Fintech Takes

Fintech 3-2-1 Goes to Vegas

Alex Johnson · OCT 27

Happy Monday, Fintech Takers.

Today’s newsletter follows our usual 3-2-1 format, with a slight twist. 

Given that I’m at Money20/20 (please find me and say hello!), I’m excited to put together a roundup of three of the buzziest topics I’ve covered in the past few months that you’ll definitely hear about over the next week (whether you’re on the expo floor or just delight-scrolling LinkedIn).

That’s right, delight-scrolling, not doom-scrolling. We’re going to start this week off on an optimistic note!

- Alex

Las Vegas street scene, May 1972. Photographer: O'Rear, Charles.

3 FINTECH NEWS STORIES

#1: The End of an EraCopy anchor linkCopied

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Back in April, I wrote a deep dive essay: Everyone Wants to Be the FICO of Cash Flow Data.

It started with a reminder of just how bulletproof FICO’s business model has been since 1995: a predictive general-purpose score, near universal distribution through the bureaus, and a government-granted monopoly in mortgage lending.

I argued that bank transaction data (a new and valuable analytic input) creates a once-in-a-generation opportunity to rebuild the credit decisioning stack from the ground up. 

The question wasn’t if someone would try to become the “FICO of cash flow lending.” We knew that multiple companies would try. The question was whether the same market opportunity that FICO seized for itself in 1995 (when the Federal Housing Finance Agency made the FICO Score the standard in mortgage lending) would be available to anyone.  

Six months later, it looks increasingly unlikely to me.

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The key ingredients in FICO’s success over the last 30 years have been its dominance in the securitization markets (thanks to the FHFA) and its distribution arrangements through the three credit bureaus.

Both of those ingredients were spoiled this year.

Back in July, FHFA Director Bill Pulte announced (in his typically chaotic fashion) that VantageScore (the credit bureaus’ competitor to the FICO Score) would be allowed to compete directly with the FICO Score for conforming mortgages sold to Fannie and Freddie.

This prompted an escalatory series of actions from FICO (ending its exclusive distribution arrangements with the credit bureaus) and the credit bureaus (Equifax undercutting FICO’s pricing), which seem destined to continue for the foreseeable future as FICO, Equifax, Experian, and TransUnion all jockey for position in this new Wild West.

Now, on the one hand, this chaos in the traditional credit scoring world is a massive opportunity for analytics companies in the cash flow underwriting space. Lenders are going to be making changes to their systems, underwriting workflows, and internal models to capitalize on the renewed competition between the bureaus and FICO. As such, they will likely be open to considering alternatives that would have been a tough sell before.

On the other hand, it seems highly unlikely to me that any analytics company in the cash flow underwriting space is going to be granted the regulatory or distribution exclusivity that FICO got 30 years ago. The FHFA wants competition to lower prices for homebuyers. And no company is going to give up the opportunity to try to own an entire slice of the credit decisioning stack and settle for a single layer, like the credit bureaus did.

The name of the game, right now, in cash flow underwriting, is vertical integration.

Plaid’s new cash flow credit score, LendScore, requires Plaid-aggregated data to function. Unlike the FICO Score, it can’t be used interchangeably across different data providers (Plaid would argue that this is because the insights from its network aren’t interchangeable either).

Nova Credit, which just raised $35 million, has been taking a similar vertically integrated approach, building a platform that combines data acquisition and orchestration, attributes and scores, and regulatory compliance.

These vertical integration plays will be challenged by a slew of more focused competitors, playing at different layers of the stack (Quiltt is trying to enable more choice and flexibility in data aggregation, Prism focuses exclusively on cash flow analytics, etc.) We will also see an increasing focus on breaking each layer of the credit decisioning stack into different, product-focused segments (Pave builds product-specific cash flow scores, aggregators like Spinwheel focus specifically on consumer-permissioned loan/liability data, etc.)

All of these companies in the cash flow underwriting space (along with the bureaus and FICO)  are smashing together, at increasing velocities, right now, and I don’t get the sense that any of them are open to ceding even a sliver of ground to their competitors. 

This frenetic competition is good for lenders as it will lead to lower prices and more (and better) product choices. However, it’s essentially the opposite of the conditions that created and sustained FICO’s 30-year monopoly.

That era is over.

If you want to get up to speed on this topic, here’s a syllabus:

And here are a few excellent resources from my cash flow underwriting nerd friends:

#2: The Dawn of Agentic CommerceCopy anchor linkCopied

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Major developments are pushing agentic AI towards the center of digital commerce.

Earlier this month, Visa launched its Trusted Agent Protocol (TAP), part of its Visa Intelligent Commerce (VIC) framework, to help merchants securely recognize AI agents acting on behalf of consumers.

Meanwhile, Stripe and OpenAI introduced the Agentic Commerce Protocol (ACP), an open standard that allows users to complete purchases directly within ChatGPT, initially from Etsy sellers and soon from over 1M Shopify merchants.

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Together, these moves (and similar work from Google and PayPal) sketch out the infrastructure for agentic commerce: digital assistants that don’t just recommend products, but purchase them on your behalf. (Google and PayPal team up on agentic commerce | TechCrunch)

Visa’s TAP establishes trust and safety; Stripe and OpenAI are building the checkout flow and monetization layer on top. 

