EYE ON: Fintech Partnerships, Bank Charters & the Future of Banking

 

Sarah:  Yeah, so I think you are fairly new to your current role. Isn’t this a new gig? So what’s it like being the Creator at Fintech Takes?

Kiah:  Yeah. So, I have been friends with Alex Johnson for a while, and in my previous role I had co-hosted this monthly podcast with him called Banker’s Corner; and he had shared with me that his employer (now our employer) was aware that there was some interest in writing more about banking. He just felt like he didn’t have the capacity or maybe the expertise to do it. He did know someone who might, so I came on with Work Week, who’s our employer, and launched my sub-brand of his brand, which is Fintech Takes Banking. I think it’s been so interesting to think about how – and you’ve seen it; I’ve seen it – the expansion into more technology topics or fintech topics, and at the same time fintech coming into banking. So that VENN diagram, the overlap is getting bigger and bigger and more distinct. There’s also at the same time newsletter readership has really exploded. Like, I think about how many newsletters I get on a daily or weekly basis, how Substack and Patreon have really shaped my consumption of information and the voices that I listen to, and it was really awesome to be given this opportunity to be a creator. And because Creator is a little bit like being a journalist, like some of the things that I do are the same, like interviewing, writing, I have like weekly deadlines, weekly podcasts now. But there’s a lot more personality involved, whereas I think that like maybe before when I was just a straight journalist, I was that person on Twitter, and now I get to bring some of that like, which no one really, it’s kind of weird to be like oh, I think I like my most authentic self on Twitter as far as social media, but if you look at my Twitter it’s irreverent, it’s funny, it’s sometimes bank-y, and yeah, so I get to bring that and my humor and the things that I’m interested to people, and I think it’s really interesting to think about how trust, like how people learn to trust someone or see their authenticity. And now I’m kind of experimenting with that myself, to be a little bit more like honest and forthcoming with like this is who I am and these are the things that I’m interested and care about, and this is my distinct voice, and hopefully that resonates with people.

Sarah:  Yeah, that’s very cool. Isn’t it interesting how career paths happen?

Kiah:  For sure.

Sarah:  And how you landed here. This is a question I like to ask a lot of our guests, ‘cause I just, it’s one of those things that I find fascinating, as how did you get to here? Because I don’t think any of us thought that growing up, it’s like, yes! I want to be in banking and payments! Yes!

Kiah:  I’ve been asking that question, too. Yeah. Who inspired, like when you were in third grade and you were playing Monopoly, did you love being the banker? No. No one. That wasn’t how you became a banker.

Sarah:  Yeah. So that’s fascinating. Thank you for sharing that. One thing I wanted to ask you was, it’s November when we’re sitting here recording this. You’ve got snow; I’ve got snow; we’re freezing. It’s nearly the end of the year and we’re in the thick of the fall conference season. So as you look back on this year and kind of compare it to what happened last year, how are you really viewing the current market for fintech and bank partnerships?

Kiah:  Yeah, I think it’s really interesting that you ground your question in a year ago, right? So, I remember some of the problems that were being discussed in really public forums a year ago. I remember that maybe a year ago we were seeing what the Bank Ledger rule, and we were even thinking about the roll-back of the definition of brokered deposits, if you can remember that. And yeah, it’s been a total, I don’t even know if I can say it’s a 180, but it’s been a real move away from the, I think the bank-fintech partnership, the banking as a service, as an area of regulatory focus, or I think like as like the morass or quagmire that some of these partnerships had, or were seen as, were causing, or were worried about causing. And I think that the shift away from a regulatory perspective coupled with the fact that the CFPB might use its victim fund of its monetary fund to make the end users of Synapse whole, seems like it’s kind of winding down this like chapter of banking as a service. And I think banking as a service has gone through a couple of iterations, like waves. I don’t know if I think it’s fair or realistic or a good idea that this one might feel like it’s closing, but it certainly feels like people – potentially regulators – have become less interested in this topic relative to where they were a year ago.

Sarah:  Yeah. I agree with you. What I think is interesting is, I do believe that the market is more cautious. They’ve learned a good lesson.

