Name: Future of Finance 2024: The Next Era of Fintech
Uploaded: 2024-05-16
Duration: 19 min 16 s
Description: Frank Keller, Executive Vice President, Large Enterprise and Merchant Platform, PayPal Steve Quirk, Chief Brokerage Officer, Robinhood Markets Tamara Romanek, Global Head of Partnerships, Plaid Moderator: Luisa Beltran, Fortune

Frank Keller, Executive Vice President, Large Enterprise and Merchant Platform, PayPal Steve Quirk, Chief Brokerage Officer, Robinhood Markets Tamara Romanek, Global Head of Partnerships, Plaid Moderator: Luisa Beltran, Fortune

Future of Finance 2024: The Next Era of Fintech

Conferences

Frank Keller, PayPal, Steve Quirk, Robinhood Markets, Tamara Romanek, Plaid, Luisa Beltran, Fortune

Welcome everybody. This is the last panel before cocktails. So we're going to be very prompt here. No pressure. So my panelists first question is A I is on top of everyone's minds these days tomorrow. What do you think would be the next or the biggest near term impact for fintech? Oh, gosh. Well, like every good Disney movie, there's a lot of good and a lot of bad that can come with A I, right? Especially in financial services. I think there's a lot of opportunities that relates to uh customer service. We talk about that a lot, but I think that personal financial management connecting your bank accounts and things like that to give access to consumers so that they have better line of sight to a full picture of their financials. That could be pretty exciting. But I do think as an industry, we have a huge responsibility to think ahead of the fraudsters because they have access to the technology too and are innovating and thinking every day about how they can um you know, challenge us all. And so I think there's an opportunity for us to really get ahead. We think about that a lot at TAD every day, especially with onboarding experiences and KYC and those types of responsibilities. Yeah, we are. Um I'm actually looking into how that changes shopping behavior and the the purchase behavior. What's interesting is uh 70% of people want personalization. But when you drill in and you look at the research, people are super scared about what does the A I do with my data, what data is used and so on. So uh when you drill one level deeper, when people trust business, them with a business uh brands about, I think that's a mckinsey study. 87% of people want to make sure that data privacy is handled well. More than 70% of people want that A I policies are, are done well. And I think that's something we're just getting started with and it's, it's super interesting. So I'm looking into how how we can personalize those experiences while keeping customers safe. That's what paypal has done over many years and with fin financial data, we're doing this now holistically also in the world of A I with commerce data and how is A I impacting the move to open banking? Yeah, you want to take that your life. Yeah, I mean, I think I touched on it a little bit in the spirit of when you think about open banking and we'll have 1033 regulation coming out here in the fall in a more formal way. And everyone is starting to engage early wage access. Uh People are providing a lot of data as it relates to how do I get from where I am today to get to a proper financial aspect of how credit can make a difference in my life. But getting people to a proper path to credit is going to be pre pretty critical. Yeah, I think as I explained, uh open banking allows uh draw enough data and to be used for uh personalized. Uh A I decision. I think people want to understand how is my data used and that will be critical, but it allows us to do much faster credit decision on on boarding KYC and all these kind of things. So is it different here than in Europe? Is there more progress in Europe? I think so, I'm German. Um so I think the Europeans are a little bit more cautious. I think in general the sentiment is uh that is very surprising people want to use it. They are just not that sure. And I think the the Europeans are a little bit more cautious about it. But I think the the themes are the same and I, when when I see regulation across the world evolving in the same way, we're all rallying around especially now uh around the same things and, and I think the regulators are struggling to uh to to follow really the pace of the industry. So European regulators are not ahead of us. They're pretty much on pace with us. They're ahead of us. I think they're ahead of us. They're an open banking on open banking. I mean, with two way back, we had open banking regulation which forced the financial institutions to open up and then there's licensing around this and this is just now happening in the US, right? So it's less from an A F I perspective or from an open banking perspective. Yes. OK, Steve, I was enjoying the conversation. I'm no, I'm learning a lot. So let's talk about after hours trading at Robin Hood. Um How has the industry responded to the entrance of a new generation of investors who are active in the markets and want to invest on their own terms? And who are these investors? Are they Gen Zers? Are they millennials? So um the Robin Hood, there's, we have 24 million clients and they came at a speed which the industry has never seen before. So I, I came from the world of Schwab TD Ameritrade and you know, it took six decades to get to 15 to 20 million customers. It took about four years for Robin Hood, but they're, they're very different investors. Average age is early thirties. Half of them are first time brokerage clients and they're challenging the norms of the way that a sometimes dodgy business um operates. So the idea that some person who looks like me has to go ding ding two times a day for them to uh make an investment