken: Right now, it’s primarily elective so four target verticals are dental, audiology/hearing aids, ophthalmology like lasik and the med spa arena as well.

Peter: Okay.

Ken: We think this is a …I mean, we internally look at a company like Affirm and say, wow, Affirm figured out how to serve a whole lot of different industries, but, you know, they’re serving just the top end of all the customers in all these industries and we sort of feel that this company is, ultimately, an Affirm for the rest of us. So, as we learn more about the elective health care procedures while moving to broader healthcare and eventually outside of healthcare as well.

Peter: Okay. So, let’s talk about the loans themselves, what’s the typical dollar amounts, interest rates, loan terms, that sort of thing.

Ken: Yeah. So, the loan terms are all sub-credit card rates, we cap out at 20%, but we have plenty of customers that we’ve worked with to have a sub-10% APR as well, typically about a two-year repayment term and typically we get somewhere between a 5 and 15% down payment as well. So, these are very much market rate credits, very flexible for the consumer, but we do things, of course, from our perspective. 

We’re serving non-prime customers and our customers are defined by income instability and lack of savings so we build a lot of flexibility into how the customers can push out payments, you know, restructure their loans over time and that’s one of the things that prime lenders and people that have a more traditional experience in credit don’t get. This is a customer that will pay their loan, but it might take a little longer and it may be a little bit more bunched up where they can pay let’s say around tax time they can pay extra. In other parts of the year, maybe they’ve got a reduction in income, they may not be able to pay as much so one of the things we have really built into our platforms because that’s where flexibility for payment….it’s essential for preserving the underserved consumers in the US.

Peter: Right, right and maybe that’s part of it. I want to dig in….you said that you approve around 85% of your customers, these are non-prime customers and you say you top out at 20%. I’m sure there are some listeners that are thinking, hang on, this doesn’t really add up, it’s an unsecured loan. Tell us a little bit about the technology, the data, underwriting, how are you able to offer these loans at such low rates?

Ken: You know, Peter, in my experience…I’ve got 20 years of experience in non-prime financial services in the US and in the UK. My last company, I served 2.5 million Americans with over $8 Million worth of credit and that was a very tough situation because we were pushing money to them for whatever needs they had directly into their bank account. This business has a lot of things going for it, one is there’s just really not a lot of true intent to defraud you, I mean, not a whole lot of people are trying to fix their teeth in a fraudulent fashion (laughs)……

Peter: Right.

Ken: ….they’re actually using services so that’s a big, big plus. The other plus is, you know, we are able to get multiple payment instruments so we’re doing some things I was never able to do before. We underwrite both the customer and the payment instruments that they provide so we’re really able to provide interesting things. One thing to mention, you know, my partner is Tim Ranney who founded and grew Clarity Credit, the number one subprime credit bureau which was sold to Experian so the two of us have spent the last 20 years doing nothing but serving and underwriting and understanding non-prime consumers. 

We’ve got a pretty unique and successful perspective around how to do that and not just in a way that we’re just looking to skim off the cream, what we think the real need is to find ways to underwrite almost everybody. So, the way we’ve made that work economically yes, there’s the APR to the customers, there is the down payment and some level of evaluation of credit instruments in that and then there’s also a discount to the healthcare provider so there’s a small discount as well. So, you add those things up and we have found a way to make that work with that sort of high approval rate.

Peter: Yeah. I mean, that’s truly interesting. We’ve had Tim on the show before, he created a pretty amazing company, I know that Experian has it now so the thing that I remember from him is he’s always looking for past trade credits that may not have been picked up by traditional credit bureaus. I presume that is part of your strategy here, is that correct?

Ken: Absolutely. I mean, the problem a lot of lenders have is even if they know how to underwrite deeper, their finance lines force them cut off at a, you know, predetermined FICO bands. We made it clear when working with first Fortress and then the most recent financing lines that we’re going to underwrite all the way down. In fact, you know, we do about …10 to 15% of our customers that we’re underwriting today are completely unscorable and actually performed great. 

To give you a sense of the type of customers that we’re serving, our biggest component, about 40+% of our customers have a 500 to 599 credit score so we’re definitely serving, you know, the deep non-prime. Actually, almost 20% are sub-500 so we’re definitely looking at that very deep level. And so, you’re exactly right, yes, we use traditional credit information, but we’re constantly, you know, digging into the type of information that Clarity collected on credit attributes that wouldn’t be typically collected by the Big Three and then also other things that we can determine including, as I mentioned, things like payment instruments that they’re providing to help us get that little bit more insight into the customers.

Peter: So, when did you write your first loan? It’s a fairly new company, right?

Ken: Yeah. We actually initially launched just before the pandemic……

Peter: Hah!

Ken: ….in February which was…..

Peter: Interesting time.

Ken: Yes. It takes me back to the first company I launched right after 9/11.  So I, obviously, have a terrible history of picking times and it was fascinating because we were going direct to consumer at that point, saw the market demand for traditional credit really dry up quickly and we quickly pivoted into the world of patient financing because that market….actually, the demand went up because now, more than ever, every healthcare provider understands every patient is critical. You can’t let patients come in and then not be able to provide that service to them so it ended up being actually great for us. We were live in August in the first healthcare practices and growing since then.

Peter: Right. That’s probably good because you….obviously, all elective procedures were….from March through May, there was really nothing happening, right, so you spend that time building up a business and then there’s been a big backlog because everyone was really ready to get going.

Ken: That’s right. Actually, our biggest client was, as I mentioned, into telehealth finance and they were doing teeth straightening. What they found was now, people were staying at home, they were on Zoom calls seeing that their teeth were not good (Peter laughs) and their demand skyrocketed. So, their demand helped our demand and now that COVID is hopefully looking like it’s in the rearview mirror. We’re now seeing tremendous demand from the brick and mortar healthcare providers which, as you said, have been in many cases shuttered for months and eager to start serving their customers again.

Peter: Right, right, I imagine. So, how are you getting the word out, you know, it sounds like you’re focusing on the providers, the healthcare providers, but how are you getting the word out there?

Ken: You never want to discount the sales process, but basically the sales process…so you walk in and say we can approve 85 to 90% of your declines and the customers will be treated very fairly with an APR that’s less than a credit card rate and the discount that you’d be charged for the service is going to be less than you pay for insurance. So, it’s been pretty straightforward and we’re really focused on the large providers right now. 

Of course, we’re at the stage of our development, you know, the temptation is always to extend a little bit too fast and I think we have the discipline to do this in the way that as we go from vertical to vertical, we can understand the unique needs to really build out a platform that supports the scale this business should see. I imagine, we look at this and then we see how the public health care spends in this country, $400 Billion. This is a very, very large need and we need to be built up to serve that kind of demand ultimately.

Peter: Right, right. Okay, I want to switch gears completely now and talk about your new book which you were kind enough to send me which was sort of a catalyst for our conversation today called “Teetering” and I’ll also link to it in the show notes. First question is, maybe we sort of step back and say, what’s the book about and then also say why write this book now?

Ken: Well, I will make the shameless plug that it was the number one hot new release in financial services, according to Amazon a couple of weeks ago.

Peter: Okay, okay.

