Spooky Season
Happy Halloween, Fintech Takers!
It was lovely seeing many of you in Las Vegas this week! The level of engagement and excitement at all the events I participated in at and around Money20/20 was off the charts.
It was also wonderful to return home and see my family. I know many people feel this way, but my kids and spouse truly are the greatest humans on Earth, and I love them so much.
And now we get to celebrate Halloween together, which is just delightful. Costumes. Trick or treat. Halloween parties. Let’s get it!
- Alex
Spooky SeasonCopy anchor linkCopied
Given all the stuff that has been going on this week, including and especially Money20/20, I thought it would be a good time to do a mailbag.
Below is a mix of questions from subscribers and questions from my own brain. If you’d like to see more of the former and fewer of the latter in future mailbags, click here and submit a question!
Now, let’s get to it!
How was Money20/20? What was the overall vibe?Copy anchor linkCopied
As always, it was a heady mix of extreme productivity, sensory overload, physical exhaustion, and fun.
However, this year felt a bit … smaller, maybe? Or more diffused?
It’s hard to put my finger on exactly what I was noticing, but I can tell you that I’m not the only person who felt like the event was a bit different from prior years.
The exhibit hall seemed less crowded. It was as if the walking paths between the vendor booths had been widened to give the impression of busyness, kinda like how we all used to increase the margins in our word processors so that we could hit the required number of pages for our school essays (To the kids reading this and not understanding, this is how we cheated in the days before ChatGPT.)
I also noticed a significant increase in activity outside the event, particularly in the Venetian, Palazzo, and nearby hotels. This “LobbyCon” strategy has been a thing forever, but it felt more pronounced this year, which probably has something to do with the inflation in Money20/20 ticket prices ($4,000 is a lot of money!) It also probably explains why Money20/20 has gone to such extreme lengths to control all of the restaurants, suites, and pool cabanas at both hotels. If you wanted to rent out any place for people to sit in either the Venetian or Palazzo, it seemed like you needed to go through Money20/20.
I don’t know. Overall, Money20/20 feels overmonetized at this point, as if the Powers that Be are determined to get a cut of every tiny bit of revenue that the show indirectly helps generate. If Money20/20 ends up relocating from the Venetian to the Las Vegas Convention Center at some point (This has been a very persistent, but unconfirmed rumor at the event for the last few years), it will likely be because of this intense desire to control and monetize every facet of the event.
Personally, I hope they chill out a bit. It’s hugely valuable to have THE EVENT that everyone in the industry attends every year. I know it’s annoying to see dollars changing hands without going through you first, but that’s the price you pay for being the biggest/most popular. Money20/20 should just accept it rather than killing the cow to get that last little bit of milk.
Was anyone actually saying anything interesting about AI? Or is it all still just buzzword soup?Copy anchor linkCopied
The messaging on the vendor booths was very AI buzzword-y, but I gotta say that the actual conversations I had with people (inside and outside the event) were surprisingly specific and, even more important, honest. Folks were willing to acknowledge where LLMs work well today, where they may eventually work well (but don’t yet), and where they may never be able to add value in financial services workflows.
This is very different than the AI conversations that I have had at industry events over the last couple of years. And it’s a reason for optimism, from my point of view. These models can provide value, as long as we are clear-eyed about their limitations and how we will need to engineer around them.
For example, I recorded a podcast with Marqeta’s new CEO, Mike Milotich, where (among many topics) we discussed AI and agentic commerce. In our conversation, Mike used corporate expense management as an analogy for the type of infrastructure that needs to be wrapped around agentic commerce capabilities.
I had never heard that framing before, but it makes a lot of sense. When a company is sending a junior employee to Las Vegas for a conference, the best practice is to give them a virtual card that has specific limits based on the context of the business trip. AI agents are the new junior employees. We need to wrap any payments capabilities we give them with controls that are set based on the contexts of the jobs we have authorized them to do.
What was the regulatory vibe this year?Copy anchor linkCopied
To put it mildly, it was quite different from prior years!
