Ideas Xchange
Happy Friday, Fintech Takers!
It was delightful to spend time with some of you in person this week at the Fintech Xchange event in Salt Lake — my thanks to Ryan Christiansen and the rest of the fintech crew at the University of Utah. Y’all are the best!
Today’s newsletter is a very brief recap of some of the conversations I had this week and the ideas they sparked.
- Alex
P.S. — Join me and Alloy’s Jason Ionnides on February 25 for a candid conversation about how banks and fintech companies are using AI to make better risk decisions. We'll share real-world stories of AI deployments: what's working, what's failing, and what we can learn from both.
RSVP here and bring your questions.
Ideas XchangeCopy anchor linkCopied
Allow me to empty my proverbial notebook of all the thoughts, ideas, rumors, and observations that I encountered at this week’s Fintech Xchange event (along with a few follow-ups to stuff I’ve been writing about lately).
Acquisitions are now the name of the game.Copy anchor linkCopied
A lot of people at the event asked me about Capital One’s acquisition of Brex. It was, for me, the number one topic of conversation. And I think it reveals a bit of a shift happening in the industry. Banks are realizing that in order to win, they either need to get bigger (this is not a new realization … the super-regionals in particular have been aggressive here for a long time) or they need to get better (offering the best products). And because regulators have made it clear that M&A is now totally fine, banks are leaning into it as a primary tactic to help drive their bigger/better strategies.
My sense is that most bank executives, still being somewhat old-school in their thinking, will choose to focus on bigger, since scale and dominance through distribution moats (i.e, branches) is a game they understand how to play, and their investors will reward them for playing well.
However, a few like Capital One may choose to focus at least some of their resources on better, acquiring fintech companies that have built best-in-class products in categories where they want to grow. Fintech investors, looking for escape hatches from their 2019-2022 batch of portfolio companies, will welcome this trend. The trick is not to crush the butterfly (as Matt Janiga explains here), which will be very difficult for most banks (even Capital One) to do.
It would be nice to have a pro-competition regulator right about now.Copy anchor linkCopied
A big theme across all of fintech right now is the big banks throwing their weight around. Whether it’s stablecoins (“You are full of shit”), open banking (more on that in a second), or access to fraud management and payments infrastructure (I’m hearing some interesting stories about bank-owned consortia), the big banks spent much of 2025 trying to bully regulators, fintech companies, and smaller banks into doing what they want.
At times, these efforts have been ham-fisted and counter-productive to their goals (such as JPMorgan Chase’s rollout of pricing for its open banking APIs). However, overall, the relentless pressure that the big banks are bringing to bear on the industry is having an effect (such as their surprisingly successful lobbying on the Clarity Act).
It makes me miss having a fully armed and operational CFPB. The FTC and the DoJ’s antitrust division just don’t understand the nuances of financial services well enough, and the prudential bank regulators tend to err on the side of stability, rather than competition, in their rulemaking and supervision.
We need a cop on the beat to stop big banks from warping the competitive landscape, and we don’t have that right now.
JPMC might lose the battle, but they will likely win the war.Copy anchor linkCopied
You can’t go to Utah and not talk about open banking. There was a great panel on open banking at the event, featuring folks from the data aggregators and formerly of the CFPB. Their conversation did a great job recapping the recent open banking drama and laying out a realistic vision of what might happen next.
Here’s my interpretation of what was (and wasn’t) said on stage, informed by some additional off-the-record conversations I had with folks in the hallways.
After much flipping and flopping, it seems as though the CFPB (having filled its coffers) is planning to go through the normal-ish process for revising the open banking rule (rather than trying to rush out an interim final rule, which had been the plan). This will provide a bigger window for industry participants to publicly comment (and to privately lobby). However, from what I hear, President Trump’s current displeasure with Jamie Dimon may cause the CFPB to switch sides on the debate over data providers being able to charge fees, which would be a huge blow to JPMC and a gift to the data aggregators who have already agreed to pay for the the bank’s data (Sorry! The CFPB says we can’t!) Similarly, the rest of the revised rule may not end up being that different from the Biden-era rule that we have in place (plus or minus a few tweaks, such as a broader exclusion for smaller banks), which makes all the drama from 2025 seem kinda pointless in retrospect.
Regardless, even if JPMC doesn’t win the battle for open banking fees, it still may end up winning the larger war. While other banks have paused in their open banking investments due to all of this regulatory uncertainty, JPMC has not. This should allow the bank to play very effective defense (influencing how aggregators and fintech companies access the bank’s data) and offense (utilizing open banking data for value-add use cases like cash flow underwriting and pay by bank) while many of its competitors fall behind.
Agentic liability is the thorniest problem we aren’t yet talking about.Copy anchor linkCopied
John Pitts, formerly of Plaid and currently of Affirm, made this point while moderating the aforementioned open banking panel, and I couldn’t agree more.
We are rushing towards an agentic AI future (whether we want to be or not), and it seems abundantly clear that one of the biggest technology/business/policy challenges we are going to run into is agentic liability. When an agent screws up, who is responsible? Will we see the development of private industry standards around agentic liability? Or will regulators be forced to pick winners and losers here?
The charter train is running full steam ahead.Copy anchor linkCopied
Another popular topic at the conference was bank charters. They had a whole panel about it, featuring folks from Mercury, Stripe, Visa, Intuit, and Square. The feeling on stage and in the hallways was that the charter train is going to keep running full steam ahead for the foreseeable future, even as the supervisory strain on the OCC, FDIC, Fed, NCUA, and state banking regulators increases (perhaps to unsustainable levels).