Ken: You know, the problem is everybody likes to talk about the challenges facing Americans today. I mean, whether investors or entrepreneurs or policy makers, everybody understands the things they’ve heard of about Americans having less than $400 in savings in case of emergency, but they don’t really understand the custom. So, what I saw in all of these conversations were a lot of false narratives and so the focus really was about trying to provide true insights into the issues that drive financial instability in this country and what all of us can do to make a difference, whether we’re entrepreneurs or investors or we’re in Congress. 

We need to wake up to the fact that the US is very different from where it was, I mean, I actually got started in this business because of an odd conversation I had in a branch back when I was a consultant. The branch manager kept on complaining about the lobby trash and how that was a big problem and I finally realized he wasn’t talking about garbage, he was talking about people that were cashing checks in these branches and he called them lobby trash. 

It made me realize that people in traditional institutions that used to serve average Americans were pushing people out of the financial systems and, you know, I began to write a book, saw that happening in education, healthcare and other things as well. What I do in the book is highlight a lot of the stories, we used a lot of original research from the Center for the New Middle Class, which is the research institute I established in my last company, to get these facts out there, get the insights from actual customers and hopefully what this will do is give entrepreneurs, investors and policy makers a bit of a roadmap for how they can make a difference and in the case of the fintech community, how they can hopefully build some big and profitable businesses.

Peter: Right, right. As I was reading it over the weekend, it struck me it’s not really written for the people, the subject of the book, it seems like, it’s written for the other folks you said. Was that your intention all along?

Ken: Absolutely. This was meant to give a voice to the people that everybody talks about. There’s sort of a really interesting thing I’ve heard a lot, there’s this, if only they. I talked to a friend of mine, a very conservative guy and he would say, if only they saved more, there wouldn’t be a problem and I perhaps sort of explained well, you know, that’s easier said than done, right. 

And then if I talked to my friends on the left, they’re like. if only the government put in place, you know, minimum wage increases or unit protections and, again, that isn’t getting the answer either because those things typically accelerate the problem. I mean, the reason we have such a hollowed out middle class is really because the impact….technology disruptions and automation and globalization and the more you increase the cost of labor, the more you create more incentives to accelerate disruption and outsourcing and things like that. I am hoping this book can begin to provide a new narrative and a new insight so that people think about what we can do, you know, again, in the private sector and from a policy perspective. 

What I talked about is flatten the curve of income disruptions for average Americans that has an impact in the way we build financial services and has an impact in the way that we think about legislation to help people get through the financial upheavals that, you know, we saw in COVID 19, but are only going to accelerate going forward.

Peter: Right, right. And I know you call these people “tightropers” so maybe just talk a little bit…..defining them and just spend a minute or so just making sure that we all know who you’re talking about here.

Ken:  It’s very much average Americans, When we look back, 30/40 years, US had a great thriving working class and middle class defined by stability and the expectation of income growth. Now, however, all that’s been hollowed out because, as I mentioned, technology, disruptions and automation and then now AI which is leading to more and more job loss and job instability, more than anything else. And then, of course, outsourcing and globalization had a role as well so now, we’ve got north of 100 million American adults that are living paycheck to paycheck, they’re working, many of them supporting families, you know, house owners. 

This is very much the core of the US but as opposed to the core average American having an expectation that they’re going to be able to build up savings towards retirement. We have the average American living on a financial tightrope, always at risk of something hitting them, an unexpected expense or a change in income that will leave them in a rough position, either having to drain whatever little savings they have, having to go to a high cost lender or having to sell possessions and it’s something that is…..you know, I’ve seen over the past 20 years serving them. This has become more and more mainstream. 

You know, when I started my first business in 2001, I was serving kind of an outlier customer base and now I think we’ve all realized this is the new reality in the US. Between the Great Recession and COVID 19, I think we’ve all realized that this can impact a broad set of this country very quickly and we’ve got to be more aware of it and we’ve all got to kind of re-position ourselves to deal with the fact that we live in a fast moving, unstable country now.

Peter: Right, yeah. It’s interesting to me reading your book, it struck me that….you talk about this, there’s no real killer app yet for this population. I mean, there’s companies like Chime and Dave, MoneyLion, your old company, Elevate and others that are serving this population to some extent, but there’s no one place that has just dominated this group, why do you think that is?

Ken: It is hard, I mean, you know, when you’re trying to find financial products for a customer that you can almost guarantee will have some sort of financial hiccup between when you begin serving them and, you know, when they’re sort of finished with the product, that’s a head scratcher to most people, but I also think that’s exciting. These are the kind of markets that create really dominant leaders when people figure it out and I think you’re right, you know, the rise of the alt-bank has been really interesting. This is definitely…you know, companies that understand the fact that traditional players don’t get it and there’s clearly a demand for a new type of financial institution. 

I think the other things that are going on that are really interesting is what my friend, Ron Suber, who helped me with some of the thinking around the book, talks about the shift from debt to equity. When you have companies like Hometap that are basically, you know, taking an equity stake in a house with you as opposed to it being just a mortgage or a rise of income share agreements, you know, ISAs, where people are taking an equity investment in the person going to college as opposed to just saddling them with more and more debt. I think that’s the sort of thing we are going to see over time, the soft of innovation that the challenger banks are just getting started. They will be doing more interesting things than really just providing a checking account and I think some of the shifts from debt to equity have a lot of interesting upside for the future, I think.

Peter: Right, right. You also talk about the government’s role, you spent a chapter saying what they could do. They will be helpful, what they could do would be harmful and, you know, given the fact that we have a Democratic administration and Congress, at least for the next two years, they’ll want to be trying to be helpful, they will err on the side of trying, anyway, but maybe you could just sort of sketch out what are some of the things that you think the government should be doing to help these tightropers.

Ken:  As I said a little bit earlier, this concept of flattening the curve that we’ve all learned with COVID is exactly the way we need to be thinking about income instability. So, you know, there’s this…split the policy prescriptives that we’re currently seeing come out of Congress and the Executive wing into things that are sort of looking back and trying to artificially increase stability like increasing the minimum wage and union protections and things like that. I ultimately don’t think those are going to be a positive, if anything, as I said, I think they’re going to increase income instability because it’s going to provide more and more incentives for employers to find ways to automate or outsource. 

So, we’re going to end up with some customers making more money, but net net more unemployment, more upheavals. I think the things that the current executive orders are doing right though are things like extending unemployment benefits clearly makes sense. If you’re going to have more people that are going to have to migrate between jobs, let’s find a way to just smooth that process for them so protections against evictions make a lot of sense, protections against aggressive creditors makes sense. I think one of the areas we haven’t focused on, as a country, is helping people with tuition support for re-training. That makes to me a whole lot more sense than forgiving student debt, particularly in a lot of cases for people that haven’t gotten the full benefit of that student debt. 

So, I think if we can reorient around this, you know, core concept of income instability as being the driver of these sort of financial challenges facing so many Americans, it changes the way we think about the legislation and changes the way that we think about the best way to support people. I mean, Americans are incredibly resilient, that’s one of the things that I try to show in stories that I tell in the book “Teetering” is because they get it, you know, nobody is complaining, nobody has a “woe is me” attitude. You, definitely, get a sense of people taking ownership for the decisions they’ve made in their life, wanting to be able to move on when life changes, but they just need a helping hand and that’s really what I think we need to be focused on.

