FinWise EYE ON:

Common Pitfalls in Reg E Compliance - Sarah Fernandez, Kaufman Rossin

In this podcast episode, Sarah Grotta and Sarah Fernandez discuss the critical importance of Regulation E (Reg E) in the banking and fintech sectors. They explore the challenges financial institutions face in compliance, the role of technology in dispute resolution, and best practices for managing partnerships with fintechs. The conversation also highlights common errors in Reg E compliance and emphasizes the need for consumer protection in dispute management. As new payment technologies emerge, the discussion underscores the importance of adapting compliance strategies to ensure consumer rights are upheld.

Takeaways

• Reg E is essential for consumer protection in banking.
• Financial institutions must understand compliance challenges.
• Technology can streamline dispute resolution processes.
• Onboarding fintech partners requires thorough due diligence.
• Reg E compliance is evolving with new payment technologies.
• Testing and documentation are crucial for compliance.
• Common errors include misunderstanding timing requirements.
• Consumer communication is key in dispute management.
• Financial institutions should monitor for potential fraud.
• Continuous improvement in compliance processes is necessary.

Kaufman Rossin

 

What are industry experts saying about financial trends and the future of fintech?

 

Join us for an EYE ON Podcast with our special guests, all industry leaders, who stopped by our FinWise satellite office during our time at Money20/20, one of the world’s largest fintech events, to give us their insights into top trends, current state of fintech and bank partnerships, financial inclusion, and emerging technologies shaping the future of embedded finance and the fintech industry. There is palpable excitement for the possibilities in the fintech industry shared in this special podcast edition.

Money20/20 Guests

• Such Patil, Head of Partnerships, and Alli Nilsen, Senior Strategic Partnerships Manager, Lithic (:30 – 8:33)
• Glenn Murray, Chief Strategy Officer, DreamFi (8:35 – 13:50)
• Taylor Cembalist, Director of Customer Success and Partnerships, NetXD (13:52 – 18:13)
• Krishnan Gopalakrishnan, Co-Founder and CEO, Plannery, and Andrew First, Co-Founder and CTO, Plannery (18:15 – 23:37)
• Sonja McIntosh, Vice President of Operations, DreamFI (23:39 – 24:37)
• Lee Easton, President, iDentify (24:39 – 31:08)
• Brittany Decker, Sr. Director, Head of Sponsor Banks, Visa (31:10 – 45:54)
• Shawn Ghuman, Enterprise Sales Lead, Sardine (45:56 – 51:24)
• Nicola Morris, COO, Highnote (51:26 – 55:12)
• Nathan Lemon, Head of Partnerships, IC Group (55:14 – 59:22)
• Stewart Watterson, Strategic Advisor, Datos Insights (59:24 – 65:11)
• David Ritter, CEO, Privacy Lock (65:13 – 70:30)

Stop! Collaborate and Listen - as Bankers Discuss Working Together on Innovation.

Summary

In this episode of the EYE ON: podcast, Robert Keil speaks with Jason Henrichs from Alloy Labs about the evolving landscape of community banking. They discuss the challenges and opportunities faced by community banks in a digital-first world, the importance of technology and data, and strategies for competing against larger banks. Jason shares insights on how community banks can leverage partnerships, innovate, and navigate regulatory challenges to thrive in the future.

 

Takeaways

• Jason Henrichs has 30 years of experience in financial services.
• Community banks excel in small business lending but struggle with deposits.
• Banking as a service offers community banks a competitive edge.
• Community banks should redefine their market beyond geography.
• Investing in technology is crucial for future growth.
• Data availability and payment systems are essential for success.
• Hope and prayer are not viable strategies for community banks.
• Community banks need to focus on unique niches to thrive.
• Collaboration among banks can lead to shared knowledge and success.
• Regulatory challenges require proactive engagement and data-driven solutions.

https://www.alloylabs.com/

https://www.linkedin.com/in/jasonhenrichs/

 

An Equity Investor Guide to Fintech Banking: Insights with industry expert, Jason Mikula

In this episode of the FinWise EYE ON: podcast, host Juan Arias our Head of Corporate Development & Investor Relations, sits down with Jason Mikula, an  authority in the fintech banking industry and head of industry strategy for banking and fintech at Taktile. An insightful discussion for equity investors and industry participants to help them understand the current state of the fintech-banking partnership industry, the evolution of technology in banking, regulatory challenges, and the differentiation between fintechs and traditional banking institutions. Jason shares his insights on recent regulatory actions, compliance investment, the broader impacts of fintech in the financial sector, and offers advice for investors evaluating fintech and banking stocks.

Matching a Fintech Program to the Right Sponsor Bank - Christienne Genaro

In this episode, Sarah Grotta, Deputy Chief Fintech Officer at FinWise Bank, discusses the concept of a backup bank with Christienne Genaro, who manages bank partnerships at Galileo. They explore the role of bank partnerships in the fintech marketplace and the importance of compliance in these relationships. They also discuss the process of finding the right sponsor bank for a fintech and the shift in use cases, including cross-border solutions and embedded finance.

The conversation highlights the need for alignment between fintechs and banks on BSA and reporting, as well as the shift away from the interchange business model. They emphasize that a backup bank is not just a backup prom date, but a strategic partnership that requires careful consideration and preparation. They also explore the idea of banks forming backup bank coalitions to provide customers with alternative options.