Financial services companies (and companies adjacent to financial services) understand how rare it is to have the opportunity to acquire a bank charter, and it doesn’t sound as if they intend to let this opportunity go to waste. My question is, how far will this interest extend? Will we see large incumbents with interests in financial services — Intuit, Walmart, Apple — apply for ILCs? Will we see more tech entrepreneurs follow Palmer Luckey’s lead and start de novo national banks? Will Elon Musk try to get the first interstellar bank charter?!?
One thing that does seem clear: BaaS banks are going to lose business. The need for BaaS isn’t going away. It’s always going to be the on-ramp for early-stage fintech startups that want to compete with banks. However, the ability for BaaS banks, even the most technologically sophisticated ones, to hang onto their largest and most profitable programs will be in jeopardy so long as the window to acquire bank charters remains open.
Perhaps BaaS will end up looking something like the mortgage market — always present, but cyclically profitable.
Will other lenders follow LendingClub?Copy anchor linkCopied
I wrote about LendingClub’s decision to switch how it accounts for loan losses in Monday’s newsletter. The basis of the decision seemed to be that the company was tired of fighting with one hand tied behind its back:
Perhaps LendingClub decided it was tired of being penalized for growth. Adopting fair-value accounting gives it some of the same near-term boost SoFi enjoys, which can lift reported ROE and earnings and create more room to invest aggressively in things like marketing and new products (it’s making a push into home improvement lending) without the numbers looking as painful in the short run.
I think the company’s assumption was that because the market seemingly doesn’t punish SoFi for using fair-value accounting (despite the fact that most banks don’t use that method), it wouldn’t punish LendingClub.
Yeah, about that:
The stock has rebounded a bit in the last few days, but still. Woof. Dropping from $21 per share to $16 is not great, and it makes me wonder if this is just a temporary blip or a more lasting sign of the market’s displeasure at this change.
If it’s the latter, will that discourage other banks and nonbank lenders from making this change?
Cash App doesn’t have to become a consumer reporting agency.Copy anchor linkCopied
I wrote about this in Monday’s newsletter as well: Block is considering selling its internal credit score (the Cash App Score) and the data that powers it to other lenders. Here’s the quote from Block:
Internal testing shows Cash App’s underwriting models deliver significantly stronger predictive accuracy than traditional credit scoring across revolving credit and longer-term loans like auto loans, student loans, and mortgages. Based on a recent analysis, Cash App's models can approve 30% more auto loans at identical loss rates compared to conventional methods.
These results give Block confidence in expanding access within its lending suite and exploring opportunities for the Cash App Score to help customers qualify for external products—auto loans, credit cards, rental applications—through strategic partnerships.
This raises several different concerns for me. One that I didn’t write about in Monday’s newsletter, but occurred to me shortly after, is the compliance challenge. I posted about it on LinkedIn:
Since the Cash App Score requires customer data from the Block ecosystem, that data would qualify as a consumer report under FCRA if it is used to establish eligibility for credit, insurance, employment, or other authorized purposes. Is Block planning to become a consumer reporting agency?
However, it turns out — and you are not going to believe this — they don’t need to become a CRA to sell their own data and score to other lenders.
Yes, it’s true. The Fair Credit Reporting Act, which governs the consumer credit reporting industry, explicitly excludes any report "containing information solely as to transactions or experiences between the consumer and the person making the report.”
In other words, a company like Block can compete with the big three credit bureaus (while not furnishing data to them) and open banking data aggregators that have become CRAs, such as Plaid (while blocking Plaid from accessing its customers data … to the extent permitted by the CFPB) while not being regulated as a CRA or being forced to comply with the requirements under the FCRA.
This seems absolutely fucking wild to me, but it is apparently true. Perhaps Congress didn’t consider this scenario to be super likely when it was drafting the FCRA back in 1970.
We are going to fight financial nihilism, and we are going to win. Copy anchor linkCopied
The organizers of Fintech Xchange gave me an opportunity on the main stage to do a soliloquy on the perils of financial nihilism and the need for responsible banks and fintech companies to give consumers hope, and I seized that opportunity.
And you know what?
The response from my fellow panelists and from the folks in the room was exactly what I hoped it would be.
There are some people working in this industry who want to profit off of consumers’ feelings of financial despair (they likely work for the Horrible 7), but they are in the minority. Most of the folks building products and companies in financial services want to be able to go home at the end of a long day and tell their families, with pride, what they did to help make people’s long-term financial dreams come true.
Nihilism is not inevitable. It is a solvable problem.
One more reason for optimism.Copy anchor linkCopied
My absolute favorite thing that I got to do in Utah this week was spending a few minutes chatting with some members of the University of Utah’s fintech club.
If you are looking for a reason to be optimistic about the future of our industry, you should spend some time with these students. It was a very thoughtful group that spent most of their time asking me things like ‘what are the biggest unsolved problems in fintech?’ and ‘how can fintech create trust with consumers, rather than undermine it?’ And very little time — unlike their older counterparts at the conference — talking about AI and stablecoins.
I love the direction that the University of Utah is taking its fintech programming, and I’m excited to see how its new Master of Science in Financial Technology degree takes things to the next level.
MORE QUESTIONS TO PONDER TOGETHER
Big news for the endlessly curious (yes, you): I’m collecting your fintech questions on a rolling basis.
What’s keeping you up at night? What great mysteries in financial services beg to be unraveled? Think of it this way, if a stranger is a friend you just haven't met yet, your question is a Fintech Takes conversation waiting to happen.
One that could headline a Friday newsletter or be answered in an upcoming Fintech Office Hours event.
Drop your question here, whenever inspiration strikes!
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
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