Peter: Right, right. Okay, we’re just about out of time, but one more question before I let you go. I really want to get your sense, you know, it feels to me we’re at an inflection point and I would love to get your perspective on this. We are at this point where the tools now are available, the data is more prevalent, we have this opportunity to really serve these “tightropers” as you call them in a much better way than we ever have before. Obviously, your own company is really focusing on this, but big picture then, do you feel like in reality this problem will be just as big at the end of this decade than it is now or will we really make serious headway?

Ken: You’re exactly right, the market here has never been bigger, right, and I think there’s more awareness of that than before and also the tools to serve that market has never been better between Plaid having, you know, online access to customers’ transactions, I mean, the sort of things that we can do to provide deep insights into how the customers are managing their financial life and helping them do this has never been better. 

But, you know, one of the challenges….you know, entrepreneurs tend to build products for themselves, one of my favorite ones is the…I hear over the years there’s always a new entrepreneur that’s found a way to serve the underserved, but when you dig into what they’re trying to do, it’s actually somebody who just graduated from Harvard, doesn’t have a job yet and needs credit until that happens, anybody can do that. 

I mean, that’s really not the kind of market we’re serving so I think it’s going to take a bit more humility to step back and understand, you know, who these underserved consumers are, but the market’s never been bigger and that’s a great thing about the fintech community. It’s incredibly, you know, resilient, it’s incredibly innovative and I think as some of these new tools, and I continue to think about Plaid and others, we will get there. 

I refer to the Tolstoy effect in terms of serving the underserved where Tolstoy had that great line when he says, you know, all happy families are the same, all unhappy families are unhappy for a different reason and that’s sort of like serving prime and non-prime customers, right. All prime customers are the same, they’ve got lots of credit history and a lot of stability, but in the world I serve and this world of 100 million American adults, it’s all very different.

And I think there’s a lot of different market opportunities to serve people who are new to the country versus people that maybe are overextended and recently went through let’s say a one-time upheaval in their life, let’s say a divorce or having a child or sending a child to college, getting them through that one-time disruption versus other people that are gig workers and really sort of managing lots of different income flows all at the same time. 

So, I don’t actually think of it as a single opportunity, I think the smart entrepreneurs are going to be the ones who are going to look at this as lots of different, very targeted opportunities and build killer programs and killer offerings to serve this unique, different types of needs in the non-prime space.

Peter: Okay. We’ll have to leave it there, Ken, I hope you’re right. I think it’s a fascinating time to be in fintech and a fascinating time to see all these new innovative offerings like your own that are coming to bear here. So, best of luck and thanks again for coming on the show, Ken.

Ken: Thanks, Peter, really enjoyed it.

Peter: Okay, see you.

You know, I agree, I think we’re at an inflection point right now where I think……I’ve had multiple conversations, probably five/six conversations, just in the last three months alone with entrepreneurs who are looking to serve this community that Ken talks about here, these “tightropers,” in new and innovative ways, in ways that reduce cost and I think that’s really….the fact that Ken and Covered Care are providing these people with really very reasonable rates for that population remains to be seen how successful they can be long term.

But, the fact that Ken and Tim Ranney, very experienced people, serving this population, they know how to price these loans and I’m confident that they’ve really hit on something here that’s going to make a tremendous difference. This is what people are pushing for and we want to be able to…you know, it’s expensive to be poor, we want to be able to get these people services and credit especially that is much cheaper than what it has been historically.

Anyway on that note, I will sign off. I very much appreciate your listening and I’ll catch you next time. Bye.

Today’s episode was brought to you by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th featuring many of the biggest names in fintech We will have the CEOs of Afterpay, Figure, Brex, Varo, Dave, Finicity, just to name a few, as well as many leaders from traditional finance. After a successful virtual event in 2020, LendIt is setting the bar even higher in 2021. So, join the fintech community at LendIt Fintech USA where you will meet the people who matter, learn from the experts and get business done. Sign up today at lendit.com/usa.

You can subscribe to the Fintech One on One Podcast via iTunes or Stitcher. To listen to this podcast episode there is an audio player directly below or you can download the MP3 file here.

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The Impact of NFTs on Fintech

We delve into the mysterious world of NFTs, how they work, their relationship with DeFi and what they could mean for fintech

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[Editor’s Note: This is an article by Devin Partida, the Editor-in-Chief of ReHack.com. Devin is a Fintech and crypto writer whose work has been featured on industry publications such as FinTech News, Due, the Swissborg blog and FinTech Insight.]

Non-fungible tokens (NFTs) are units of data associated with unique digital files, most commonly cryptographic assets on a blockchain. These files can be anything, but they’re often pieces of art, music or recordings of live performances.

These NFTs are traded on what are effectively online digital art markets, with records of ownership, bidding, and transfers stored on the blockchain. Blockchain is the digital ledger technology that supports cryptocurrencies, smart contracts, and other cutting-edge applications.

What has made these NFTs notable recently is the high values that some early tokens have sold for. In March, a digital trading card of Tom Brady sold for more than $1.3 million in Ethereum. Famous auction house Christie’s sold an NFT of a digital painting for more than $69.3 million.

Unlike tokens and coins, which are fungible, NFTs can’t be exchanged for one another. They all have their own values and code that makes them unique from each other and identifiable.

These NFTs have already had a major impact on the crypto space. Soon, they’re likely to have an impact on fintech (financial technology), both inside and outside crypto. But the transformative potential of the tech may be overshadowed by concerns about the security of crypto assets, and the impact that NFTs may have on the environment.

NFTs May Drive DeFi Innovations

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Top 10 Fintech News Stories for the Week Ending March 27, 2021

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We lead the news this week with Robinhood, as they finally announced plans to go public. Large funding rounds continued and the trend of fintechs applying for banking licenses continued. And, of course, we have SPAC news. Here are what I consider to be the top 10 most important fintech news stories of the past week.

Robinhood files confidentially to go public from TechCrunch – The long awaited Robinhood IPO is getting closer. The popular stock trading app filed confidentially for an IPO so soon we will learn their financials and other metrics.

Revolut submits draft application for U.S. bank charter from Reuters – Leading UK digital bank Revolut has been in the US now for a while and they have showed their commitment to this country (after pulling out from Canada) by applying for a banking license.

FT Partners closes $500m Spac from Finextra – FT Partners have helped several fintech companies with SPAC deals and now they have decided to create their own SPAC.

New York Regulator Finds No Fair Lending Violations on Apple Card Applications from The Wall Street Journal – You may remember the furore in late 2019 when several people, including Apple co-founder Steve Wozniak, complained that Goldman Sachs showed bias in their underwriting of the Apple Card. The NYDFS found no such thing.

Feedzai raises $200M at a $1B+ valuation for AI tools to fight financial fraud from TechCrunch – The biggest funding round announced this week was the $200 million Series D for Feedzai making it the latest fintech unicorn.

Global funds giant Fidelity joins the race for the first US bitcoin ETF from Business Insider – We have lost count of how many companies have filed applications with the SEC for a bitcoin ETF but this is the first one from an industry giant.

Upstart launches new offering to connect borrowers with banks from FinLedger – Upstart was in the news again this week with the launch of their Upstart Referral Network to better connect banks with personal loan borrowers.