Jonathan Gould (OCC), Kyle Hauptman (NCUA), and Rodney Hood (formerly NCUA and OCC) all spoke at the event, and there were numerous other regulators and policy folks in attendance. Their on-the-record commentary was fairly consistent with the priorities they’ve touted publicly, including debanking, opening up access to charters and licenses, and being more friendly towards innovation (especially crypto and AI).
On the AI point, I am hearing that federal regulators (especially the OCC) are showing a lot more openness to bank usage of LLMs. However, that usage must be closely supervised through model risk management frameworks and can only be used for certain tasks, such as automating or augmenting back-office tasks that were previously done by humans. Other uses, such as using LLMs to generate new content/answers/decisions, are still seen as too risky, likely due to concerns about hallucinations.
What are the Halloween costumes in your house this year?Copy anchor linkCopied
I have a Steve (Minecraft character), a gladiator, and a piglet. My wife is a witch. And I am going to be a fighter pilot attending the U.S. Navy Strike Fighter Tactics Instructor program.
What’s the current state of open banking in the U.S.? What open banking questions are we not thinking about enough?Copy anchor linkCopied
There’s still a lot of uncertainty, and none of us should expect that to change anytime soon.
The news this week is that the judge in the Bank Policy Institute’s lawsuit against the CFPB issued an injunction suspending the compliance deadlines in the CFPB’s open banking rule (originally slated to start in April next year) until the CFPB completes its reconsideration of the original rule.
This isn’t entirely unexpected, and it gives the CFPB more breathing room to (hopefully) make some thoughtful modifications to the existing rule.
In issuing his injunction, the judge indicated that the banks were likely to succeed on the merits of several aspects of their case, including the definition of the term “consumer” (he seemed to agree with BPI that the CFPB’s current definition is too broad) and the burdensome impact that the rule would have had on banks’ data security efforts.
This is interesting and potentially relevant if the revised rule from the CFPB pisses off the banks and leads to another lawsuit in the Eastern District of Kentucky.
However, more immediately relevant are the nearly 14,000 comments submitted to the CFPB in response to its Advanced Notice of Proposed Rulemaking. I haven’t gotten a chance to fully review the comments yet (I will soon), but my friends Evan Weinberger and Jason Mikula have, and it sounds like there weren’t a ton of surprises. Banks are pushing for fees and the most restrictive scope on data sharing possible. Fintech companies and data aggregators are pushing for the opposite.
Two of the issues that everyone is upset about, but that the CFPB is unlikely to help much on, are liability and third-party risk management. These feel like problems that the market is going to have to sort out, rather than leaving it in the hands of regulators. This was the subject of Wednesday’s Fintech Takes podcast, if you’re curious to learn more!
I also heard concern when I was in Vegas about a resurgence in screen scraping, especially if the revised rule or the private agreements between big banks and data aggregators leave smaller fintech companies and data aggregators without other viable options.
It’s important to note that this resurgence in screen scraping would, if it happened, look very different from how it has in the past. Imagine screen scraping performed by AI agents running locally on individual consumers’ mobile devices, authorized by those consumers and using their bank account credentials. This is both a feasible and terrifying possibility for banks, as it would be essentially impossible for them to throttle or block. It would basically be the open banking equivalent of a DDoS attack.
Finally, at several different events at Money20/20, I was able to chat with folks about the growing use of cash flow data in lending. I write and talk about this often at Fintech Takes, so I won’t belabor it here. I’ll only say that there was quite a bit of discussion on an important and unsettled question: What cash flow data is unfair for lenders to use (and in what contexts)?
Is it fair for a lender to decline an applicant because they are a Cricket Wireless customer rather than an AT&T customer? Is it fair to give an applicant a lower credit limit on a credit card because they have attached seven different earned wage access apps to their checking account in the last two years? What if I use those data points to push an applicant down a higher-friction account opening path due to fraud concerns? Or to lower the credit limit for an existing credit card customer?
