OBSERVATIONS FROM THE FINTECH SNARK TANK
As far as I know, Taylor Swift didn’t win any banking or fintech awards this year. Maybe next year she’ll offer a Taylor Swift Debit Card so I can give her a Fintech Snark Tank Banking and Fintech Award.
Speaking of banking and fintech awards, Cornerstone Advisors’ Gonzo Banker blog recently published its annual banking awards, which is perennially the most widely read post on the site.
This awards are a great reflection on what happened in banking and fintech this year. My five favorites and my takes on them:
May Day was the day First Republic Bank failed. Coming off the failures of Silicon Valley Bank, Signature and Silvergate, this failure “struck a serious dose of survival panic into banks around the country,” according to Cornerstone.
My take: I’d put March 10—the day of the Silicon Valley Bank bank run—as the worst day. It was the day that killed any optimism anyone had for the prospects of a good year in banking.
The Illinois senator’s continued assault on the industry’s ability to support safe, secure consumer and business payments is grounded in unsupported claims about interchange.
My take: The irony of the situation is that the group supposed to benefit from his regulatory proposals—small business owners—would be one of the victims, as they’ll see lower revenue, higher costs, and they’ll lose out on rewards from their own credit card spend.
I’d love to know how much money the senator and his wife run up on their rewards credit cards each year. Having the “Durbin Amendment” named after you is about as humiliating as having a disease named after you.
Despite concerns about credit quality and impacts to lower-income consumers, Buy Now, Pay Later (BNPL) is not going away. Cornerstone’s Brandi Gregory says BNPL is the “write a check for cash at 4 pm on Friday afternoon and have a fun weekend” trick. According to Cornerstone, “ultimately this endorphin-producing point-of-sale experience will face a consumer debt service reckoning.”
My take: BNPL is not only “not going away,” I don’t believe consumers will face a “debt service reckoning.” Debt levels for BNPL are far lower than outstanding credit card balances and are not nearly the threat that BNPL naysayers are making them out to be. BNPL is the new entry level credit card and we will increasingly see banks and credit unions offering this capability—not criticizing it.
Hillebrand brought down the house at this year’s Acquire or Be Acquired conference when asked about the bank’s work-from-home policy. To paraphrase: “Sure you can work from home—on Saturday or Sunday.”
My take: Great quote, but if banks and credit unions aspire to attract top talent, working from home has to be a component of their employee benefits plan.
According to Cornerstone, the Vampire Squid “confidently entering consumer banking only to crash and burn with its Apple Cards deal being offloaded to AmEx after Apple had successful market growth.”
My take: Whoa, wait a second here. I know I’m not the most attentive person, but when was an Apple-American Express deal announced? The question of who Apple should partner with is a good one. I don’t see the logic of a partnership with American Express—from either party’s perspective. The Goldman Sachs-Apple partnership will make for a great business school case study someday.
The Not-So-Annual 2023 Fintech Snark Tank Awards
Five banking and fintech awards from this blog:
Who says neobanks—and niche strategies—are dead? In a market where nearly every bank slobbers over rich, established doctors, Panacea is thriving by serving the underserved segment of the market—young physicians right out of residency programs with lots of debt and poor credit history. The fact that this segment will be rich, established doctors in five to 10 years doesn’t seem to matter to banks.
Panacea gets it and has established a neobank that doesn’t rely solely on interchange for revenue. Panacea is profitable, has originated roughly $350 million in loans over the past two years, and nearly doubled its revenue between 2022 and 2023. Who says neobanks are dead? Oh wait, I did in an article title The End Of The Neobank Era.
The Fed nearly fell over backwards congratulating itself over the launch of its faster payments capability. One Fed employee posted on LinkedIn that “history was made,” ignoring the fact that TCH has offered RTP for six years and Japan has had it since 1973. With most institutions in receive-mode only, however, FedNow volume has been underwhelming in its first six months. There’s a huge B2B opportunity for faster payments, however, for innovative and strategically-focused banks.
Let’s be honest: 2023 was not a good year for BaaS as regulatory and technology issues plagued both banks and fintechs in the space. According to Cornerstone Advisors’ annual What’s Going On in Banking study, while the percentage of banks currently pursuing or developing a BaaS strategy remained constant heading into 2023 vs. heading into 2024, the percentage considering a BaaS strategy dropped from 13% to 8%. Prediction: In 2023, Cornerstone gave cryptocurrency its “Comeback Technology of the Year” award—in 2024, it will go to BaaS.
Mikula’s weekly newsletter, Fintech Business Weekly, is on top of the BaaS situation, ferreting out regulation-offending BaaS banks like no one else in the industry. Woodward and Bernstein would be proud of Mikula’s efforts. And it’s all the more amazing considering Jason seemingly spends half his time vacationing in Mexico.
It may be wrong to call Leda Writes a “fintech” blog—it’s really a Life Perspectives blog with a banking/fintech twist to it. Efi’s weekly blog is a must read—there are very few people in the industry I learn as much from as I do from Efi. BTW, is it just a coincidence that they’re both Greek?