America used to be behind on digital payments. Not any more from The Economist – With the growth of digital payments during the pandemic U.S. payments companies like PayPal, Square and Stripe are now world leaders with huge valuations to match.

Plaid accelerator announces inaugural cohort of fintech startups from TechCrunch – Plaid’s accelerator program, called FinRise, has chosen five fintech startups to join its first cohort.

In 2020 Fintechs Raised $44.4 Billion Venture Funding, A Record Amount Excluding Ant Group’s Big Raise in 2018: Research from Crowdfund Insider – Last year was a great year for fintechs looking to raise money, a record year in fact, as shown by the Pitchbook report.

Podcast 291: Lex Sokolin of ConsenSys

The Global Fintech Co-Head of ConsenSys talks DeFi and NFTs and what they mean for the future of finance

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You have probably heard the terms DeFi, which is an abbreviation for Decentralized Finance and NFTs, meaning Non-Fungible Tokens. They have been covered in the news a great deal in the past month or more. So, I wanted to do an episode where we do a deep dive into these topics to find out not just what they are but what they might mean for the future of finance.

My next guest on the Fintech One•On•One podcast has a front row seat to the changes we are seeing with DeFi and NFTs. Lex Sokolin is the Global Fintech Co-Head and the Chief Marketing Officer at ConsenSys, the leading blockchain technology software company that is building many of the tools for the next generation of financial infrastructure. Lex is also the author and publisher of the Fintech Blueprint newsletter and podcast.

In this podcast you will learn:

  • Lex’s circuitous journey to the blockchain world and ConsenSys.
  • How Lex defines Decentralized Finance.
  • Why people are flocking to DeFi today.
  • Why the next computing paradigm is programmable blockchains.
  • What to consider before getting started in DeFi.
  • How DeFi gives power and authority back to the users over their assets.
  • Ways to put your money to work in DeFi.
  • Why Lex thinks we are now over the hump in user experience for DeFi.
  • How many people are using the MetaMask wallet every month.
  • A detailed explanation of non-fungible tokens and why they are valuable.
  • Why NFTs allow artists and musicians to finally be paid fairly for their work (for a deeper dive listen to this episode of the Fintech Blueprint).
  • Lex’s perspective on Square’s acquisition of Tidal and what it means for NFTs.
  • The mistake of the last decade of fintech.
  • Why this is just the start of the creation of a completely new financial infrastructure.

This episode of the Fintech One on One Podcast is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking.

Download a PDF of the transcription of Podcast 291 – Lex Sokolin.

Click to Read Podcast Transcription (Full Text Version) Below

FINTECH ONE-ON-ONE PODCAST 291-LEX SOKOLIN

Welcome to the Fintech One-on-One Podcast, Episode 291. This is your host, Peter Renton, Chairman and Co-Founder of LendIt Fintech.

(music)

Today’s episode is brought to you by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th featuring many of the biggest names in fintech. We’ll have the CEOs of Afterpay, Figure, Brex, Varo, Dave, Finicity, just to name a few as well as many leaders from traditional finance. LendIt’s 2020 event was also held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021, so join the fintech community at LendIt Fintech USA where you’ll meet the people who matter, learn from the experts and get business done. Sign-up today at lendit.com/usa

Peter Renton: Today on the show, I am delighted to welcome Lex Sokolin, he is the Global Fintech Co-Head and the Chief Marketing Officer at ConsenSys. Now, this is quite the epic episode, it’s actually the longest episode I’ve ever recorded in 291 shows, but I didn’t want to edit it down because I feel like what we covered here is really important.

We’re talking about two of the hottest topics in fintech right now and that is Decentralized Finance or DeFi and Non-Fungible Tokens, NFTs. Now, we go into each of these in some depth, we provide examples of how to get started, what it really means for not just fintech, but for the broader economy and also, Lex provide his perspective on where he thinks these two really hot trends are going, It was a truly fascinating interview, hope you enjoy the show.

Welcome to the podcast, Lex!

Lex Sokolin: Thanks for having me, my pleasure.

Peter: Okay. So, let’s just started with giving the listeners a little bit of background about yourself and we were chatting earlier, you’re living in the UK, have been for many years. Why don’t you give us a little bit of background before you got to ConsenSys.

Lex: Sure. So, I’ve got a lot of New York in me, now a little bit of London and I also have a little bit of Moscow for sort of a secret agenda, you never know (Peter laughs), but I’ve kind of hit up different parts of the world, but really grew up in New York and considered that my home. New York has a gravity to it and so that gravity is Wall Street, as many immigrant kids got pulled towards Wall Street and so started out at Lehman Brothers and in 2006 in a strategy function for the Wealth Management asset management business. I kind of got trained up on an analytical skill set thinking about money and was very fortunate, I think, to have the crash happen very quickly.

Fortunate for two reasons, the first is it didn’t really affect me deeply, I was just an Analyst Associate, a couple of years out of school and then also, I didn’t miss it, I didn’t miss the experience of being in the 2008 crash. I think it was such a rich experience that many people who graduated in 2010 or 2015 or 2018 would benefit from seeing a real nice meltdown and everything. That gave me permission to separate from Wall Street and do my first startup around 2009/2010.

I was at Columbia at that time and so buffered myself with government loans, and it subsidized….robo advice discovery and kind of ideation so I started a company called NestEgg Wealth which was B2C robo, very quickly turned into a private label digital Wall platform which is now called AdvisorEngine. We raised about $50 Million from WisdomTree and sold to Franklin Templeton last year.

And so, I spent a chunky amount of time in digital wealth and kind of thinking about personal finance, how people hold assets, how they invest, why they do it, the behavioral bits around it and then sort of dove head first into the financial advisor value chain. And so, you start talking about data and custody and trading re-balancing and equities and fixed income and intermediation and the whole sort of machine, the whole factory of how actually the investing side of finance works.

Around 2016, I left the company and wanted to really look around and go deeper and joined an equity research firm called Autonomous Research to start their frontier technology kind of fintech practice and so….most of the work there was about yelling at hedge fund managers who allocate large checks to traditional financial services companies about how everything they’re doing is doomed, none of their investments will work and Google would have destroyed all of it. And so, it was good rhetorical practice because I feel like you can’t really persuade people using normal words in that environment.

The additional advantage of the work I did at Autonomous was basically three years of thinking across the industries, getting out of wealth to banking and lending and payments and insurance and seeing the same structural pattern repeat. There’s no difference between a wealth tech platform and a digital lending private label platform and a Banking-as-a-Service private label platform. And then if you melt that down to APIs, it’s all the same stuff underneath as well, in terms of just from a macro perspective of what it’s doing to the industry.

And then the other dimension is the actual things that are novel like the platform shifts that matter. And so, putting advisors or bankers or underwriters or carriers or whatever it is into a phone, that’s nice in a way so we did that. It’s over, there’s no point anymore in the sense of like it’ll continue to happen, but it’s not where the innovation is really bubbling up. And so, if you think about that as distribution, the question is what is left to do in finance and what hasn’t been done.

That’s really what’s taken me to blockchain and programmable blockchains as a theme, I think, is completely fundamental to what the financial services industry will look like. Sort of the punch line there is financial manufacturing, but let me pause before I go down the rabbit hole.