These are questions that don’t yet have definitive answers because lenders have never before had access to these types of insights in FCRA-compatible data.
How worried are banks and other market incumbents about stablecoins? How worried should they be?Copy anchor linkCopied
They seem pretty worried, from what I can tell. There was a lot of stablecoin-related FOMO that I saw manifesting in the Money20/20 exhibit hall and in the sessions on the agenda.
But how rational are those fears?
Truthfully, I don’t know.
If your institution does a lot of cross-border money transmission or has a lot of consumer or business customers in countries where there is a demand for USD-backed assets, I would be worried.
Obviously, that doesn’t describe most banks, and, to be honest, I don’t find any of the domestic consumer or commercial banking arguments for stablecoins so compelling as to justify upending most banks’ existing product roadmaps. I talked about this a lot on The Community Bank Podcast with Chris Nichols, if you’re interested in learning more.
What are your takes on the NBA season so far?Copy anchor linkCopied
I’m so glad you asked!
Wemby is, as the man observed, a figment of our basketball imaginations. If he can keep up anything close to what he’s been doing in the first couple of weeks of the season, the Spurs (who are 5-0 and stocked with intriguing young NBA talent + my goofy king Luke Kornet) are going to be a major problem.
I am annoyed that Austin Reaves is balling out so hard that he is keeping the Lakers afloat despite LeBron’s bad back. Same for Maxey and Edgecombe, turning the vibes around in Philly despite being weighed down by the corpse of Joel Embiid. Arrgghhh!
I thought the Hawks, Magic, Timberwolves, and Rockets would have been doing better. Still plenty of time, obviously, but I may need to recalibrate my expectations (especially the Magic … what the hell happened to the defense?!?)
I’m happy that the Blazers are doing well. Jrue Holiday is a capital-A Adult, and that matters more than most folks realize with young teams.
The Kings and Pelicans are just so completely screwed, and I don’t know how it gets better for them anytime soon. It feels like they need new owners, who can then hire new management to start (slowly) turning the ship around, like the Wizards have been doing.
And the Celtics? Well, it was a rough start, but the win over the Cavs was big and indicative of their upside if they can win the turnover battle and hold their own on the glass. Also, making your threes really helps.
What’s the gambling news story that is raising your blood pressure the most right now?Copy anchor linkCopied
There are many to choose from, but we have one clear winner:
Trump Media and Technology Group Corp. … today announced that it will make prediction markets available on Truth Social through an exclusive arrangement with Crypto.com | Derivatives North America (CDNA), a CFTC-registered exchange and clearinghouse. Following the integration, Truth Social will be the first social media platform to offer its users technology to access embedded prediction markets capabilities through CDNA.
Truth Social users will be able to trade prediction contracts related to major events and milestones, such as political elections, interest and inflation rate changes, commodity prices on gold and crude oil, events across all major sports leagues, and more using the new product technology called "Truth Predict." Prices will update in real-time, allowing users to react instantly to developments in major current events.
It’s fascinating that Crypto.com won this business, rather than Kalshi or Polymarket, both of which count Donald Trump Jr. as a strategic advisor.
Here is, apparently, why we need this (courtesy of Devin Nunes, Chairman and CEO of Trump Media):
For too long, global elites have closely controlled these markets - with Truth Predict, we're democratizing information and empowering everyday Americans to harness the wisdom of the crowd, turning free speech into actionable foresight.
“Democratizing information and empowering everyday Americans” by offering unregulated sports betting through a social media platform. Are you fucking serious?
And then there’s this description of how it will work, which (fair warning) will make you much dumber if you read it:
Truth Social and Truth+ users who have Truth gems, which are earned for interacting on the platforms, will be able to convert their gems into the Cronos (CRO) digital currency and apply them to purchases of Truth Predict contracts.