Kiah:  Sure.

Sarah:  But as a banker I can tell you that sometimes we do still get these programs that are brought to us, and I look at them and it’s like, you can’t do that, right? You can’t do that.

Kiah:  Right.

Sarah:  But it’s interesting, because now I have a little bit more grounding to push bank, because I can say you do remember this consent order here, right? Let me share this with you and this is why we’re not going to support this program this way. So I think we’ve got some more learning to do, but it feels very different this year.

Kiah:  Yeah, I do think that we went through a really obstructive period of time. People, and users of Synapse still don’t have their money, right? Like we can’t say that enough or underline that enough. There are still people being actively hurt by some of the species that came out of banking as a service, and my concern as a journalist is did we correct these problems? Did we make sure this would never happen again? From a banker perspective, certainly I hope that everyone who’s involved in embedded finance and banking as a service feels more confident to say no, or feels more . . . sometimes when, before a bad thing happens you’re like, am I being a Cassandra about this? Is it like, but am I just being too negative? And hopefully everyone in banking as a service who really wants this businss line to succeed feels now that like, my concerns were valid, and every day I’m trying to manage to avoid this particular outcome and other potential outcomes that I haven’t imagined yet, or maybe haven’t come to pass. But I’m right to be worried and I’m right to like be cautious of – I don’t think we’re going to get back to the wild heyday of 2022. I think hopefully many of the banks have understood more of their role and really what’s the worst that could happen. But it does kind of suck that like you’re still seeing some of these programs that you’re like, be so serious. You’re like where were you a year ago? Are you living on a different planet than I am?

Sarah:  Yeah. I think part of it is that we’ve gotten a new batch of banks that want to play in the sponsorship/baas environment. Maybe they haven’t quite learned all the lessons at a ground level. I mean, certainly they’re aware and I’m sure they want to do the right thing. But some of these programs that we should be concerned about, at least in my opinion, are finding a home in some cases, and I think it’s the new class, right?

Kiah:  Yeah.

Sarah:  And so, I think it’s going to be this continual evolution and we’re going to have to re-teach some of the newbies.

Kiah:  Right. Also, none of the things that motivate some banks to enter banking as a service have really changed, right?

Sarah:  Yeah.

Kiah:  Many community banks are still facing margin pressure, or they’re trying to grow fee income, or they would like to gather low-cost deposits, so another question is with the technology making it a little bit easier to facilitate some of these partnerships, have they made those investments that are going to be necessary from the compliance perspective and the oversight to succeed in this business line, and can they price it correctly, right?

Sarah:  You just nailed it in two areas, yes. It’s all about, are you going to build your compliance infrastructure correctly, and are the fintechs willing to pay for? That’s so key. You know, I know that you’ve been doing some writing and some speaking on bank charters and fintechs’ interest in getting a bank charter. And I was just reading up on some of this, and I saw that applications are at an all-time high of 20 federal filings. And that was like through October. And that doesn’t count some of the state charters, so others are also pursuing state charters. I’m thinking of like the payment charter in Georgia and things like that.

Kiah:  Yeah.

Sarah:  What fintechs are you seeing that are currently pursuing that particular route?

Kiah:  Yeah, it’s interesting. Everyone, we were talking about the all-time high of 2020, whereas like you know, I remember someone telling me that there used to be like 200 new banks a year. Yeah, prior to the financial crisis, and obviously those are different types of applications. So there’s a couple. There’s some broad categories, and I think it’s always really important to say like what charter are we talking about? Who are they applying with? How are they applying for this charter?

There are some, let’s just say, traditional de novo charters. And there’s been two. And I think that there’s kind of a perception like this is a very involved way to apply for a charter, but that’s AirBorne and NewBank has indicated they’re going to apply for one of these charters.

There have been fintechs that have acquired a bank, so the charter, the application they would have submitted isn’t necessarily for a charter, but it’s for M&A. We saw a couple of those at the beginning of the year and those are always really interesting, because it means they found a bank that they wanted to partner with and that’s I think a little bit harder of a matching problem.

