Transcription:
Chana Schoenberger: (
Good morning. I'm Chana Schoenberger. I'm the editor in chief of American banker and even though I've been here all week, this is actually my first time on stage. So thank you all for coming. I really appreciate it. It's been so interesting to learn so much about the payments industry. So what we have here now is a very interesting panel of three people talking about how FinTech and banks can pave the way for a new payments landscape. So I have here Roy Ng, who is the CEO and co-founder of Bond Financial Technologies, Cristina Vila, who is the CEO and co-founder of Cledara and Scot Lenoir, who's the chairman of Evolve Bank and Trust. So do you guys wanna just go through super quick, just give us one sentence on what you do, Roy, why don't you start?
Roy Ng: (
Absolutely. Bond is an embedded finance platform that enables any digital brand or software company to embed banking, credit, and debit card capabilities inside their applications.
Cristina Vila: (
Cledara, we help companies discover by manage and consult all the different software vendors that they have in their business and we provide them with virtual cards to be able to pay for that software.
Scot Lenoir: (
Good morning, Scot Lenoir Evolve Bank. We're a FinTech technology bank that supports the FinTech ecosystem through an API technology layer. We do acquiring, issue related banking and we support the FinTech ecosystem with clients like Roy and Cristina.
Chana Schoenberger: (
Great. Okay. So Cristina, do you wanna just kick this one off, tell us when brands like Cledara are looking for a platform, what do they look for?
Cristina Vila: (
So one of the first things that we look for is to make sure that working with FinTech is actually core to their business and that is definitely very important and then not only has to be core but we need to have the support of management and the wider organization because building this new type of products and experiences require rethinking how things are. So you definitely need the support of everybody there and then the other thing that we look for is that they have very well established risk and compliance frameworks because one of the key things that sometimes we've experienced in the past partnering with banks is that if that's not the case, then it creates a lot of volatility for our customers in terms of the experience they receive when they're trying to onboard into these new FinTech products and therefore that's something that now we actively look for and then the other thing would be, no, I think that would be the core ones.
Chana Schoenberger: (
So, you've had bad experiences in the past doing this.
Cristina Vila: (
Yes. So when we've tried to partner with banks, then we've had situations where all of a sudden the bank has decided to compete with us or try to take our customers and then they make this whole compliance and essentially they turn it into a weapon against us and they just say, oh, no, sorry. Now you cannot do that and that's because maybe the framework that they had was not clear enough, so therefore they can just interpret it in a different way and then it forces us to change the way in which our business operates, which then means our customers no longer find the same value, which means that it results in a churn on our side. So, it's very important that is clear from the beginning as to how these things will work and if they have to change, what timeline will they give us so that we can then potentially look for different partner bank.
Chana Schoenberger: (
That sounds very scary. So it's a matter of having very good lawyers to read the contract in advance.
Cristina Vila: (
Very good lawyers but also making sure that you have a good relationship with the bank, so that you can hopefully work before you hit that wall and make it better and maybe they do want to go that route and they want to compete with you directly but then at least if you have a good relationship, hopefully they can help you through that transition.
Chana Schoenberger: (
Okay. So let's talk about the roles and responsibilities you'd need to get a program up and running. So first off Scot, tell us what a bank like Evolve would need to do.
Scot Lenoir: (
So, I think about it like any other vendor, excuse me. Part of our due diligence process at the very beginning is, we collect a lot of data related to KYC compliance, technology, financials. We do a website app review. So we do a deep dive on the client that's coming to us and from that we do a memo if you will, like your loan memo that you would do to approve the FinTech that's coming to us. So a deep dive on the client who their end users are, we ask a lot of questions about their use case and so that's some of the things that we do on the beginning and then from an ongoing standpoint we do at least review annually with the client across all those aspects, financial, IT, compliance, web, customer service, how they handle customer services and other piece of that puzzle that we do. So that's the roles and responsibilities from the beginning.
Chana Schoenberger: (
And Roy tell us what a company like Bond would have to do in the same light.
Roy Ng: (
It's very critical that upfront we are aligned with both the bank and the brand to Scot's point, as a platform we fulfill on a lot of the obligations that the bank really would like our brands to actually take on and so that clear alignment very upfront was very important and I think back to what Cristina was talking about in terms of the bank competing with them, I think a big part of this business while there's a lot of technology involved is around trust and so, we spend a lot of time with both our bank partners, as well as our brand partners to ensure that level of relationship is there and I think a lot people in tech, don't talk about the relationship side of FinTech and it's extremely important that you have that level of trust, both on the brand side and as well as the bank side,
Chana Schoenberger: (
How do you build trust with complete strangers?