What are the best spots to meet folks in the Venetian/Palazzo?Copy anchor linkCopied
The seating area upstairs in the Venetian, near Bouchon, is very nice and very uncrowded. I hadn’t spent much time in Juliet Cocktail Room before, but it was fun (including the occasional outbursts of karaoke). And if you haven’t been inside the Ice Bar, you should (at least once). It feels a little like home to me!
How are fraudsters utilizing AI? And what can financial services providers do to catch them?Copy anchor linkCopied
This was the subject of the panel that I moderated at Money20/20, featuring Neha Narkhede (Oscilar), Naftali Harris (SentiLink), and Zhi Zhou (eBay).
In the course of our conversation, Neha, Naftali, and Zhi provided some rather frightening (though nascent) examples of how fraud rings are beginning to leverage LLMs. The key takeaway is that much of the anti-fraud technology that we have built and optimized over the last 20 years or so, stuff like ID scanning with liveness detection, will soon be routinely beaten by fraudsters armed with sufficiently sophisticated generative AI tools.
So, what do we do about that?
Rather than fighting AI with AI, Naftali suggested going back to the basics and focusing our identity verification efforts on data that can’t be faked.
Specifically, he recommended focusing on data that has authority (such as confirmed social security numbers issued by the Social Security Administration) and history (Naftali gave the example of his email address, which has decades of history associated with it). Cash flow data strikes me as another potentially valuable data source in this context, as it has both authority (bank customers are KYC’d before their accounts are opened) and history (cash inflows and outflows).
What happened to Fiserv?Copy anchor linkCopied
Bad quarter.
Historically bad quarter.
The company reported earnings well below analysts’ expectations and revealed that it wouldn’t hit the financial forecasts set under former CEO Frank Bisignano. The disclosure dropped the company’s stock 44%, erasing $30 billion in market value. In response, Fiserv announced that its chief financial officer is leaving and that it is shaking up its board of directors, replacing the chairman of the board and the head of the audit committee.
How did this happen?
The company spent the last six years pinning much of its growth story on its merchant services business, which it acquired when it bought First Data in 2019. Key to that effort was Clover, a POS system provider that was acquired by First Data in 2012 and then acquired by Fiserv through its acquisition of First Data in 2019 (Frank Bisignano was CEO of First Data and took over as CEO of Fiserv after the acquisition).
Reporting from Bloomberg suggests that Bisignano and his executives propped up much of the company’s last few years of growth — Fiserv’s share price more than doubled from the end of 2022 through 2024 — by doing everything they could to grow the number of Clover customers and then throwing a lot of new fees at them:
Bisignano and his top deputies, looking to ensure the device remained a money maker for Fiserv, started loading up the product with a slew of fees as part of its so-called “value-added services” for merchants.
The move juiced revenue in the short term but the results of Lyons’s review suggest it might have cost Fiserv in the long run when it comes to customer satisfaction.
At the start of the year, analysts flagged that revenue from Clover was growing far faster than the payment volumes the system was processing — normally the two would increase at similar rates.
This backfired, as small merchants began to turn away from Clover and towards alternatives like Square and Toast. In the latest quarter, growth in Fiserv’s Merchant Solutions segment, home to Clover, slowed to 5%, roughly half the pace of the previous quarter.
I think the key miscalculation here was that small merchants aren’t captive to Clover to the degree that Fiserv’s traditional customer segment (small banks) are to the company’s core banking systems. It’s much easier to switch to a different POS system and, given the level of competition in the space, many merchants are doing just that.
And, by the way, Fiserv’s banking business isn’t safe either. The company also reported that revenue from its financial-solutions division fell 3% in the third quarter, while its margins plummeted to 42.5% (down about five percentage points from the same period a year earlier). More pain in this area is likely still coming. The company has a massive amount of consolidation work in its future, as it significantly shrinks down the number of different core systems it supports and attempts to transition banks over to new systems.
Bottom line — the core providers aren’t so much companies as they are canvases for stock market analysts to project stories of consistent, predictable growth onto. When those stories are interrupted, you get corrections like this one.