The third charter type is industrial loan charter. Those would go to (CFACE) sp? and then go to the FDIC. If I could just broadly summarize those, a lot of auto manufacturers are interested in this charter. It looks like Edward Jones and OneMain. I think these charters are really interesting because these are proposed banks that are interested in doing lending to some degree, is probably how I would think about that business model, and why are they applying for this charter?

And then we’re got the uninsured bank charters, and it’s so funny when you are a bank reporter and you just run into all of these types of charters and you’re just like why don’t we have one charter. Or why don’t we have one charter but it can come from the federal government or the state government. When I was writing my story about national trust charters, they’re like not called national trust charters. Like that’s basically like a straight name for them. There’s one that’s like full service charter or like full charter, national bank charter. It was crazy. So, the national trust bank charter, which would be an uninsured bank charter and you can’t lend and you can’t take deposits, you just custody assets, what I broadly characterize those, and there’s been like I don’t know, eight – are mostly digital asset companies or Wise was going to apply for one of these charters. In this application it seems like many of the applicants will also request or apply for a master account from the Federal Reserve. And the idea is that they would be able to institutional funds or digital assets and then use the payment rails that come with the master account.

So, did I lay out – also what we don’t have is a lot of traditional bank charters in this, right? Like . . . 

Sarah:  That’s the interesting part, right? I mean, nobody’s looking at getting in, and as you talked about the history of where we were prior to the financial crisis, I think that was most of the charters that were back then.

Kiah:  Oh. Yeah.

Sarah:  Because banking was a very different animal, and how things have changed.

Kiah:  Right. Right. And it is kind of sad from that regard that the economics of applying to be a bank have changed enough that most investors see higher returns maybe in the digital assets space or the fintech space versus the traditional community bank space.

Sarah:  Yeah. Yeah. So, what’s the reason behind all of this interest in charters? When I think about it, I think about is it about control? So I’m a fintech and I want to have more control over my business, and I don’t want to be dependent upon a financial institution that may or may not get in trouble with its regulator? Or is it the political environment that we’re in right now, where they seem to be more open to different types of payments and supporting fintechs? Or is it really all about the perceived cost saving? Or is a little bit of everything? What are your thoughts on it?

Kiah:  Yeah. So, sometimes I ask myself when I’m writing why this, why now? And as far as why now, I think that’s maybe like 75% of the answer, is that the window of opportunity may be open. And so whether or not I think any company is like this is how we will win, is by getting a charter, you probably, if you think that you might want a charter, this is probably the right time for you to file. Like you kind of have to strike while that iron is hot. The person who signed the 2021 OCC interpretive letter saying that the OCC believed digital assets fell under the national charter scope is now in charge of the OCC. So there may not be a single person who is more receptive to this argument than the person in charge of the OCC. Though I hope at the same time, like you’re not applying before you’re ready. You were ready. You were always ready. And the moment came, right? You would want to be ready for these opportunities. Whether or not any particular company is ready for these opportunities remains to be seen.

Comptroller Gould seems to personally believe, based on his public comments, that it’s better to have things inside the regulated financial space than outside the regulated financial space. And so he is I think involved in widening the supervisory perimeter and making it possible for more institutions to enter that space in order for regulators to have more oversight of it. And I think that’s really interesting because we talk a lot in this country about private credit and the risk of private credit, and how post financial crisis all these mortgages moved outside, right? Like they moved outside. And I think the way we talk about credit as if like it’s bad or it’s risky or it’s a negative, that this thing moved outside of our regulated financial space, and is now like do we have a sense of how big it is? Do we know what kind of underwriting standards? Do we know that it’s being valued properly? And I think we’re actually kind of seeing some of that right now happen in the private credit spaces. As the economic environment is changing and some of the credit is weakening, either because of interest rates, consumer health, or potentially fraudulent activity, right? We’re kind of seeing some of the consequences of having things outside of our supervisory perimeter, and we get to ask ourselves like hey, do we like this? Do we not like this? The mortgages are still getting made. They’re getting made by a non-bank. But do we think that it would be better if they were inside and subject to the same supervisory oversight.

