Don’t Forget About The Other Banks
Happy Monday, Fintech Takers!
I’m on vacation this week (family road trip!), so expect slower replies to emails and (hopefully) a calm and restful energy from me coming after this week.
But worry not, we still have lots of great content coming your way this week. Plus, a ridiculously exciting update from the Fintech Takes Network 👀
- Alex
Bur Forget Me Not from North American Wildflowers (1925) by Mary Vaux Walcott.
3 FINTECH NEWS STORIES
#1: Don’t Forget About The Other BanksCopy anchor linkCopied
What happened?Copy anchor linkCopied
Citizens Bank is empowering its customers to better manage their direct deposit allocations and recurring payment preferences:
The primary focus has been on reducing the time it takes a user to update payments methods or set up direct deposits. With Citizens’ new switch payments capability, customers can update payment methods directly with the likes of Netflix, Amazon, Spotify, Lyft and Verizon.
Users can also choose between a Citizens debit card or checking account for recurring charges, seamlessly update their card-on-file for top bill payments and subscriptions in the app, as well as manage issues related to lost or stolen cards without having to manually update payment account details.
The bank also rolled out a direct deposit feature where users can update where their paycheck is deposited.
This gives customers a more efficient way to update where their paycheck is deposited without paperwork or employer coordination. With the Citizens app integrated with payroll providers, this feature allows users to redirect all or part of their paycheck to their Citizens accounts in a few taps.
So what?Copy anchor linkCopied
In last week’s heavily anticipated debate on open banking between Phil Goldfeder and Ron Shevlin, Ron was asked which companies would be the biggest winners and losers if JPMorgan Chase’s proposed pricing went into effect.
He only mentioned one loser: MX
I understand the point Ron was making (relative to the other big data aggregators, MX doesn’t have the scale to force JPMC to play nice-ish), but I personally disagree.
I think MX could emerge as a big winner from all of this.
Why?
The scuttlebutt I’m hearing behind the scenes is that a lot of other banks (apart from PNC) are not happy with JPMC. While these banks weren’t thrilled with every part of the CFPB’s open banking rule, they didn’t want the rule to be vacated (because they lack the resources and technical chops to aggressively combat screen scraping) and they didn’t want to see JPMC try to reshape the open banking landscape via fees (because they lack the leverage to impose similarly aggressive pricing while negotiating strategic one-off deals with large fintechs).
And now that the rule is being revamped by the current CFPB, these banks have the opportunity to push for changes that address their specific concerns while also working with the data aggregators to go on offense with open banking.
Given its focus on banks (particularly regional and community banks) as customers, MX will be well-positioned to take advantage of this shift, should it occur.
This news from Citizens suggests that it might.
From my reading of the Finextra interview with Citizens’ head of deposits and customer engagement (which is worth reading in its entirety), these specific capabilities are being enabled by Atomic (through a partnership with Mastercard … another potential winner in this scenario) in order to increase the stickiness and profitability of new Citizens’ deposit customer relationships.
Much like two-day early access to paychecks, I can’t imagine that automated direct deposit switching and payment-on-file updating won’t become table-stakes features in consumer banking.
Seems like a slam dunk.
#2: Loan Servicing Needs to be About More Than Just EfficiencyCopy anchor linkCopied
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A fintech infrastructure start-up focused on loan servicing raised a Series A:
Salient, a San Francisco-based platform for lenders to automate the post-loan origination process, raised $60 million in Series A funding, it tells Axios Pro exclusively.
Salient uses generative AI to automate collections, customer service, and compliance monitoring — acting as a dashboard for lenders to track all their loans.
Salient uses voice recognition to monitor customer service calls and flag violations of complex state or federal lending rules. For example, active service members are entitled to interest rates of 6% or below, and customers who wish to no longer be called must be marked. Failures can lead to steep fines.
In addition to customer service, Salient's AI agent, with additional information from the customer, can complete insurance claims and get necessary paperwork from the lender — cutting down on time and complexity.
Salient counts Westlake Financial and AutoNation among its customers.
So what?Copy anchor linkCopied
A couple of things here.
First, despite what the news headlines might imply, Salient does not provide a loan servicing system. Those systems of record (provided by companies like LoanPro, Canopy, Peach, FIS, Fiserv, and Shaw) are the foundational infrastructure in this phase of the lending lifecycle.
Salient is an AI-powered customer communication and compliance monitoring solution that sits on top of lenders’ existing loan management systems and call centers.
Second, judging by a quick scan of its website, Salient is heavily focused on helping lenders increase their operational efficiency in servicing and collections, claiming to deliver benefits such as cutting customer interaction times by 70%.
This focus on efficiency is understandable.
The company’s current clients appear to be clustered in the subprime indirect auto lending space. Because indirect auto lenders are dependent on dealerships to send them customers (rather than having to win and retain customers directly), these lenders tend to prioritize ruthless efficiency over customer centricity.