What happened to Frank Bisignano?Copy anchor linkCopied
He’s doing great!
He was appointed by President Trump to lead the Social Security Administration in late 2024 (a role that he reportedly wasn’t familiar with and had to Google … which led to one of the greatest quotes ever: “That’s one of my great skills, I'm one of the great Googlers on the East Coast”).
When he accepted the position, he agreed to resign from Fiserv and divest his stake, including common stock, options, restricted stock units and performance equity grants. Following his resignation, the restricted stock and a portion of the performance grants vested, giving him more than 3.2 million Fiserv shares worth roughly $594 million when he was confirmed to his role in May. He then sold Fiserv stock between May 16 and July 1, fetching roughly $530 million.
Those same shares today are worth just $229 million — meaning that selling earlier in the year avoided losses of about $300 million.
And in accepting the government role, Bisignano picked up another valuable perk: a certificate of divestiture, which allows him to defer capital gains tax on the Fiserv sales provided he invests the proceeds in approved assets such as Treasury bills or broadly-based mutual funds.
As the old saying goes, it’s better to be lucky than good!
How do you think about fair value accounting and SoFi’s representation of its financial condition?Copy anchor linkCopied
Great question!
For those who haven’t seen Kiah Haslett ranting about this on Twitter, the context for this question is that SoFi (a fintech lender that later acquired a bank charter) refuses to report its loan performance the same way that other banks do.
Most banks and traditional lenders account for loans at amortized cost, meaning the loan is booked at the amount extended, and interest income is recognized over time. Expected credit losses are captured through CECL (Current Expected Credit Loss) reserves, which reduce both earnings and the carrying value of the loan upfront. Gains or losses are recognized only when the loan is sold or impaired. This approach smooths earnings over time and ensures early recognition of credit risk.
SoFi uses the fair value option (FVO) for many of its loans, recording them at estimated fair value when originated. This allows SoFi to recognize an immediate gain based on the modeled difference between fair value and cost. After origination, the loan’s carrying value changes with market factors such as discount rates, credit spreads, and prepayment assumptions. Because credit risk is embedded in the fair value, SoFi does not maintain a separate allowance for credit losses, which results in profits being recognized upfront rather than over the loan’s life.
I’ve always found SoFi’s accounting choice weird and a mild red flag. Fair value option depends on investors having confidence in SoFi’s valuation models, which should be a tough ask given that the company isn’t all that old (founded in 2011) and has yet to have its models tested by a real economic downturn (2020 doesn’t count, given the level of government intervention).
But SoFi, which went public via a SPAC in 2021, has always seemed to me to have a slight bias in its approach to investor relations towards retail investors, who may not care about these nerdy accounting nuances.
How was the basketball tournament?!?Copy anchor linkCopied
It was GREAT!
Thanks to the support of our wonderful sponsor, SOLO, we were able to host the biggest and best Fintech Takes The Court Basketball Tournament yet!
We had branded jerseys. We had referees (a necessity, given the competitive fire of many participants). We had an MC and a DJ. We even had the UNLV cheer team come in and do a halftime performance!
We crowned a new champion (congrats to Team Pick & Payroll!) We held our first-ever three-point shooting contest (I see Andrew Grant!) And, most importantly, everyone had fun, and we had no significant injuries.
It’s absurdly awesome that I get to host something like this, and we will be back and even bigger next year (if you are interested in sponsoring, hit reply to this email!)
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!
WHAT ARE THE BIGGEST UNSOLVED PROBLEMS IN FINANCIAL SERVICES?
The Fintech Takes: Builders Summit is just a couple of weeks away!
We are gathering an experienced group of 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.
And that’s where I need your help.
I have built a lot of time into the agenda for attendees to talk and to brainstorm solutions together, but I want to make sure those discussions are focused on the most important problems in our industry.
But what are those problems?
I have my own opinions, certainly. But I want to hear from you!
Hit reply to this email and let me know what you think are the hardest and most important unsolved problems in financial services.
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