Roy Ng: (
We have conversations, we've visited, evolved multiple times on site, just to build that relationship. Scot has introduced us to many people within the organization, so we feel very comfortable being able to ping various folks directly and we have a very open and transparent dialogue about various topics with our brands, Cristina, Brad and I, we meet on a regular basis, both on zoom as well as in person, when we have the opportunity to just get a download in the business in some ways their successes are success, right. So, we're very vested in understanding their business model and helping our brands every step of the way.
Chana Schoenberger: (
Okay. So when you talk about banks, partnering with brands, what types of brands are banks seeing interested in, who's coming to you to ask for a partnership?
Scot Lenoir: (
Yeah, so our brands, well, let me back up and first say, as a bank, we do not go direct to consumer or business. All of our brands are the front end for us. They're the one acquiring the customer. So just know that on the front end of how we approach the market. So our platforms, we have several hundred, they would be B2B, B2C, digital wallet, neobank, stablecoin crypto. We just about see it all. One of the things that we do look at is diversity in our diversification, in our platforms that we handle. So again, we've probably seen just about everything in the marketplace and the new stuff that's coming down the path as well.
Chana Schoenberger: (
And what do they want from you?
Scot Lenoir: (
Yeah, well, it's a variety, it's a variety of things we call them solutions. Basically what that means is again, we do acquiring, so we do push and pull transactions. We have a banking layer where we offer what we call virtual accounts, accounts on the fly. You can open up a bank account, a real bank account with a rowdy number. That account, that bank, that banking account will have, ACH, wire, real time payment, RDC, check printing capabilities and then we do issuing as well and so, we work with issuing processors as we have our own issuing processing stack as well. So our platforms have a variety of use cases. They just use these different solutions with us. A lot of them just wanna do ACH. A lot of them wanna open up bank accounts. A lot of them wanna push to card. So, we probably offer 20 solutions and clients pick one to 20 of them.
Chana Schoenberger: (
And what happens when there's a situation like last week, the stablecoin market sort of melted down, does that get in your way in any fashion?
Scot Lenoir: (
I don't think it gets in our way. It creates a lot of panic, but not, not from a day to day standpoint. We don't hold crypto, we don't custody it. We just provide the Fiat part of that transaction. So I think it creates a lot of uncertainty but I haven't seen where clients have lost their money or something bad has happen.
Chana Schoenberger: (
Great.
Cristina Vila: (
I may add on this. So I think so obviously you are talking about what you see today and I think when I think of it, of the question, I think in future, we'll just see any company, right? Wanting to partner with companies like bond and evolve to be able to embed financial services into any experience, because in the end we need to pay for everything that we wanna buy and there is no reason why I need to go somewhere else to be able to achieve that. So the way I think of payments is that payments are an enabler to something else and as such, they should really be embedded into the experiences that people want to have. So, we were talking last night with Roy and for example, imagine now I wanna buy a house. Why should I have to figure out how mortgages work, right? I should just be able to walk into the house I want and just be able to buy it, easy, right? So it should not be so complex as it is today and like this, everything.
Chana Schoenberger: (
That's so interesting. So a home builder would have its own payment system, click here to buy this home.
Cristina Vila: (
Exactly and a hair dresser, why they couldn't have their own, like I'm coming to the hair dresser, I just wanna pay and this is where I always come and that's how I wanna do it. I don't want to have to park my car,
Roy Ng: (
By the way, what Cristina is describing is real now. I mean, there are a lot of software in vertical software companies that are integrating banking and payments within their stack and in the end it better serves their end users and also allows them to have, they have the context that maybe a bank does not have to basically address their needs much more specifically.
Chana Schoenberger: (
Right. My bank doesn't know what I like to do with my hair or what sort of products I buy and why should they care? Yeah. Okay. So, when you think about partnering directly with brands versus partnering with companies like bond, that's it in the middle there? How does that work?
Scot Lenoir: (
We call them aggregators. A lot of people use bank as a service. There's a lot of different terms that are used for, for firms like bond and Roy's, I think from our standpoint, we do business both with the bonds of the world, as well as clients that come to us directly. I think there's a good place for Roy and his firm, in terms of creating that middle layer, because the question is from a FinTech or from a brand, how quick do you wanna get to market? And so for banks, if you have five people in your brand or you have 5,000 people in your brand, it pretty much takes the same amount of time to do that and so where do you wanna spend your time as a bank? And so what firms like bond had done have created, have integrated in our technology layer have created a number of good, a lot of software around that, that the brands can plug into and get up very quickly.