is quite foreign to them. You know, Amazon doesn't close and clearly we don't need the human beings on a trading floor. We survive COVID without a person on a trading floor. Um So, you know, the idea that um they can't make their invent a lot of them do their education and, and they find their um investment opportunities in the after hours, They work during the day. So it's always been a source of frustration that they can't invest whenever they want to invest. If I wanna buy a stock at $10 I don't really care if I get executed at 3 a.m. or, you know, when all these people are standing on a trading floor. So, um, we, we, we approached that problem and said, let's fix it. Let's find a way to accommodate their schedules and let people invest whenever they'd like. Um, and so we stood this up, we started very slowly with a small number of very liquid names, but we're up to about 900 symbols. And, um, we seen, well, this week you can guess it was quite busy because we're the only, we're the only game in town. And so, um, you know, we've seen huge volumes as a result of that. Is there any time that's busier than others, um, around earnings or when there's news that happens overseas, we'll see huge bikes in volume. Um, and you know, there's, there's an opportunity there for people. Either they, they want to capitalize on that or maybe they want to protect an investment that they have. Um, I, I do believe in five years. We'll laugh at the idea that this wasn't the norm because it, it really doesn't make a lot of sense. I mean, we have other asset classes that trade around the clock seamlessly. This one just needs to get on board. Ok, let's talk, let's talk, regulatory Tamara. You mentioned that there was some big regulatory issue that got announced today. Well, it was the Supreme Court, uh you know, kind of came out and said that the CFP B will continue to receive funding, right? And they're the ones that are driving the 1033 initiative, which is really good for consumer data rights setting standards for data sharing properly. It's gonna drive a ton of innovation in the ecosystem. I run partnerships at PLAD and just seeing the various types of fintech and financial services companies, big banks for the original fintech. So let's be clear about this. Um But I think what's fascinating is to see the type of innovation that everyone is, is being able to create, to help users access their favorite financial apps and engage these two gentlemen right here are customers of Plad and so it's great for us to see the long time. Um You know, having the, the relationship that we've had with you all for all the years and being able to take advantage of that in early stage, early movers here on the stage with us. Interesting. So let's sorry. II I think our first connection was with Venmo, right? Then. That was the very first one. So people linking their bank account to fund their Venmo account experience and pulling money out the same way. It's like an on ramp experience. So let's talk about fraud. Um So A I and fraud. So we've been talking about A I a lot at this conference. Can we talk about how it's helping criminals conjure up sophisticated means of fraud? And I know plat has been doing a lot of stuff. Um I mean, it's very interesting. I, um I just briefly gave a speech on this topic that like now school kids are basically can access uh tools that were not available just a short while ago and go online and actually get read a tutorial how to do fraud and using some of these A I tools. Um So it's, it's moving, it's democratizing fraud and fraud is now, I think if you, if you take the fraud economy globally, it's like the fifth largest economy in the world, I think in, in, in 10 years it will be the third largest economy in the world. It's crazy. Well, he just scared me. I didn't realize it's gonna be the third largest. Wow, maybe we should get into that. Well, there are other guys that don't like that either. So Tamara, can you talk about deep bakes? Are they sometimes too good for like the human eye to detect? So, when you think about it, so we have a product called Plaid Identity and Verification. And it's all about the on boarding experience, whether you're linking a bank account to any experience and you know, just deep fakes are probably one of the scariest things we can think about. I remember a couple of years ago, my bank account calling into the bru system. Would you like to record your voice? It's making different forms of authentication, like irrelevant, right? And so we really have to keep thinking about, it's not just about your one time picture, maybe it's the the way you move your head and making sure that the liveliness is there when you're on boarding a user. But it's not even just that it's like I think that our head of identity and verification is predicting that three years from now pure document verification will be obsolete. So we have to find other ways to get insights and network information to inform, you know, is Frank really who he says he is. I miss the days when you just asked what my favorite ice cream was. Yeah. Right. Might have to get a little more personal than that. I think the notion of a digital identity and how we can all work together to make that fraud proof. And future proof and how, how its constituents is uh is something that will need to evolve very rapidly. And again, something I think that uh the traditional way of how legislation and so on has caught up uh will be very difficult. If, if you go to Brazil, I think driver's license is digital by now, you go to some of the uh East eastern European countries. A lot of the uh all the identities are digital and some of the traditional Western European and us is just moving slow in comparison. So what are small