Going back to what I said about the charters, as in the different charter types, I think it’s really interesting what we’ve seen from the experience of the three consumer fintechs that received charters. And we understand how important it is that lending is a component of some of these business models, right? Like that really helps the economics. I remember I interviewed LendingClub in 2021 about getting their charter, and they shared that at the time they were already a public company, they were secured title in their loans so they had certain disclosures that they had to do, and then the CEO at the time had kind of a weird ethics scandal so they had to replace their CEO, and at a certain point they realized that they were kind of doing most of the work of compliance, reporting (because of being a public company under the SEC), and they felt like the economics were we could just 1) bring in deposits – like that would be better for us. In our business model, it would be better for us if we did it, so it made sense for them. I don’t know fully like how much money does it cost to have bank partners, access to payment rails for you, the digital trust, you know, like a national crypto trust bank, and whether or not the regulatory compliance costs would be less than the benefit of being able to directly custody assets for customers, charge them. I’ve heard Anchorage’s business model makes a lot of money. So, clearly they’re making it work, even though they had a 3-year-long consent order. I think it’s certainly a business model some people can make work, and definitely if they think they can make it work and this is the time to apply, this is your window of opportunity to apply, like you might as well go for it. You can always get rid of your charter, of course, sell your charter in the future once you have it.

Sarah:  It is true, but I do think that traditional bankers who may be very concerned about more fintechs with charters could take a little bit of comfort in what you’re saying, in that it is all about the regulators having more direct access to the fintechs. It may sort of close that gap, potentially, between the regulatory oversight of a non-directly-regulated fintech today.

Kiah:  Yeah.

Sarah:  But also, the flip side is that not every fintech is going to go down this route, because to your point, it’s still a hefty lift, right? From what you’ve heard and what you know?

Kiah:  Yeah, I’m under the impression that it’s not easy to be a bank. Famously. And the bankers are telling me that any day.

Sarah:  Absolutely. Again, we talked a little bit about baas banks needing to create an infrastructure of compliance and then all that will be transferred onto the shoulders of the fintech if they decided to go down that route and I’m sure there’s lots of fun audits and reporting requirements and other things. I can certainly see some of the big guys going down this route, though. I anticipate we’ll hear a lot about that in the upcoming year.

Kiah:  It will be interesting to think about the big fintechs in our lives as consumers, certainly, like and I’m sorry to drop a name, but would Chime over get a bank charter? Why or why not? Or would PayPal ever get a bank charter? Why or why not? Or an ILC or whatever, and to just ask yourself for different companies who have already made certain choices about their business model, certain partnerships, they have certain revenue structures, it’s not going to be right for everyone.

I did forget to mention, and this is kind of funny that you asked about this, the payment charters that states issue.

Sarah:  Yeah.

Kiah:  And that’s always been kind of fun for me because I joke like as a bank reporter, I get to put horse blinders on and the state payment license that is distinctly for non-banks is like not in my purview. But it’s interesting, and I have been thinking about charters and licenses in general as like they’re either a gate, a moat, or they’re a piece of technology. Right? And so sometimes the regulators not being interested in accepting charters, like we haven’t seen very many applications in the past, right. That was kind of serving as a moat. And now that they are interested in receiving these applications, the question is like 1) how is any company going to use this charter or use this license? And 2) how are the traditional charter holders like the banks going to respond when that moat they were enjoying falls, and other people get to enjoy that same thing that they have?

Sarah:  Yeah, absolutely. And you and I when we were chatting the other day in preparation for this conversation, you mentioned that if this really takes off, if we start to see a variety of new charter types and we start to see fintechs moving in that direction, this could potentially change the way we do banking. Right?

Kiah:  Yeah. I think that banking is kind of a verb and a noun; it’s a place but it’s also an activity. And I think that technology, wait, go back. Like thirty years ago we got interstate banking.

Sarah:  Yes! That’s exactly what I’m thinking. That’s so funny, because I wrote that note to myself as well. Like could this be as impactful as that.