Scot Lenoir: (
And, as Roy said a minute ago, at the end of the day, I just wanna say this for all the bankers in the group, you're responsible for all the actions of everybody at this table. So you can't miss that, right? So firms may be doing their KYC, may be doing their customer service, maybe doing their reg E stuff, but at the end of the day, you as a bank own it. So I spoke earlier about the ongoing piece that we do, that's important because you have to make sure these partners are doing that because again, you own it. So, a lot of times there's direct platforms that are larger, that want to come directly into our technology layer and are sophisticated and versed enough to handle customer service, AML, transaction monitoring, where a lot of firms that are starting up, can't do those services and they need firms like bond to do that and so that's how we think about the market.
Cristina Vila: (
And if I may comment, from the side of a startup here. So we personally, we started in Europe as a company and there, we integrated to a banking as a service platform and that worked very well for us because we could go to market very quickly and one of the core things that we were looking was do they have the capabilities that we need to be able to create the product that we want to create and then when we were looking to expand towards the US, we thought of doing exactly the same because we had proven that it Is the quickest way to get to market, but also it's also a great source of expertise because Roy and his team, obviously they have great relationships with the partner banks.
Cristina Vila: (
And this means that they can operate as that as I call it, that translation layer between the startup and the bank. So they can actually help you be successful. Because if we go directly to the bank, we don't have that longer relationship, which means that maybe some of the things that we want are completely off what, their risk appetite is like. So essentially you are maybe wasting everyone's time. So, it's very important to have a partner that really understands that can help you navigate, those intricacies of big banks and help you be successful and then the other thing that we really were looking when working with bond is, aside from the capabilities, how much business logic they've built in into their solution because ultimately, we want the least possible. We want the access to the payments infrastructure but not necessarily the business logic because that's what we want to build on top.
Cristina Vila: (
And some of these companies, they create a lot of these for you thinking that they're helping you but actually then they are not enabling us to create that experience that we want to offer to customers and here, for example, we want to make sure that we do underwriting before we do KYC, because we want to make sure that we don't collect personal information if we don't need it. So we want to do a quick assessment and then say, okay, fine, now we can proceed and some banks, they have it hard coded the other way or some solutions and they have hard coded the other way and then it's like big friction for us for example.
Roy Ng: (
I would also say for a lot of customers and brands that come to us, they're really looking for an all in one platform. So the banking partner is one part of the solution. You still need other solutions like K Y C K Y B. You still need a processor. There's a whole host of things that you actually need to launch a successful and compliant financial services program and so for brands like Cristina, it's like they come to us and we provide everything under one roof. So instead of contracting with multiple different vendors and coordinating that integration, there's really one single entity that you have to deal with in order to launch the program and that's a huge value prop for technology companies in fintechs because for the most part, they wanna focus on the customer experience. They wanna really drive toward adoption and allow the infrastructure piece bond is able to take care of for them.
Chana Schoenberger: (
So let me ask you Roy, when you pick banks to work with, how do you choose the ones you're gonna work with?
Roy Ng: (
Yeah, I think a couple things, one is around what demand we're seeing in the market in terms of what type of product be it, basic kind banking, debit card construct to credit and credit related products. So different banks have their focus areas and as we choose banks, that's the first criteria. Second is back to the conversation earlier around trust, right? Like we do several in person onsite meetings to meet with each bank partner to get an understanding of their own setup and how they can support a platform like bond. So that we could satisfy the needs of our customers and so I think there's two way kind diligence when we work with sponsor banks.
Chana Schoenberger: (
Okay. I just wanna go back to what you were saying, Cristina, about what happens when a bank tries to compete with you. So this is obviously the big problem with financial services right now is everybody wants to do everybody else's job and when there are many companies who will see an interesting niche and decide that they can do it and they're already working with people who do it. So I imagine this is becoming increasingly common. So what do you do about that?