The implications are enormous. 

Search and discovery could shift from Google’s ad-filled pages to private, conversational environments where agents act on intent in real time. OpenAI could become the front door for commerce, with quality-weighted recommendations replacing ad auctions as the discovery model (if it chooses to follow my advice, that is). 

But (I’ve said this before, and I’ll say it again and again) this also raises a thorny question: if these AI systems act “on your behalf,” who are they actually loyal to? 

The user, the merchant, or the platform itself? 

As “agentic AI” moves from buzzword to an industry standard, the next era of e-commerce will hinge on how that question is answered.

Here is some required reading (and listening) to get you up to speed: 

#3: The Dollar Without BordersCopy anchor linkCopied

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Stablecoins have gone mainstream. 

If you’re a Fintech Takes reader, you’ll know the GENIUS Act has given payments stablecoins a formal regulatory home, though regulators still need to draft specific rules around reserves, issuers, and how restrictive the prohibition on yield-bearing payment stablecoins will actually be. 

In the meantime, the market isn’t waiting. Visa, Stripe, PayPal, and numerous others are already building on-chain payment rails, while Circle’s USDC continues to anchor institutional adoption and banks and other large incumbents watch closely (and start experimenting).

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Stablecoins have become an extension of the U.S. dollar and, increasingly, a mainstream payments mechanism.

I recently had the pleasure of joining SouthState’s Chris Nichols on The Community Bank podcast for the most open-minded conversation I’ve had yet on stablecoins, and why community banks should be urgently curious about stablecoins (I suggest you tune in!). 

We dug into four emerging use cases that stand out.

Store of value abroad: The clearest win so far! In countries battling currency instability, stablecoins let people and businesses hold U.S. dollars without a U.S. bank account. In these countries, a stablecoin like USDC functions as a de facto dollar-based bank account you can open with a smartphone. 

Cross-border payments: A potential operational advantage! Traditional correspondent bank networks rely on a daisy chain of banks, each adding cost, time, and compliance risk. Stablecoins cut that down to one hop that settles in minutes. Banks serving trade corridors or suppliers abroad can use this infrastructure to compete with Wise and MoneyGram (which are also starting to move on stablecoins).

Domestic and retail ecosystems: The most theoretical use case, right now! Retailers like Starbucks and Walmart could look at stablecoins not as crypto but as infrastructure for loyalty and working capital. Starbucks already sits on a lot of money in prepaid balances; a Starbucks Coin could, in theory, take this model a lot further. Walmart could do the same, tying its coin to Pay by Bank rails to reduce card fees and fund instant rewards.

Developer infrastructure: The choice of a new generation! Developers gravitate to whatever the cool infrastructure of the moment is — and right now, that’s stablecoins. Stripe now makes it possible to issue, hold, and settle digital dollars natively, skipping legacy cores entirely. Others are following Stripe’s lead, building an alternative, outside the reach of banks, for the next generation of fintech developers.

Here’s a list of recent-ish writings and recordings on stablecoins from myself and others:

2 READING RECOMMENDATIONS

#1: Chinese tech giants pause stablecoin plans after Beijing steps in (The Financial Times) 📚Copy anchor linkCopied

A really interesting window into the conflicting thoughts slowing down China’s progress on stablecoins. The Chinese government seems to want to simultaneously prevent U.S. dollar backed stablecoins from expanding the United States’ fiscal dominance, prevent private Chinese companies from exercising too much independence via their own stablecoin initiatives, and prevent stablecoins from creating excessive fraud or financial risk within China’s financial system.

The answer to these concerns would obviously be for the Chinese government to launch its own digital currency, which it is reportedly working on (e-CNY).

#2: How the Trump companies made $1bn from crypto (The Financial Times) 📚Copy anchor linkCopied

I’ve been dismayed by the reaction I’ve seen from some folks in the crypto community defending President Trump’s decision to pardon Binance’s Changpeng Zhao. 

Bribery, which this clearly was, is very bad! We shouldn’t be in favor of it!

And to those who argue that the prosecution of CZ was unfair given how rarely we put bankers in jail when they violate the Bank Secrecy Act or facilitate money laundering, I agree! But the answer is to prosecute these crimes (regardless of who commits them) more!

Anyway, if you’re looking for a thorough overview of the Trump family’s connections to the crypto industry, start with this excellent FT article.

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. 

For those attending Money20/20, what are you most looking forward to?

Could be a session or an event or just catching up with someone in person. Let me know!

If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network!

FINTECH TAKES: BUILDERS SUMMIT

As you may know, Fintech Takes is hosting our first-ever in-person event on November 12th and 13th in the mountains outside Bozeman, Montana.

The Fintech Takes: Builders Summit is the industry event that I’ve always wanted, but have never quite been able to find. We are bringing together experienced founders and operators from banking and fintech — the folks who are actually building products in our industry — and giving them the content and networking opportunities they need to find (and understand) the next big problem they are going to tackle.

If that sounds like something you’d be interested in participating in, apply to attend or hit reply to this email to get more information on sponsorship opportunities. We still have room, but it is going fast! 

Thanks for the read! Let me know what you thought by replying back to this email.

— Alex  

By Alex Johnson

Fintech Takes

The weekly read for the people who build fintech and the banks that carry it.