Kiah:  It has to be. So, the role that geography played in protecting and helping banks grow prior to interstate banking, national interstate banking, and then it’s not been 30 years since that. And then we have the internet, and then we have cell phones, and we have social media, and we have the channels by which people access financial services. And they think about their financial lives, and they find comfort and trust in brands, and the role that geography played in helping banks like reach a customer, right, for many banks even still today, your customer kind of lives close to your bank. Like that’s like, that’s a really core fact about your customers. But within the last 30 years we have seen so much channel change, and I think geography hasn’t gone away completely, but it’s probably been severely diluted from maybe 90% of the consideration, maybe 20% for many people. And I think every traditional community bank does not compete nationally, but they compete against every national bank that does compete nationally. So your competitors have just exploded. And your customers maybe don’t place the same emphasis on geography that you did, and so the question is like what does that mean for you, bank, but also what does that mean for us, customers, about how we (verb) bank. And also, what does it mean for the future of (verb and nouns) banks and banking? And I think that’s really exciting and scary, and I know that FinWise, like the way that you guys probably conceptualize customers and customer reach and demographics, you probably think about it way, way differently. Who is your ideal, perfect or the customers you want to serve more of? Than some banks maybe in a place like Nashville that are more focused on a small business customer in a county.

Sarah:  Yeah, absolutely. That makes so much sense. And I’m wondering if you think about it from the customer perspective, if we aren’t going to be sort of having a much more disjointed financial picture? ‘Cause now what I’m doing is I’m engaging with specialists, right?

Kiah:  Yeah.

Sarah:  I’m going to the fintech that specializes in this type of credit card. I’m going to this fintech that maybe specializes in personal loans over here, and HELOCs over here. And I’m getting a debit card over here, and I’m getting my crypto over here. With technology it probably doesn’t matter, because there’s technology to bring that all together kind of. I’m wondering if that’s what our financial future looks like.

Kiah:  Yeah, I kind of have a rant about this, not from a banker perspective, but it’s from a person with money problems, like adjacent money problems. I think that Robin Hood is kind of the polarizing brand, right, like the brokerage. I think they’re polarizing for me because they gamified stock purchases. I don’t know if that was right for society. I mean, it was great that they lowered trading commissions down to zero, like that was really good. Gamified stock buying, not so sure about it. Futures trading, or like gambling but calling it futures trading, that’s like bad. I don’t think that’s a hot take. And then they’ve thrown in crypto and they have a credit card. They have a rewards credit card. And I don’t know what their product’s road map looks like, but what I can tell you is like from that I think that Robin Hood has a pretty good idea who its customer is. And maybe some of the problems its customers have. Maybe some of the products that its customers would find valuable or interesting. I think Robin Hood knows how its customers think of Robin Hood. What I’m actually really interested in is that if I’m Robin Hood and I introduce gambling to my customers or (sorry), futures trading, and my customers lose money and they have adverse consequences – but do my customers blame me, blame Robin Hood for that? Or are they kind of like eh, that’s what I expected to happen. And too, like is that a problem that I’m interested in solving? And I don’t know the answer to either of those questions. But I think it’s interesting that Robin Hood has like played with this idea, like its customers and how its customers think about money, and why they would pick Robin Hood.