Cristina Vila: (
So in our case, when we've been in this situation of this direct competition, obviously the first thing is, okay, let's start looking for a different partner because that's gonna be sustainable because in the end, if they have more resources than you and if they just want to really, truly apply to it while they could, the reality is, it's rare that they actually want to fully focus on that which means that in the end, there will be like an average product. So for us, the other thing that we focus aside from looking for some other partner bank is making sure that we are superior in the product, in experience or in surveys and when we were at this previous startup where Barclays just decided that they wanted to compete Heron with us.
Cristina Vila: (
So we just say, let's make sure that we offer this 10 star experience to customers and customers were calling us and they were saying, Hey, do you know that Barclays is reaching out to us to become their customers? Did you know about that? and then obviously the whole company was aware that, that was going on and we were always polite. So what we always say, look, they are still a partner, even though they are not a great partner at this point in time, but they're still a partner and it's because of them that we are in market. So let's make sure that we don't trash them but we need to make sure that we convinced those customers that obviously they need to stay with us and not go with Barclays and they did because in the end, what they realized was that we were offering the service that they wanted and Barclays was only trying to get that business to then cross sell other things. So it was just very different motivations.
Scot Lenoir: (
Can I add something to that? I get asked all the time why we got in this business four or five years ago and I think one thing you have to realize is, fintechs or these brands do a good job of customer acquisition banks historically are not very good at it. We all have the same core that we deal with, right? There's three or four cores out there. Our front end looks the same as everybody else's, that's a reality and so I think our approach was these folks are good at it. Let's support them from behind the scenes and that's how we've done it and so that's just been our approach and so we don't compete with our clients in terms of direct. As I said earlier, we don't go direct but I think if you're a bank, you have to be thinking about that because you could put yourself in a bad situation for your business and so that's how I think about it from the bank perspective.
Chana Schoenberger: (
Okay, great. Let's talk also about the international aspect to this. What differences are you seeing between the US and Europe when it comes to banking and payments infrastructure for FinTech?
Cristina Vila: (
So, having it done in actually three different markets in Egypt in London and now here in the UK, sorry, in the US. So with Europe, what we see is that there the whole banking scene is actually less evolved that here. So here you have banks like evolve and cross river and CBW that they have a core strategy to work with FinTech and that's not really something that you find in Europe. There you have banks here like Barclays that they will say, well, that's a small line of business for us and we'll do it and if at some point I don't wanna do it, I just shut it down. So it's not core to them. So that's why the experience is never a great one when you work with them.
Cristina Vila: (
And that's also why there, the banking as a service industry grew faster than here and then you already have like players like rails bank, right? That they are a bit more advanced and they are clearly the dominant player in Europe and then here you have now companies like bond and other ones that they're also doing a great job and I think bond has a great product there that it will, that we think has those attributes that will make him or will make them the clear winner, the same as when we were choosing in Europe, we spot the rails bank was the one that had the best attributes there. So for me, the difference is this, that it's just, it's somehow more advanced on the banking of the service but less advanced on the banking layer and therefore yes is quite different after all.
Scot Lenoir: (
And from a banking side, we have a lot of clients are international and so we think about this a lot in terms of how money gets moved internationally. I think there's gonna be some interesting trends happening related to crypto and stablecoin, we're actually in a project with MasterCard where we're settling card transactions in stablecoin and since we're on the acquiring side, we think there's some interesting opportunities to settle in stablecoin and you saw strike do that here recently. So I think from an international standpoint, the way we think about it is a lot of our clients are global and how are those payments gonna get processed globally and still a compliance or regulated way. So that's how the bank thinks about it.
Roy Ng: (
I mean, just from our perspective, partnering with sponsor banks, we're seeing increasingly more banks becoming interested in participating in this space. I would say even a couple years ago, it was really a small group of sponsored banks that are really supporting fintechs. I think over the last six to nine months, larger banks have been approaching platforms as well as fintechs to basically try to do programs and historically Durban exempt banks were tend to be the banks that participate in this space but increasingly you are seeing bigger banks and at least their pitches that they could support international just given an international organization. So, it's gonna be interesting to see how this plays out just from starting obviously domestically but as these larger banks come into the game, it'll enable the platforms as well as the FinTech to go global much more easily.
Chana Schoenberger: (
It's interesting because a trend we're sort of watching here and this goes along with what we saw in the last session about sanctions is deglobalization, which is of course the opposite of this, which is what happens when companies move more domestically and they sort of shrink their global presence. So it'll be interesting to follow that over the next few years and see how those two things clash.