Peter: Okay. Lex, why don’t we go down for a little bit. Just tell us exactly what you do at ConsenSys?

Lex: So, I joined ConsenSys about two years ago now, I do a couple of things there with the main one being to co-lead our fintech group called ConsenSys Codefi which is a product development group responsible for building software products around digital assets to organization, decentralized finance, StableCoins, really you name it, the intersection between large financial institutions, B2C users of crypto networks, everything that relates to enabling these actors financially, helping them figure out how to use decentralized finance, helping them figure out what it means to have blockchain-based currencies, to have financial infrastructure. That’s something that we do at ConsenSys Codefi.

I also spent quite a bit of time leading the Marketing Team for the firm as a whole and then thinking about tokenization, token launches and economics for the sector. So, it’s a little bit of a war salad, but this is such a broad space and that’s why I’m really attracted to it.

Peter: Right, right. Let’s go right into it. I want to first talk about DeFi, Decentralized Finance, and I want to dig fairly deep in here, I’d love to get your take. Firstly, let’s just start with how do you define it, particularly for lay people.

Lex: It’s a lovely word, (Peter laughs), it’s a lovely word, Decentralized Finance, you know, is decentralized good, is decentralized bad, are you conservative or are you liberal or are you a libertarian or are you an anarchist? It’s a catchall phrase, the same way that fintech is a casual phrase. I think of it really as financial infrastructure that sits on programmable blockchains, but I am also a finance geek and kind of an industry insider and so I overcomplicate the answer.

The first flip that you want to do for DeFi is separate out the asset class so the thing that you invest in, the thing that you want to own, the token, the security, whatever it is, right. So, there are….like Bitcoin is an asset class, crypto currency is an asset class so within DeFi there are things that you can buy that represent exposure to something, let’s say to some economic activity so there is a bunch of assets there in DeFi. That’s largely why people are enjoying, flooding into it, it’s just to get access to the returns from projects, early stage venture style projects in DeFi.

The second related but different point is that DeFi is a financial middleware, it just happens to be correctly made. Like, I don’t know if this is a personal point of view or this is a ConsenSys point of view, but once you sort of grock that blockchains are where computing is going to happen, meaning, you know, we’ve gone from large warehouses doing computational work to personal computers to then laptops to then…..the Internet has Cloud and the Cloud runs programs and then your mobile phone is really your window into a gigantic Cloud and the Cloud executes the software and you access it through your phone and the next computing paradigm is we all run nodes of a network that agrees on a collective truth and executes software against it.

So, once you understand that the next computing paradigm is programmable blockchains, DeFi starts to make sense as just financial software on these programmable blockchains. And then, because, you know, programs speak to each other, they’re not written in different languages, they are not on paper, they are not across different standards and so you have fixed income and insurance and asset management and payments, all written in the same language and in the same standards, you know.

So, in the traditional world you would think of a card network like a Visa has almost nothing in common, in terms of its infrastructure, with private equity investment shop KKR which has nothing in common with the infrastructure of something like Tradeweb and Fixed Income Electronic Trading which has nothing in common with the value stack represented by InvestNet or AssetMark for portfolio management.

In Defi, it does, it’s all the same, it’s all just software and Etherium and it does all of these things across the different functions, you know, and you can look at a super app like Ant Financial and it is obvious that these functions are distributed together. Consumers use payments and lending and banking and savings and insurance together because no human being cares at all about the separation between these products unless you work for a regulator.

And now, from a manufacturing perspective, the factory that makes these financial products, they also now do not care at all what asset class they’re making, they’re just software on a computer. And so for me, you know, if I go back to the sort of break between there’s the asset class, the things that the factory makes and then there’s the factory itself, you know, I’m endlessly encouraged and motivated by the factory because it is the Google or Spotify moment for the financial industry right now.

Peter: Right, right, okay, So, let’s just talk about getting started in De-Fi. Over the last couple of months, I’ve sort of educated myself, I would say, a working knowledge about having a MetaMask wallet which is like, I believe, the ConsenSys made wallet and I’ve got an Aave account and a Compound account and also also own those tokens separately which is totally, obviously separate to what the DeFi investment is and I bought some DAI on Aave and Compound and a bunch of other things and I’ve been getting my returns coming in.

So, this is one aspect to DeFi which is the lending aspect and I am lending my DAI now to someone getting a return on it, but is that sort of ….there’s a lot of listeners who do not have anywhere near the knowledge that you have, is it smart sort of on-ramp to getting started in DeFi pretty typical or how do you recommend people to get started?

Lex: I think the first kind of conceptual shift that you need to make is because the space is now like an expanding fractile, it’s very complex at the edges and it’s only going to be more complex at the edges. Things don’t go back, they’ll go forward. I think the first step is just to understand what exactly is going on with blockchain-based finance before even going to pick a name and buy it. You can have Apple and GS and Bark and DB as stock names and, similarly, if you were to throw 500-letter acronyms from the S&P 500 at people, they’ll be like this is all nonsense.

That’s a reasonable reaction to when you see a print of DeFi tickers, but it’s no different than if you were to see a list of any other financial tickers. So, I think the first step is just like why is my experience so different here, what is going on, you know, and the analogy that I default to is this concept of the wallet. If you have a physical wallet in your pocket and there’s some cash in it, you walk around, there’s cash in your wallet, maybe there’s some cards in there, the cards do different stuff.

They might be loyalty cards or they might be credit cards, they might have your identity on there, you might have keys in your pocket as well so you’re walking around with this physical wallet and you go to a store. When you go to a store, the store doesn’t hold your wallet, you know, you go to a Starbucks, they don’t hold your wallet, you take out your wallet from your pocket and you give them your card into their payment processor and they charge you and on your way you go and they don’t get to keep your wallet once you leave.

In the Internet world that’s really changed quite a bit so if you go to Amazon or if you go to any retailer these days, what happens is that that retailer has a locker and in that locker is all your stuff. You leave your credit cards in every store you go to, they’re just there in their locker and then you also give them a bunch of other stuff like your identity, you know. So, imagine you walked into a Starbucks and they said, hey, great to see you, give us your name and password to open your locker so that we can take your money out and it’s just like a crazy paradigm if you think about it that way.

And so, the blockchain-based finance approached does, it reverses it back when you again have a wallet that the stores do not and this goes back to the De-Fi protocol question which is Compound and Aave and the rest of these companies, they don’t have your account, they don’t have your money in the same sense that a bank account does or that Amazon does when you give it your payment information. With a bank account, it literally has your money sitting on the bank balance sheet.

What is happening in the DeFi sense is that you, the user, have a MetaMask wallet installed, what the wallet really does is it gives you access to a particular location, an address on the blockchain. So, it stores and encrypts your access to it which is like a key, it’s actually called a key, and then you’re the one holding that key and that is what gives you control over what happens to the money that’s maintained by this network. And then when you come to Aave or Compound or DAI or MakerDao or Yearn, any of these other projects, they’re like a little vending machine.

They perform a transformation function, it’s a little map robot and they ask you…well, you have to click on a button first that says, I want to give you this, right, like I want to put the coin into the pinball machine, I want to buy a Coke. In one case, it might be, I want to put a bunch of my money into a box and get another type of money out, I want to collateralize this black box with ETH and I want to get a USD cash equivalent account and there’s a mathematical transformation function that allows you to do that and that’s MakerDao and DAI. All of these De-Fi protocols are centrally these little robots that you can take money out of your pocket or out of your portfolio, permission them to access it and then permission them to do stuff to that money.