Then I’m a customer of SoFi, and I’m a customer of SoFi because it offered comfortable, affordable student loan refinancing. And I don’t think that’s not an innovative product, but it’s not a product many banks are interested in offering. And my student loans, when I re-fied they were like less than the price of a car. And I had repaid them for like eight years fully; I’d been employed the whole time; I was employed in an area that I had graduated in. I thought I was a great credit risk, and I could not find a bank that valued me as a customer who thought that my problem of how my student loans made me feel financially – like cared about solving that problem. So then I re-fied with SoFi, because they actually did care, and they offered a very competitive service and price, and then SoFi now also offers really interesting (I don’t know if you ever looked at SoFi’s product map), but like they offer, I found my car insurance through them, I replaced my car insurance; they do personal loans; they do a credit card; they have a travel thing. They do email me way too much about mortgages, but I’m glad that someone thinks that maybe I could buy a house, because I don’t think I could buy a house, but SoFi thinks I could buy a house. They offer career counseling. And it’s just kind of interesting because it’s a lender that maybe just has a sense that if this person cared about student loan refinancing, they’re probably at this very specific stage in their life, and their money’s like OK now. But they’re going to enter periods of time where their life will change and so their relationship with money might need to change, or they will have different questions about money, and we’ll kind of grow with them in that journey. And I think maybe many banks don’t conceptualize their customers in that way. Maybe they don’t have the data to conceptualize the money-adjacent problems their customers have, or that why would I turn to you, my bank, instead of turning to anyone else? And I heard this about retirement, too, that like some people were like I’ve watched ten hours of YouTube videos about how to retire. I have to like, how much money am I going to need? How do I set up my accounts correctly and stuff? And I haven’t heard from my bank at all. And they retired this year, so they stopped getting the paycheck, right? And man, that’s like a really good time for that bank to be reaching out. I just think these are some of the questions that I don’t know if banks always conceptualize. I get it. It’s really hard to run a bank on a daily basis. But I think if we think about how people’s relationship to geographic place is changing, the internet’s changing how we interact with brands, and who we will go to look for, for trusted advice, right. I think banks sometimes are cutting themselves out of these conversations because they haven’t thought to themselves, well, a person with a question would just walk into the branch.

Sarah:  So maybe the term “community” is being redefined, right?

Kiah:  Oh, completely.

Sarah:  Yeah. The community is whatever the fintech wants it to be, and they become expert in that “community” and to your point, like Robin Hood, they understand that community they’re building very well, and then it maybe isn’t just a one-hit wonder.

Kiah:  For sure.

Sarah:  It is maybe broad-based financial services, but for a very specific niche market that kind of thinks about banking all the same way.

Kiah:  Yeah, and I’m . . . I just mentioned a lot of retail examples, and I understand many community banks, that’s not who their most profitable customer segment is, but I’m haunted by this stat that I learned from Chris Nichols, and I’m sure other people who work in the data analyst profitability analysis space can tell you, is 20% of your customers produce 80% of your revenue. Most of them are kind of net neutral to your revenue. And then a certain percentage are like actively subtracting from your revenue. The question—and we have like 4,000 banks in the country—is there a reason why we’re fighting for all these people? And how could we both cultivate and grow the amount that are within that neutral, to make them more profitable? And how could we maybe encourage them to say, you’re just not in my community? Like we’re not the community for you. We’re not the community bank for you, right? And I don’t think that’s bad, that’s how you want the self-selection to work out.

Sarah:  Yeah. But that’s an anathema to most traditional community bankers, right. I mean, we serve everyone. We are a part of the physical community and serve these individuals, and so not being able to serve and to say no to a particular individual within that community is a fundamental change. And so to your point, maybe this is the point where we start to rethink what banking means in this country.

Kiah:  For sure, and I definitely think that – I’m always interested in questions of identity. This conversation is really a question about the identity of banks versus the identity of these fintechs that will acquire these charters. It kind of feels like there’s an existential question here between what banks are (the noun) what banks are, and what does it mean to bank, or who offers banking services, and why do these – what’s important about the question? Why does this question matter? Who does the answer matter to?

Sarah:  Interesting, interesting stuff. One thing I wanted to ask you about, too, because I haven’t had a chance to spend enough time on this, unfortunately: What are your thoughts on the Federal Reserve Governor Waller’s introduction of the “skinny master account?” How does that fit into this whole conversation, and what is a skinny account, and is it going anywhere? Because I hear things, and I should be concerned about it; and I hear other things, and it’s like oh, I don’t know, it’s not that great. But what are your thoughts on that?

