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#Money2020 USA: reaching FinTech 3.0

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I enjoyed chairing a half day stream at #Money2020 in Las Vegas focused upon breaking news and views. It actually turned out to be more around how banks are partnering with start-ups, with several sessions discussing how the partnership started and how it worked.

The first session had Amazon discussing their cloud services. I remember a decade ago that most banks wouldn’t touch cloud at all. They feared it, as it was risky. It was off site, it was a third party, it could compromise the bank and so on and so forth. So, it amused me to hear Scott Mullins of Amazon Web Services saying that HSBC had built their total open banking architecture on the AWS Cloud. He also threw in how Goldman Sachs and Barclays are moving to the cloud for good measure. How times are changing.

That discussion led to a chat with Anthony Noto, CEO of SoFi. I know SoFi, short for Social Finance, quite well from their days when Mike Cagney was CEO. Back then they focused upon High Earners Not Rich Yet (HENRYs). Now they focus upon High Earners Not Wells Served, although the acronym is not as good. Their average customer is between 25-40 and the company has expanded from student loans and credit to deposits, savings, insurance and more. In other words, SoFi is pretty much a full service bank today.

After that Bank of America joined the discussion talking about Erica, their AI powered chatbot. Over 4 million customers are now interacting regularly with Erica and the bank said they’d been surprised about how people talk about money. It’s not the words you would anticipate apparently. Equally, they made a key statement that the move from digital to physical and vice versa has been critical. The move from a chat with Erica to contact with a human call centre representative with seamless transfer has been a critical differentiator. What the bank means by this is that the human gets all the conversation from Erica before picking up the phone. Hence, it feels like a continuation of the chat with the bot. Nice.

There were then three back-to-back sessions with banks and FinTech entrepreneurs talking about their partnerships. It began with Rick Striano of Deutsche Bank in a conversation with Bruce Parker of Modo, discussing how Deutsche Bank was using Modo to reach mobile wallets and peer-to-peer networks for payments transactions the bank would not otherwise reach. What interested me here was the discussion of the deep dive the bank made into the company Modo. They had procurement people, product people, financial people, compliance people, legal people and more all crawling all over Modo to ensure the due diligence was complete before signing an agreement with the start-up. That level of due diligence comes as a shock to most start-ups, so beware. It’s painful.

That discussion was followed by Pablo Sanchez, Head of Retail Banking and Wealth Management at HSBC USA, talking with Al Goldstein, CEO and Founder of Avant, talking about their partnership. HSBC USA has launched a whole new digital lending platform that will go live early next year with Avant. Avant provides a lending service themselves, but nowhere near at the scale or type of audience that HSBC reaches. What was interesting here is that the two guys created their alliance partnership over a breakfast at Money 2020, 2017, last year. Things happen at Money 2020.

There was a follow on talk between John Stecher, Chief Innovation Officer at Barclays Bank and Jon Zanoff, Managing Director at Techstars, about the bank to start-up ecosystem. Barclays has been working with Techstars for quite a while in their bank start-up hub called Rise, to create new ways of doing finance. Jon pointed out that of the firms Barclays selected, they had received over $700 million in follow-on investment from their seed funding rounds with Techstars. That just goes to show there’s some serious new ideas growing here. It works.

I also noted John’s sage advice that most start-ups over-promise and under-deliver. Just tell people what you have for real today and what you’re planning for tomorrow. Don’t make out you have it all today. Equally the other Jon made a good point that until a bank’s compensation schemes tie innovation to bonus, nothing will change within the culture of the bank. Both good points.

The session finished with a talk about Marcus, Goldman Sachs newly launched digital retail bank. What surprised me most in that discussion was that Marcus has attracted two million customers in the USA, depositing over $20 billion and taking out $3 billion of loans in just 18 months. Even more notable was when Omer Ismail, COO of Marcus, said that they had already achieved 75,000 customers depositing over $2 billion in just over a month since launch in the UK. Just shows what you can achieve if you offer one percent more interest on deposits than everyone else.

All in all a fascinating session and it corroborated my view that we are in the third generation of FinTech. The first generation was destroy, disrupt and unbundle the bank. The second was banks encouraging disruption with innovation theatre, hackathons and start-up days. The third generation is where banks are seriously working with start-ups to change the bank  by rebundling the FinTech. The start-ups need the bank as they have no history, no brand and no trust; the banks need the start-ups as they have no innovation, no risk and no attitude for change. As Pablo of HSBC said, if they had tried to do what they’ve do with Avant in a few months internally it would have taken years, as so many departments would have crawled over it. They crawled over it anyway, but now they call it due diligence.

Meantime, I did also point out that FinTech is mainly about doing what we do today cheaper and faster with technology whilst TechFin is doing things completely differently with technology. What surprised me is that this comment became a Money 2020 highlight moment.

Just wait for Money 2020 China.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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