And so, I just want to kind of open up that paradigm shift that really gives authority and power back to the user over their assets. I think the adjacent question is like well, what should you invest in, what should you do. I think there are some basic functions that have been developed, the ones that you described are a great starting point.

So, number one is, put in collateral into a box and get a US dollar StableCoin cash equivalent. Another primitive would be take an asset and receive an interest rate on it for lending it out or borrow an asset at some interest rate. This is like a margin desk, it’s not borrowing and lending in the sense of underwriting risk, it’s in the sense of somebody wants to go long and short so it’s just like a Morgan Stanley or Goldman Sachs capital markets desk and so you can get an interest rate on giving your asset for somebody to borrow and pay you for. From there, there are more complex things as well.

There is stuff that looks a lot like asset management or like a big fixed income fund where a community of people make investment decisions on your behalf and they might be maximizing interest rates, they might be maximizing usage reward which are called “farming.” And so, you might hop in and provide money into what’s called the “vault,” but really looks like a fund. And then, I think another one that bears talking about is providing liquidity which is essentially allowing you to act as an institutional market maker where you’re putting money into a box that people trade against so you’re sort of like the market maker on a stock exchange floor, but you’re doing this again through code.

And so, those are the ones that have been the most popular. Of course, trading is enabled, insurance is enabled as well so we’re really sort of at the edge of that unfolding complexity that I started talking about.

Peter: Right, right, yeah, It is super interesting because…..the thing that struck me…I remember when I first bought Ripple, it was like back in 2016 or 2017 and it took me all weekend to figure out how just to buy it. What I was struck with the MetaMask wallet is it’s really no more difficult than applying for a bank account, it’s easier actually, and you’ve got a chrome plug-in that you could just go and do it.

I was surprised when I went to this other site to sort of recognize that I have a MetaMask wallet. It was really simple, but I think it seems to me that right now, it’s really crypto enthusiasts that are really creating MetaMask wallets and other types of wallets. What’s it going to take to get it more into the mainstream where someone who might have a 401K and it’s invested in the stock market, knows nothing about finance, what’s it going to take for them to get a wallet using some of the DeFi features?

Lex: So, a couple of things on that. As you can tell, brevity is not a virtue that I have. (Peter laughs)

Peter: It’s okay.

Lex: You know, so the first point is like people love to hate on the crypto user experience, but I agree with you and I think that the crypto user experience at this point is very much on par with B2C fintech because many fintech entrepreneurs are now in the crypto space and have just re-created what was once novel and interesting and now, it’s delivered through Goldman Sachs Marcus to millions of people. You know, they’ve re-created on top of the blockchain paradigm and the other day I had to fill out wire instructions….you know, this was an electronic experience, I was on a bank website, I was typing in where the money was going and I had to put in the bank account and bank number of the destination and it felt like a totally insane moment.

I mean, this is a small thing, people have had much worse experience with wires and getting them over the line, but like I had to go to a PDF and then the routing number was on the PDF and I can copy the number once and then I put that into the first field that says account number and then the second field confirms that the account number is real so I have to type it. You know, I can’t copy paste it in there so I have to type it and so I’m typing a nine digit bank account number from memory from what I’m seeing and comparing it to a PDF.

If it matches the first field then it’s good and that’s that, that’s the security and it is so unbelievably awkward and error prone and this is why we have settlement issues and reconciliation issues and why literally thousands of people in finance wake up everyday to match one Excel file to another and say these are the breaks our firm has to pay millions of dollars to reconcile that.

With MetaMask, like you might be initially put off by the fact that you have this long hash which is your address and you have to copy it around and paste it in different places, but, it’s unbelievably easy. You press on the number and it copies it and then you paste it somewhere and you’re done and it’s never wrong. From a user experience, it’s really ….I think we’re over the hump. The second point around how do we get more normal regular people into it is I do think it’s worth pausing on whether that is still a true concern. We know that Coinbase has $90 Billion in AUM or let’s say in custodied assets and about 43 million users. So, 43 million out of 300 is a pretty good market penetration for the United States, it’s an amazingly high number.

And as a robo advisor entrepreneur, it dawns on me now that it was never a Betterment, it was always Coinbase. The robo advisor was never a Betterment, you know, and I love Betterment, I have nothing but respect for them. I think they’re ethical and they execute super well in all this stuff, we’ll put Wealthfront to the side. But, they’ve got $28 billion or so of passive asset allocation and Coinbase is going to go public at $100 Billion. It was always about the novelty and the next generation there. And so, I think the actual adoption is much higher than some of us who’ve been in the space for a while feel.

And then, when you look even at mathematics squishes inside of decentralized finance sort of explosion, our monthly average users are now at 2.5 million per month, these are people who every month use the wallet. Two and a half million of actives is pretty high, it’s pretty, pretty high even when you compare it to the Robinjoods and the Chimes and so on, we’re going to print you the 10 million users, but you look at the actives and it’s roughly comparable. So, it feels to me that we are now in the….I think we’re past the early adopters, I think we’re passed the…. just the crypto geeks and I think for the basic functions of accessing Ethereum, may be holding NFTs, may be holding the DeFi tokens, I do think we have that adoption.

Peter: Yeah.

Lex: There’s still more to do, I think a lot of that will be done from the off-ramps so Coinbase and finance extending into the programmability, but I think there is a lot of progress already.

Peter: I should also point out, you can get Coinbase at their own wallet which you can use in some of these DeFi applications as well, you don’t have to use MetaMask. I want to switch gears and talk about NFTs. You just mentioned them, they are the hottest thing….in the last two weeks, I have seen more articles on NFTs. The Wall Street Journal had a big piece this morning, you have Marketplace/NPR talking about it, NBA Topshot is now kind of …I would almost say it’s mainstream, but, Lex. it obviously stands for Non-Fungible Tokens, again, give us your take on why it’s so popular.

Lex: So, there are fungible currencies like the dollar, if I gave you a dollar, if I gave you another dollar, you don’t care, it’s the same. ETH and Bitcoin and even the tokens of these DeFi protocols, they’re all sort of the same divisible and fractional. Non-Fungible tokens are a unique object, broadly speaking, you can have additions, you know, you can have ten of the same objects like you can have ten prints or posters of an Andy Warhol, but they’re designed to be the one unique thing. It can be a visual image that an artist makes like the digital artist Beeple who I think has a $6.5 Million Christie’s auction going on right now so speaking about the mainstream.

Or, it’s the videos of sports moments like NBA Top Shot where you got fans collecting basically Harry Potter frames, moving images of people they love and admire and just want to look at it all the time and feel that this is rare. Why does it matter? There are some starting criticisms that misunderstand what’s actually going on, right, because you can say, it’s nice you’ve got an image, I’ve got that image, I just screenshot it, what’s unique about your image. The NFT is supposed to be unique and owned and it goes in that same wallet that I was talking about when you’re walking around….you know, Starbucks doesn’t have a locker, you have the wallet in your pocket and similarly now, in your wallet is your collectible card of LeBron or whatever.