The conversation touches on the factors that may prompt a fintech to seek a second bank, such as the need for diversification and the changing regulatory landscape. They also discuss the importance of building strong relationships between issuers, processors, and banks to ensure success.

Takeaways

• Bank partnerships play a crucial role in the fintech marketplace, and finding the right sponsor bank is essential for fintech success.
• Compliance is a key consideration in bank partnerships, and fintechs should seek sponsor banks that are reg savvy and have a good relationship with regulators.
• Fintechs are exploring new use cases, including cross-border solutions and embedded finance, as they expand their product offerings.
• Alignment on BSA and reporting is crucial for fintechs and banks to ensure a successful partnership.
• The marketplace is shifting away from the interchange business model, and fintechs are looking for sustainable revenue streams beyond interchange fees.
• Processors like Galileo can help fintechs find the right sponsor bank by providing curated lists and facilitating introductions. Having a backup bank is not just a backup prom date, but a strategic partnership that requires careful consideration and preparation.
• Banks may form backup bank coalitions to provide customers with alternative options.
• Factors that may prompt a fintech to seek a second bank include the need for diversification and the changing regulatory landscape.
• Building strong relationships between issuers, processors, and banks is crucial for success in the fintech industry.

How Do Fintechs Become Sponsor Bank Ready? - Stan Orszula

In this episode, Sarah Grotta interviews Stan Orszula, a partner at BFKN, about the future of banking and the role of fintechs. They discuss how fintechs are an extension of what community banks do, offering specialized services to different communities. They also explore the challenges and opportunities for community banks in partnering with fintechs, the importance of regulatory oversight, and the need for preparedness and education in the fintech industry. They touch on topics such as BSA/AML processes, broker deposits, backup banks, and potential future regulations.

Takeaways

• Fintechs are an extension of what community banks do, offering specialized services to different communities.
• Community banks can benefit from partnering with fintechs to stay relevant and provide innovative solutions.
• Regulatory oversight is crucial in fintech-bank partnerships, especially in areas like BSA/AML processes.
• Fintechs should be prepared, educate themselves about the regulatory environment, and seek guidance from experienced professionals.
• Backup banks and contingency plans are important for fintechs and banks to ensure smooth transitions and protect end users.
• Future regulations may focus on areas like FBO accounts and broker deposits.

Mentioned in this episode:

Third-Party Relationships: Interagency Guidance on Risk Management: https://www.occ.gov/news-issuances/bulletins/2023/bulletin-2023-17.html

 

Flying Drones and Fintech Data Integrity: What Do They Have in Common? - Lee Easton

Lee Easton, President of iDentify, shares his journey from the world of drones to helping financial institutions make sense of their data. He discusses the key data issues that banks are trying to solve, such as transaction monitoring and reconciliation. Lee also talks about the potential of cloud infrastructure and tools like Snowflake in improving data management in the banking industry. He envisions a future where major core providers are on Snowflake or similar platforms, enabling real-time data sharing and improving operations.

Takeaways

• iDentify helps financial institutions solve key data issues such as transaction monitoring and reconciliation.
• Cloud infrastructure and tools like Snowflake can improve data management in the banking industry.
• Real-time data sharing can enhance fraud detection and risk management in banks.
• Moving away from file-based data exchange can reduce operational failures and improve efficiency.

https://www.goidentify.com/

The Fintech Map

The Rise, Stumble, and Forward Go of Fintech - Jason Mikula

In this episode, Robert Keil and Jason Mikula discuss the state of Fintech and the impact it has had on the banking industry. They explore the successes and challenges of Fintech companies, particularly in the areas of consumer banking and lending. They also discuss the role of traditional banks in partnering with Fintechs and the potential for innovation and disruption in the industry.

The conversation highlights the need for continued improvement in areas such as regulatory compliance, customer service, and the management of complex technology ecosystems. The conversation explores the challenges and risks of new banking business models, particularly in the context of banking as a service. It discusses the metrics and behaviors that can lead to unhealthy businesses, such as focusing on top-line revenue and ignoring profitability. It also highlights the importance of clear differentiation and understanding the customer segment when entering a competitive market.

The conversation touches on the differences between European and US fintechs, including the regulatory frameworks and the benefits of starting as an e-money license before becoming a bank. It concludes with a discussion on the future of regulation in the fintech industry and the potential impact of upcoming elections.

Be the first to get your hands on Jason's new book:

Banking as a Service: Opportunities, Challenges, and Risks of New Banking Business Models - by Jason Mikula

https://fintechbusinessweekly.substack.com/

Takeaways

• Fintech has brought about significant changes in the banking industry, particularly in consumer banking and lending.
• Fintechs have addressed issues such as high fees, clunky technology, and predatory lending practices that were prevalent in traditional banks.
• Partnerships between traditional banks and Fintechs have led to innovative solutions and improved customer experiences.
• However, there are challenges in areas such as regulatory compliance, customer service, and the management of complex technology ecosystems that need to be addressed.
• The role of VCs in funding Fintechs and their influence on the success or failure of these companies is a topic of discussion. Metrics that focus solely on top-line revenue can lead to unhealthy businesses.
• Clear differentiation and understanding of the customer segment are crucial when entering a competitive market.
• Starting as an e-money license before becoming a bank can provide a clear framework for fintech operations.
• The future of regulation in the fintech industry is uncertain, with potential changes depending on upcoming elections.

Banking as a Service: Opportunities, Challenges, and Risks of New Banking Business Models - by Jason Mikula

https://fintechbusinessweekly.substack.com/