Fintech Insider Podcast by 11:FS
00:49:48 · Benjamin Ensor
[00:49:48] S0: So Marketo of course is not a credit issuer. So it would be partnering with banks, providing banking as a service, etcetera. So in effect, what we're looking at here is potentially some of the banks that are offering banking as a service displacing the big banks that have got some of those, as you say, of those co branded credit card programs and so on. And the really interesting piece is potentially this piece, all three of you, I think we're talking about tailoring the credit based on data that perhaps the merchant has about who this customer is and so on. So interesting. Does mean people get credit at a better price potentially?
00:50:26 · Jeremy Balkin
[00:50:26] S4: If I could jump in there, I think it's possible. Although the one thing I would say, and this is for those who are less acquainted with just what is involved with the card scheme and issuing a card, the card itself and all the fancy bells and whistles that we heard from, just before, that's like the tip of the iceberg. The actual iceberg itself is the compliance program, KYC, AML, in The US alone, the amount of regulations around consumer finance, it's called Reg E, SOC two compliance. There's a whole bunch of rules around having customer service, phone numbers to call, dip and pin chain, like that itself is the engine for a successful program of any kind and credit where it's due, Marketa not only built the awesome technology piece to this, but they realized that to build the rest. And I think that's a huge competitive advantage. Once you've got the building blocks of a program ready, then you can do all these fancy bells and whistles on top of that. And I think that's just the one bit of advice I would say to a lot of potential fintechs out there who are thinking, oh, let's go and issue a card, whether it's debit or credit, make sure you get the foundational pieces of a program right, because you don't wanna have problems with the regulators later. And more importantly, you wanna have a compliant program so that it's ultimately successful. So whilst it's very easy to compare which sexy platform to work with, Just know that's just the tip of that iceberg. You've got to see the rest of it, the servicing part, the compliance part of it, get that bit right first.
00:51:58 · Benjamin Ensor
[00:51:58] S0: Yeah, that's spot on because we've seen a number of firms getting a slap on the wrist in North America and indeed in Europe for not doing all of those crucial pieces well. Maybe one last thing, there's this point here about loyalty schemes that Randy Fernando was making. Kate, how important is that? I mean, if a merchant has already got some kind of loyalty program going on or points going on and so on, tying a credit into that seems like a logical extension. That not a killer app, but is that really compelling for customers, you think?
00:52:37 · Kate Moody
[00:52:37] S2: I think again, it's one of the next big areas where I think we should start to see proper innovation is again, we've got all these very old world loyalty models about collect five stamps or, you know, all these kind of very basic programmes. Actually, what you're looking for is this dynamic way for a merchant or someone that you have a relationship with to incentivize you to interact with them. And that might be through some of the stuff that Jeremy's building out, know, it might be that you can have complete confidence that you can buy and get your money back if it's not the right thing. It might be through a loyalty scheme. It might be through all sorts of other components. Yeah, I think loyalty as a whole space again, I suppose if we go back to what I saying earlier about you have lots of conversations with banks about global expansion being really hard, lots of banks are now sort of saying like, Oh crap, what do we do about loyalty? So I think that's definitely a space where these types of offerings, again, as we start to move some of the power back towards merchants, will put some of those big loyalty providers under the cosh to try and do more interesting things to compete with that.
00:53:43 · Benjamin Ensor
[00:53:43] S0: Well, super interesting story. As you all said, Jeremy and Pranav and Kate, a fantastic achievement by Marquetta. So well done to the team there and wish them every success with that. Okay, now for big click energy, a quick fire roundup of some of the more click worthy news from this week. And I've got the first one, which is that the Consumer Financial Protection Bureau has issued its open banking proposal. The long awaited proposals would see the implementation of the Dodd Frank Act section ten thirty three. This act would put The USA on a par with Europe, Hong Kong, and other regions around the world in driving forward open banking in the country. The proposed rule would provide standards and restrictions on the collection, use and retention of consumer information. Among other things, the rule requires depository entities to make available for consumers and authorized third parties, data relating to consumers transactions and accounts. It establishes obligations for third parties accessing a consumer's data, including privacy protections for that data. It provides basic standards for data access and it's intended to promote fair, open and inclusive industry standards. Initially, the rules will apply to accounts and credit cards, but coverage could be extended in the future. So this is a big deal that people have been waiting for this for, well, pretty much a decade, bringing in some real regulations and some rules around open banking in The States. But there's good news and bad news here. The good news is great. Here's some rules. Fantastic. There's some consumer protections. Fantastic. There's some rights, but there's some things missing. There's nothing here about brokerage accounts, for example, and nor are there really any regulations around standards. And as we've seen across Europe, not having standards makes it so much harder to get Open Finance going. So there's a lot more to unpack and far too much for this episode, but we're going come back to this story because this is a big one. Kate, you've got the next one.
00:55:39 · Kate Moody
[00:55:39] S2: Yeah. Our next story comes from the BBC, but again covered in lots of different places, and that is the FCA, the Financial Conduct Authority in The UK, is to lift the cap on bankers bonuses in The UK. From the October 31, the cap on banker bonuses in The UK will be lifted, allowing financial institutions to once again offer unlimited incentives. The cap was introduced in 2014 by the EU, following a public backlash after the two thousand and eight financial crisis. The government hoped the new rules will support businesses to lower their fixed costs and compete more with The US and Asia. However, the move is not unanimously welcomed by the industry as the cap on bonuses has led to an overall increase in basic salaries. We're running a poll on LinkedIn to hear your thoughts as it stands at the point of recording. 58% of respondents do not think the cap should be lifted, but 42% agree with the FCA. Nice spicy one, I'm sure to put in this section. I can see both sides of this one. Obviously it's a very nuanced decision. I think I'm probably going to risk being unpopular and say I'm at the moment in favor of the 42%. I think bringing a cap in made total sense in the aftermath of 2008, given the damage that the banking sector had created in the wider sort of global economy. But it feels like one of those things that looks good on paper, but it doesn't change the reality that financial services is a highly remunerated sector. So if that money isn't coming from bonuses, you know, it's going to come from basic salary. And I think actually probably the more important thing is to look at, you know, how are those bonuses decided and what are the metrics that drive them? You know, historically, I think one of the biggest issues in the financial services sector has been that incentives are aligned to things which are not aligned to what customers want. So actually, you know, if we see a return to bonuses, but bonuses are driven by good positive customer outcomes in line with what we're seeing in The UK around consumer duty, I think that could be a much better system than just having bankers paid high basic salaries that have no connection to the good that they're creating in society. So yeah, caveated, maybe this could be a good thing, but looking forward to seeing how it rolls out.