And so the first criticism, which I think is incorrect, is I can just take a screenshot, I can right-click and save and the answer to why that’s wrong is the same answers to what’s the difference between the Mona Lisa and the poster of Mona Lisa. The poster of the Mona Lisa carries the same visual information and it doesn’t matter because nobody cares about the visual information itself. The visual information is a very small part of the pleasure of what the Mona Lisa generates, right. It’s the original artwork, it is the history of that object being originally made by the creator of that object who is famous and has social capital. It is the historical context of what has happened to that piece of art, who has owned it, how has it passed through different environments over time, you know, and then it has cultural importance.

The one that’s hanging here’s important and the print in your dorm room is not and so it’s the exact same dynamic here. Just because you have a copy doesn’t mean you have the original and the original is the thing that the artist made and then you can get to kind of the discussion of let’s have two artists, one is a painter and makes beautiful portraits and another is using oil paint and then another is a painter that makes absolutely gorgeous portraits, but they use their iPad and PhotoShop. They spend an identical amount of time creating that beautiful portrait.

Why is it that you value the physical, but not the digital. In part, because the digital is infinitely reproducible and so there’s no price whereas the physical is scarce. So now, what’s happened is we have a mechanism that says, this digital work is scarce and authentic and you know, I’m not here to sort of pump up crypto prices, that’s not the point of the storytelling, but the shift is like a breath of fresh air for creators, for digital creators and by the way, there are fewer and fewer non-digital creators and more and more digital creators because we’re all stuck in our COVID worlds and it’s sort of obvious.

Here’s my sort of…I’ll to try to conclude on this, this is the framework I have…so what Napster did, and I grew up on Napster as my defining moments in the early 2000’s, was it massively, it exploded the demand side, the people who got to enjoy music because it crashed the price to zero of all music. So, you go along the demand curve, right, supply and demand kind of cross, and then you crash the prize to zero and so anybody who wants music now has access to it, massive increase in people enjoying creative output and file sharing and all that.

Artists got crushed, Lars Ulrich of Metallica was particularly unhappy, teenagers were jailed, that was a fun time and so now, we’re in the opposite moment of that where all of a sudden, you have digital scarcity on creative output, digital creative output, and so you can have markets and economies around it. So, you’re seeing a massive entry on the supply side so more musicians, more artists, anybody who knows how to deal with an audience and make music or videos or art is now trying to create more stuff that is blockchain-anchored because they feel like they can get paid for it. So, I would say, it took 20 years to balance out what file sharing in Napster did and that’s what we’re looking at now.

Peter: Right. I want to dig into the weeds a little bit, if I may, I was listening to the recent podcast you did and I’ll link to that in the show notes, you’re talking about the music and creators and you can…I want to talk about how smart contracts are kind of incorporated here. On your show you gave the example of someone creating an original piece of music and then someone else could have taken that original piece and then adapting it to their own and having a new original piece, but the original creator also gets a cut and it’s all done through smart contracts. Can you explain a little bit about the mechanics there.

Lex: So, it all starts with why Ethereum and programmable blockchains are valuable. They’re valuable because they are digital property rights enforcement system and that’s useful when you have economies. Like the reason finance has been the first use case on Ethereum is because economies and trading and market are very natural to the system which says this is real, this is not, you know, here is money and here’s instruments. And so, it is naturally the case that the economic features of the creative industry are what is the emergent, the obvious case coming out of here.

You know, it’s not about like how can I look at digital art, it’s about how can I have exchange and venues of exchange and then royalty payments or commissions against this art. It is software capitalism, I mean, there is going to be a lot of people from the remix culture of the 2000s or a digital artist, a digitally native artist who bristle at NFTs because they grew up on file sharing, free remixing, copy left, you know, like hate the lawyers, finally we’re free of that. And this goes the other way, this brings back….this is DRM [Digital Rights Management] to the max,  you know, it brings back power to the artist, but it is participatory and optional, like you don’t have to buy the original print of the CD, you can just always listen to it on Spotify.

I think what you’re referencing, it applies both to art and to music where let’s say you have a piece of art that you’ve made and you’ve posted it on a platform like OpenSea or Rarible or one of the other ones and you’re the author. And so, you might specify that you as the author get a 5 or 10% commission in all secondary markets, every time it’s resold, you get a commission. So, let’s say you sell your first piece for $100, you get the $100 and somebody else owns it and then two years goes by and you’re super famous, you’re amazing, you’re really big on Twitter and so whoever owned your piece is now able to sell it for $100,000, even though they bought it from you for $100.

That’s a life changing event for that owner of the digital asset, then you’re also getting 10% so you’re going to get $10,000 on that, essentially, commission or royalty payment in perpetuity. Every time the exchange happens that revenue comes back to you as the creator. That is basically the collapse of the entire creative media intermediation value chain from a financial perspective which, again, is obvious if you think about fintech. Fintech has been cutting out intermediation for commerce and for trade and so on and this is what’s happening here. Same thing for music, right, music is unbelievably……I did a research in to this last week.

Music, the structure of royalty is an ownership and who gets paid for what and if it’s used in a commercial versus if it’s used on a Spotify stream, a massively complex economic structure, you know. But, to simplify it to the basics, the artist gets a very small percentage for the streaming or the usage of the piece of music and often they might not even have to rights to the actual thing that they perform. Their music label might have given them the song they perform and the music label also gets paid for the usage of the information in the song and you only get for the performance rights.

Anyway, there are now DJs and musicians who are minting their CDs, like the original CDs to their fan base and then there are mechanisms by which, you know, royalties from the resale of that music go to the musicians even when their fans purchase it .So, we’re very early in these dynamics, they’re very much not polished, but that is the promise I think for the disruption inside of the value chain in the creative industry.

Peter: I just saw an email like Kings of Leon, I think it was, just on the weekend how they released their new album as an NFT so that’s groundbreaking in and of itself. I want to ask about Square and Tidal which you wrote about recently. I read so many articles about it and I felt like most did not have any idea what the hell Jack Dorsey was thinking when he bought, he spent this money on Tidal.

You’ve got this long piece about that, love to sort of get some of your thoughts on that because the way I look at it, you put in this piece, you saw how broken and the financial industry…..the financial part of the music industry is where these people are getting a third of a cent for one play on Spotify and you just can….whereas he could have made a decent living selling a few thousand records or 10,000 records back in the 80’s and 90’s. Now, you have to be a megastar to make a living there.

Just maybe touch briefly on why you think ….what Jack Dorsey is thinking by acquiring Tidal which, for all intents and purposes, was really a second tier or third tier player in the music streaming space.

Lex: So, I write this for The Fintech Blueprint which is my weekly newsletter and then it gets the long take so syndicated on CoinDesk and you wouldn’t believe the amount of flack I got from the crypto community for this NFT article about …where I framed it through the perspective of Square and Tidal, you know, telling the NFT story through the perspective of this deal rather than trying to tell it through the perspective of Ethereum.

Torn to shreds for not schilling ETH which is, you know, maybe check the body of my work, but the core outline is this, it’s not A to B, it’s like logic steps A through Z. So, title is maybe A Third Tier Streaming Service, it does print  $170 Million in revenue and it has 2 million users so if they were a fintech it’d be 3 billion so there’s that. I think even on a cash flow basis, it’s not a terrible deal at all, it’s good for Jay-Z who I think bought it for 50.