That said, I hope Salient eventually broadens its focus beyond operational efficiency and compliance. As I wrote about recently, there is a MASSIVE opportunity for lenders that can reimagine loan servicing and collections as opportunities to build customer trust and differentiate their brands. And AI is set to play a significant role in this reimagining.
#3: What Are You Doing, PayPal?Copy anchor linkCopied
What happened?Copy anchor linkCopied
PayPal is enabling merchants to accept more than 100 different cryptocurrencies:
Fintech giant PayPal launched a new payment option on Monday that will let smaller U.S. merchants accept more than 100 cryptocurrencies, including mainstays like Bitcoin and Ethereum but also zanier options like Trump’s memecoin and even the novelty token Fartcoin. Any U.S. business using PayPal’s online payments processing platform can opt in, said a spokesperson.
So what?Copy anchor linkCopied
I just … I don’t … why?
WHY?!?
Here’s the answer from Alex Chriss, President and CEO of PayPal:
Imagine a shopper in Guatemala buying a special gift from a merchant in Oklahoma City. Using PayPal’s open platform, the business can accept crypto for payments.
Right, but in that answer, we seem to be skipping past an important point: Why would a consumer in Guatemala want to pay for that special gift from the merchant in OKC with $TRUMP or FARTCOIN?
(Editor’s Note — My sincere apologies to my parents for typing that last sentence. I know this isn’t what you intended when you were paying for those four and a half years of college tuition.)
Isn’t the whole point of PayPal offering its own stablecoin (PYUSD) to solve for that exact use case? Don’t consumers living in countries with unstable monetary systems want to keep their money in USD-backed stablecoins? Not volatile memecoins?
Wait. Hang on. Apparently, PYUSD is a part of this:
To settle the transactions, PayPal will let users connect existing crypto wallets they own to a checkout page. Depending on a buyer’s crypto wallet, PayPal will sell the cryptocurrency on a centralized exchange like Coinbase or a decentralized exchange like Uniswap. The proceeds of that sale will be converted into PayPal’s own stablecoin, which will then be converted into U.S. dollars sent back to the merchant.
OK, let me see if I have this right.
PayPal will take your FARTCOIN, sell it in a crypto exchange for U.S. dollars. Then it will use the dollars to buy PYUSD. And then it will sell the PYUSD for dollars and give the dollars to the merchant.
Is that how this works?!?
And if so, what could possibly be the purpose of that complex series of transactions? Apart from laundering money through PYUSD to make it appear more successful than it actually is.
Lending tip of the monthCopy anchor linkCopied
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Most underwriting assumes borrowers are either creditworthy or not.
But the truth is that most are creditworthy until Monday (then the layoff hits, the car won't start). In fact, 78% of Americans are living paycheck to paycheck.1
TruStage just dropped an article on why loan delinquencies are rising even among the best-intentioned, and how lenders can respond without tightening the screws.
Spoiler: payment protection isn’t just a borrower perk; it’s a lender strategy.
If you’re building in fintech, you need to read this👇
1 Payroll.org, “Survey Reveals Six Percent Increase in American’s Living Paycheck to Paycheck in Just One Year”, Sept. 2023.
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2 READING RECOMMENDATIONS
#1: Stunning SBA 7(a) Fraud May Be Largest In Agency's History. Why Isn't Anyone Talking About It? (by Jason Mikula, Fintech Business Weekly) 📚Copy anchor linkCopied
Jason crushed this. Incredibly thorough reporting on an important and undercovered story.
Grab a coffee and a croissant. This one is long, but very much worth it.
#2: Arrival (by Shea Serrano, Good Movie) 📚Copy anchor linkCopied
I will occasionally recommend some non-fintech reading, but only if it’s really good.
This piece, written by one of my favorite writers about one of my favorite movies, certainly qualifies.
And it’s not paywalled!
Enjoy!
1 QUESTION FROM THE FINTECH TAKES NETWORK
There are a TON of interesting questions being asked in the Fintech Takes Network. I’ll share one question, sourced from the Network, each week. However, if you’d like to join the conversation, please apply to join the Fintech Takes Network.
Which BaaS banks have the best strategy?
A lot of them are just sorta flailing around. Some of them are great at execution, so their lack of strategic focus doesn’t really hurt them. The ones that are bad at both strategy and execution have mostly been run out of BaaS by the regulators.
Which ones have the best strategy?
If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network!
INPUT REQUESTED!
I’m working with Dilly Labs and the wise and powerful Tom Johnson on a little research project and I am looking for folks who work at a consumer lending company (bank, credit union, non-bank lenders, etc.) and who have experience buying/implementing/working with credit decision engines to fill out a quick survey.
Credit Decision Engine Vendor Survey
I promise it won’t take long! And it will be extremely helpful! So …
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Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