Cristina Vila: (
And I think that the interesting thing is that for example, we are a software company after all right and we embed payments there to provide that full journey but our customers, our software customers are global. So that's why we've had to in the end, bring different partners to the mix, to be able to support them in the main markets where they operate and again, there is a massive opportunity here to really be able to create these global products where the layer on top removes and abstracts all that complexity for the customer.
Chana Schoenberger: (
Great. Great. I wanna take questions in a second but I just wanna ask you real quick as the last question here. What is the coolest thing you've seen recently in FinTech that was not your own company?
Cristina Vila: (
It's bond
Roy Ng: (
Thank you.
Cristina Vila: (
Very true. For me, it's really this banking as a service platforms have really changed the way in which people can experience financial services and we are only at the beginning of it. Like we are only seeing a few companies really bringing the tools together and even for us, right. When we are raising venture capital investors, struggle with it, like, okay, are you software or are you fintech? Well, we are both and so this means that even there, right? It's something that we need to open our mind and really become super creative on what can we actually build here? Which is because the sky's the limit, right?
Roy Ng: (
And by the way, if you have not used Cledara, check it out. We are actually not only is Cledara customer of ours, but we're actually a strong user of the platform and it really gave us a lot more visibility into our SaaS spend. Like all of us spend a ton of money on software, and majority of it is subscription software nd I think their solution is pretty brilliant. So obviously that's top flavor but another thing that is very interesting to me, at least that happened this week was MasterCard's announcement of the biometric checkout. That was cool and I know they're working with a bunch of vendors and behind the scenes to really push it out but I think getting that more broadly adopted, I know Brazil's starting and I think MasterCard has had some ambitions to roll out globally. I think that could be a game changer. You don't even need to take out your phone. You just look into the screen and you check out but I think this is back to a theme of how payments and banking can just be seamless. In your everyday lives. You don't need to have a actual device or a card. It's just part of you it's part of your daily life. So very encouraged by that.
Scot Lenoir: (
I would say I'm gonna look forward versus looking back. I get to see hundreds and hundreds of clients a year. They're very cool, like Cledara and others but I would say going forward, the things that I see in the space are two things. Number one, there's some work being done because all of our banks, all the banks in this space are fighting the same thing with fraud, bad customers, bad end users, things like that. There's a project going on to work all of us work together to keep the bad guys out because I'm telling you that bounce from me to cross river, to web and even within our own platforms with our own customers. So there's gonna be some cool things that are happening in that space and then I think the other one that's coming down the pipe is, and these guys were talking about earlier, if you're a chime customer or a Dave customer or earn whoever those folks are, you want more utility to your wallet.
Scot Lenoir: (
And what I mean by that is, I can have a card but can I take that card and do something or can I take my balance in my account and do something else with it? And I think you're gonna see some interesting things happen where I could walk up to a retail outlet and get cash out or put cash in cash in is starting to play but I think the cash out is another piece of that and I just don't see where cash is going away for the most part. So I think there's gonna be some cool things in more utility to the digital wall.
Chana Schoenberger: (
Interesting. Okay. We have time for one question from the audience. Anyone has a question for these very interesting folks. No one, no one. Okay. We have one question.
Audience 1: (
Hi. I think Scot mentioned just now about it. I'm just building on that, right? And the future of payment. So future of hand services will be a lot on interoperability, how it comes across, right? BA is a great concept and with things coming together is all going to come together. How do you see interoperability coming in the finance world, right? Coming, which can make it more frictionless.
Scot Lenoir: (
Interoperability, in the last part,
Audience 1: (
Yeah. Interoperative across the ecosystem, right? Which will make it frictionless.
Chana Schoenberger: (
How do we get them all to work together?
Scot Lenoir: (
At one level I see there are a lot of banks. I talk to a lot of banks every day, I think about getting in the business, one thing but at that level, I think you're gonna see a lot with stablecoin crypto. It's here to stay. I heard the conversation a little bit earlier in the Q and A, it's here. It's gonna stay might as well, deal with it but I do think this interoperability is coming. I will plug something for just a minute. If you're a banker, there's a new association coming out for bankers as a service, you should check it out. There's just gonna be all the banks coming together that are in the space and working on regulatory stuff and things like that. New products, new solutions, best practices, things such as that but I do think you're gonna see faster payments. You're gonna see it more efficient payments and I think what banks have to realize is how do you maintain regulatory compliance around that and I think that's what banks are struggling with right now.
Chana Schoenberger: (
Great. Thank you so much to everyone. I really appreciate you joining me up here and thanks for coming.