Anyway, so it is a music streaming service and it’s got really cool people involved, they’re just cool. The main point is that they have a huge audience and Square has an interesting history, Ark Invest talks about this very, very well in their research. How did Cash App totally….how did they completely run around Venmo. Venmo was so far ahead and was growing a really fast clip. Out of nowhere, it felt like Cash App came out and caught up and overtook their growth curve, now being the primary P2P money movement app, we will put Zelle to the side.

And so, how did they do that and the answer is they did it through really clever growth hacking which is they partnered with the hip-hop community and with the influencer community and instead of spending money on Google Ads they let the influencers and the artists do giveaways. So, hey, I’m a musician, if you want $100 tell me what your Cash App wallet is. You drop the link through Cash App wallet and that person sends you the giveaway so like I don’t know which artist, but it’d be cool for like Jay-Z to send me $100 and all I have to do is drop a line with my account to Cash App on a Twitter thread and this is what worked for them unbelievably well, really smart, clever marketing.

I think it was definitely connected to…I’m guessing it’s connected to Jack’s understanding of social media because of running Twitter and understanding people psychology on Twitter and all of these and so that is the Square growth hack. Of course, Square also has Bitcoin as an asset that you trade inside the app and there are teams specifically dedicated to crypto development, I think both inside of Square and Twitter and it’s no secret that Jack is an enthusiast for crypto infrastructure, more generally. And so, if you kind of connect the lines, what can you do with Tidal.

First, you’ve just bought yourself your go-to-market strategy, you actually own your go-to-market strategy because you understand how to market through the artists who are cool. No other fintech really, outside of a couple of teenager ones using TikTok, understand how to do this and reach the populations served by these artists. So, that’s number one.

Number two is you’re a small business bank if you are Square and oh boy, are there a lot of small businesses inside of Tidal. Every single musician is a small business that can now have every single financial service as part of their streaming experience, and I think that’s really important. I think they’re also buying an additional customer base for their B2B side, but then if you take one step further in terms of thinking through NFTs and the economics of scarce digital art and music, you can kind of paint forward a vision of the world where title is integrated as a bank, but is also a wallet of the authentic music, of the actual music objects.

So, the streaming stuff is a way to pay publishers, it’s a way to pay royalties, it’s the mathematics that creates royalties and if you own both the bank and the streaming service and you have the direct relationship with the artist and you’re able to transform the publisher into a blockchain-based smart contract and therefore, you don’t need an intermediary to do the artist relationship and so on, it becomes a really novel and strange and weird, but it’s like a bundle of options, right. In a Black Swan event where this intuition is right, this is a massively valuable company and I think that’s probably underneath it.

Peter: Right, right. Anyway, we’ve gone over time, but before we leave it here, I do want to get you to paint a picture, if you would, about the future of finance. I feel like we are in this fascinating time right now….the last ten years of fintech, we’ve had some really good incremental change. There’s been a lot of good work done and I think some really impressive developments, but it feels like in this time of potentially just re-wiring the cord of the whole financial system, maybe you could just give us your vision of what this is going to look like as sort of DeFi, NFTs, obviously they are related, as they become more mainstream.

Lex: Trying so hard to be precise. The mistake of the last decade of fintech, which is really fintech, using that word, is thinking that a digital storefront is enough. Yes, Netflix started out by mailing you DVDs, who cares, that embarrassing, it’s wrong, it’s done, it’s over, nobody cares, right. I spent a chunky six years of my life building wealth tech software for financial advisors so they can deliver websites to their clients or an app to their clients.

Okay, you’re talking about a value chain that many people who are growing up in Fortnite will never touch in their lives because if you are $100 Million investor who has grown up in Fortnite, you’re not using a Swiss private bank, you’re just not, you wouldn’t be caught dead using a Swiss private bank and I love Swiss private banks. As somebody who has like…you know, Lehman Brothers would have loved to be UBS, I spent a lot of time thinking about that model.

And so, I think what we are going to realize and see now very clearly is that digital manufacturing is much more important than digital distribution and that in every disruptive cliche, things that are at this point sort of lame to talk about which is what happened to media from the Internet and Google, what happened to transportation from Uber, what happened to music from Spotify, in all of those cases it’s not distribution, it’s manufacturing.

There is no Internet of paper books, there is no Spotify of CD-Roms, it doesn’t work, it’s a waste of time. And so, I think we are seeing that shift now where digitally native manufacturing of financial product actually is going on and digital distribution, of course. Obviously, there’s going to be someone, whether a new entrepreneur, whether Goldman Sachs or whether RobinHood, that’s just going bolt on their consumer footprint to the new stuff. And we also know what the outcome is in terms of price so price has to collapse because it cost nothing to manufacture and then the value chain collapses as well.

And so, to me, that industry outcome is really…it feels very clear, you know, especially in a world where Google Pay is a $20 Million user neo bank that’s sitting on top of Banking-as-a-Service and has done every sort of wiggle possible in order to not be a bank and at the same time provide all these financial services, give it five years and they are going to connect to the Amazon Cloud for Ethereum and the end like literally, the end! If Amazon is running the Ethereum Cloud with every single financial services open source protocol in it and Google is connecting to Amazon to distribute all of it, what else exists, like, I don’t know.

And so, I think the challenge, the question is how much simultaneous time periods are we going to live in because…I think you’re deep in the payment ecosystem as well and so, you know, there are multiple rails that are alive today at the same time. People use cash, people use QR codes, they use electronic payments, they use still point of sale terminals, they’ve got the card networks, there’s Faster Payments, there’s ACH, lots and lots of rails, it’s not a winner take all and it’s very possible that we’re going to have just a separate economy for kind of new finance that sits alongside Wall Street and Silicon Valley and fintech can over time…like Amazon goes from 1% share to 20% share of all of commerce and I don’t know what the destination is.

The anecdote I have is, you can be on the road in the US and you can have a horse and buggy and an Amish person on that road and then next to them you can have some chugger from the 90’s eating gasoline and being like a very dirty car, but with a motor. Next to that, you can have a self driving Tesla that’s fully electric and it’s the same road and it’s all the same people in the same country, but they’re living in different time periods. So, we are right at that edge of just I think a completely new financial infrastructure emerging.

Peter: Okay. We’ll have to leave it there. It’s a very exciting time, Lex, it was great to chat with you and really appreciate your coming on the show today.

Lex: My pleasure, thanks for having me..

Peter: Okay, see you.

I don’t know about you, but my head is spinning after listening to Lex talk there for the last 50 plus minutes. We’ve had such amazing things happen, I think, in the last ten years of fintech. As Lex said and I tend to agree that was the precursor for what’s really coming. I don’t whether NFT is just going to be this fad that are going to just crash and burn, but I think the technology behind them, the smart contracts, having these things really be intelligent, you know, ways to kind of transact.

I think that concept is here to stay, it just makes perfect sense. Whether we get there in five years, in ten years or 20 years, I think this is the way finance is going that’s why I wanted to make it such. I didn’t want to edit it out, I made it such a long show because I felt like it was important to get into the details here.

Anyway on that note, I will sign off. I very much appreciate your listening and I’ll catch you next time. Bye.

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