Kiah:  OK. So. Sarah. I’m like a little obsessed with this because I think there’s some intrigue. What happened, if listeners aren’t familiar, is that on October 21^st [2025] Governor Christopher Waller gave a speech and he mentioned something called, or he proposed, a skinny master account. And he said that he proposed it because there would be like, he understood that basically there were some firms for whom they just don’t need the full master account. They don’t need the full reserve; they don’t want to do discount window stuff; they wouldn’t have like a daylight overdraft, or whatever; but that they could use access to the payment rails. And everyone freaked out. And I think fairly. Like everyone freaked out. This was like, this would happen a very like, it feels like a big change, because the Fed has been engaged in some litigation around an application. Someone, Custodia wants a master account but has declined it, but for years the Fed said nothing on the application. And so Custodia made a separate legal argument that said like, you need to publish like the eligibility.

Like I, if you look at who has, and also like separately, we probably need to know who has master accounts in this country, right? Like is that information that we could receive? And so there has been a lot of interest around who gets master accounts and why, and for what reason, and in part because the Fed has operated these accounts for decades. They say now that there is a lot of, a very determined criteria of who gets these, but in the past maybe there wasn’t. Like I learned that like TVA, the utility provider in Tennessee has a master account. Like I don’t know why they have a master account. I learned that the Bank of Guam lost all of their banks, like we talk about a banking desert, like the island of Guam lost all their banks. They tried to open a territory-owned bank, like called the Bank of Guam. They applied for a master account, and they were not able to get one for years, which meant that like no, there was no bank. There was no bank in Guam. Everything had to be kind of done like, and everything had to be done digitally, if that makes sense, like because the two banks on the island had closed. And so, there’s this whole background around who gets master accounts and why. And why people want master accounts, or why non-banks want master accounts, is for payment rail access.

Sarah:  Mm-hm.

Kiah:  So they don’t have to work through an intermediary, correspondent bank, banking as a service bank, embedded finance. He gives this speech October 21. Everyone’s freaking out. This comes up at Money20/20, because he gives it right before Money20/20. And then I found out that like recently, like I put this in an outline to talk about with Alex, and on November 6^th, which was several days ago, he walks it back. And he says there’s a misunderstanding out there that somehow a fintech could just show up and go hey, I’d like a skinny master account. And then he goes on. You have to have a bank charter to do this. So if you’re not a bank, and you don’t have a bank charter, you don’t have a right to ask for one at all. And I was like, I was so annoyed because, but I think it’s funny, but I was annoyed because I was like, he acts like all of us were crazy for reading his comments the way we read them. And no, no, no, you silly gooses, he was actually only talking about like bank charters. And so, I think he’s really narrowing the scope to basically the uninsured depository institutions, like he’s kind of covering like yeah, it sounds like he’s like walking back covering for something, and so it’s funny because you’re like what do you think about this? And it’s like well, 1) my theory is he got in trouble with someone. I have no inside information, but I read—I don’t think anyone was wrong for reading the skinny master account commentary.

Sarah:  Provides you with access to the Fed’s payment solutions.

Kiah:  Yeah. You – were you thinking it was only for banks? No.

Sarah:  No. No one got that.

Kiah:  No. No one got that. Anyway, so that’s the update, and I have like questions about that, but then like on the proposal itself the way I understood it is, this sounds to me like a national money transmitter license that former Undersecretary [of the Treasury] for Domestic Finance Nellie Liang proposed last year. Like low-key shade, every time I hear about “financial innovation in the U.S.” I’m reminded that other countries actually do have national money transmitter licenses, and we don’t. And that like for good or bad, I think that any time someone makes this like what I would say is like unsupported argument that like the U.S. is the most innovative, financially innovative country in the world, like be so serious. We don’t even have a national money transmitter license. Like we’re so scared, we’re so scared of that, rightly or wrongly, like we don’t have it. Other countries do. If we were serious about this, we could go learn from the other countries and be like hey, what’s your experience been like? Did it increase financial access? Did it bring things into the supervisory perimeter? Did it invite unacceptable risk? Or like, and do you regret it? Or did it lower the cost of access? Did it, you know, I don’t know. So like I’m intrigued by a national money transmitter license, and even though I think maybe banks in the long term would see that as a competitive threat, I am not always in the business of being like well, just ‘cause the banks don’t like it, like it doesn’t mean that we shouldn’t have it. I think that if you say the way many banks do that you believe in the free market, then we should probably, we probably can’t really lean on that argument as much as maybe we should be leaning on it. Again, this is the charter as a moat and not a charter as a piece of technology. So that’s my like very specific rant about this speech and the concepts in it.

Sarah:  Interesting. You know, this is one of the things we’re going to need to follow through the next several months. I think this is going to be one of the key things that I’m watching, also along with 1033, what’s happening—

Kiah:  Of course.

Sarah:  –with merchant data, privacy, on that front. And then I think I will try and pay attention to some of these state payment charters, because I think that’s going to be very interesting to see if they reallly make their mark and really change things, or if it’s just kind of suited for one specific use case or another that a state might want to particularly support for some reason.

Kiah:  For sure. I also, something I think listeners should think about as in with kind of the future of [verb] banking, is to ask themselves like how are they clocking the competitiveness currently of LendingClub, SoFi and Vero? And how do they conceptualize the competitiveness of companies like Stripe, Squared and PayPal? I think that there’s some concern about what the future looks like, and I think that’s fair; but the question is like how are we understanding the current environment? Because in many ways the competitive concerns we think about in the future, they are already here, right? There are many big players that already exist, and so as people think about the future, don’t be kind of like so focused on the future that you’re not in the present and you’re not paying attention to what is around you, right? Like while we think about things like 1033 and national money transmitter licenses.

Sarah:  Yep. That’s just good advice. I like your thinking on that front. Definitely going to be an interesting year to see how all this unfolds. But before we wrap things up here, I just wanted to ask you where you’re going to be? Because I know you’ve got a crazy travel schedule ahead of you, so people who want to talk to you about charters and other fun things in the banking space, where can they find you over the next few weeks?

Kiah:  Well, I’m fortunately at the end of most of my 2025 travel schedule. Yeah. I’m headed to Bozeman, Montana for Alex’s Fintech Takes Builders Summit, and then next week I will be in Washington, D.C. for ASU’s Policy Summit. And Sarah, I have a surprise question for you.

Sarah:  OK.

Kiah:  I will be moderating a panel on The Possibilities of Embedded Finance, and I will be speaking with four bankers at Banks That Do Finance. What question should I ask them from you?

Sarah:  Oh, goodness. Oh, put me on the spot. You know, I would probably go down the rabbit hole of 1033 probably, because they were just talking about it. But that’s going to be just so critically important to the success of embedded finance, so the question is: Does it survive? Do we need it? Can we exist with our current environment? Which is a point you made, which is we have consumer data access today. Is there a better way of just sort of framing up what we’re doing today, and let’s not worry about rules and laws to make that happen.

Kiah:  I love it.

Sarah:  And I would focus in on the pricing piece, because I think that’s the problem with the policy that initially came out, is that financially it was just completely unfair. So I want to talk about an interchange model with data.

Kiah:  Yeah.

Sarah:  People boo and hiss at me when I bring up the “I” word, but I think if you have it and it’s something that can be moderated because look what happened when you didn’t have that infrastructure in place. Look what happened. You have an organization who has a lot of data out in the marketplace saying I’m going to charge this astronomical fee for my customers’ data, because I’ve spent a lot of time working to collect that data and to keep it safe, and so they were able to charge a huge fee that may or may not make the future of banking [the verb] what we want it to be.

Kiah:  Yeah. Oh, I love it. It’s funny because I’m sure 1033 is going to come up like all day.

Sarah:  Yeah.

Kiah:  So it’s going to be like the one baas panel where we don’t have to talk about it, but no, it sounds like we’re talking about it.

Sarah:  You’re going to be talking about it. I think you will. It’s just not going away. I thought it was dead for a while, and it came back.

Kiah:  It’s coming back.

Sarah:  It’s definitely coming back. Well, that’s fascinating. Thank you so much for this great conversation. Love to get your perspective. You’ve got such a very interesting view of this marketplace. I want to thank you.

Kiah:  Well, thank you so much for having me and just letting me ramble about what the future of [verb] banking looks like for our [noun] banks!

Thanks for listening.