businesses doing? I mean, it's going to be a big burden on them to deal with fraud. I mean, how are you guys helping them? I mean, I'd love partnering, of course. Right, I think that like leaning into partners to help leverage tools, I mean, a lot of the tools that we, you know, we we do serve as a small business community as well. Uh So making sure the developers are there to help integrate the right solutions to get them at the right point in time when they need to engage in onboarding on whether it's onboarding a merchant experience, paypal or if it's onboarding to a user experience at sofi or Robinhood, I think that being able to have access to those tools that and a lot of merchants I think have purchased bespoke solutions to solve for certain things. But I think it's really critical for all of these things to operate and be um leaning on one another to, to kind of have a full picture around what you can do to help drive your decisions. I mean, we've been operating in the payment space uh for, for quite a while. And the biggest thing is how do you compete with fraud? Uh How do you understand this is somebody just traveling or this is really fraud happening and we are democratizing that with our risk services also for small businesses making that accessible for them, giving them like you, you take a very large company, they have large teams that can deal with that. If you're a small business, you're the only person running your shop. You want everything out of one hand, you, you're not risk expert. So that's where we are thinking about how we can help them for sure. Great. So Steve back to you. Um So last week Robin Hood produced its second consecutive earnings surprise you guys reported. Um You guys beat earning expectations. You also received a wells notice over your crypto tokens traded on your platform. Were you surprised? Uh Yeah, we were surprised and I have to be careful about what I say, but I can, you know, I can share everything that we shared publicly. Um So we're one of the few firms that has both a brokerage business and a crypto business. So we are very accustomed to be high, being highly regulated. Um And we actually welcome regulatory clarity because it helps us understand. We have a model that's we can replicate and it's easy to do so. Um not easy, but it's, it's not, you know, if it's understood, we can, we can accommodate that and, and work compliantly. Um So we thought we were on a very good path. You know, we did not list 300 coins, we did not have staking lending, we were very careful. Um So we were kind of surprised. We also and I know glad shared this on C NBC. You know, we were asked to come in and register, we did that 16 times didn't happen, was not reciprocated. So, um so we were a little surprised that we um were the recipient of the well notice. And you said you mentioned that you're searching for regulatory clarity. Are you finding it anywhere? Uh not in the US, we're finding it in Europe. So we're now in Europe from a crypto standpoint because I think um they're at least providing a framework to start and it, by the way, it, you know, we're on the hill a lot talking to our elected officials and we're like, look, this is not an area where we want to fall behind um because of uncertainty about how we're going to regulate this. Um And I think, I think there's a lot of consensus around that. I just think they need to gather up and, and make sure that they're all unified and then let's get going on a path, you know. Do you think the SEC understands crypto? I do think they understand it. Um, I just think that there's not consensus about what exactly they wanna deem. I mean, look, the, the two regulatory agencies that we both are part of CFTC and the SEC don't even agree on what a security is. Like, one thinks Ethereum is not a security and one thinks it is. So if that's like mom and dad not telling you, you know, I'm a kid, how, how the hell am I gonna know? I mean, it's not exactly an environment you wanna operate in. Great. There's one way in this is really his area, I think, but I couldn't agree more on the regulatory clarity. I think that's super important. Uh, and, and again, outside of the US, moving much faster, much more clarity on things. Well, I don't know. It's, it's actually a really good opportunity. If I, if I just put myself in, in the shoes of people in these other jurisdictions, this is, um, this is the future and if I have an opportunity to have a competitive advantage, why wouldn't I take it? Ok, I'll provide you this regulatory clarity. Bring all your business over here. A lot of the firms are. Um, so, you know, how much momentum is that gonna gain before we, you know, wake up and I think if you're in the merchant market, what would you do? Right? If you lean into digital, uh digital rails, digital identity, crypto, these are the things that the biggest like you, you know, we launched our ST coin. So, so one of the huge opportunities is we heard it on the earlier panel is cross border. How do you bring down the cost? She sent $200 across, across border today? 6%. I think that you, you pay on average. How can you bring that down? Right. I have a friend of mine, she's a filmmaker. She sends money to uh her film crew in Malawi and it's really hard for her to get the money there. So that's where those rails could be very helpful, but we need the clarity and from an investment standpoint. So if you think about it, um the uh the 11 Bitcoin etf ctps that were launched recently, they got, you know, more traction in a very short period of time than virtually any ETF that's launched. And that happened in, in the world of Robin Hood as well. It's people just taking a small portion of their portfolio and, and saying I want some exposure to this. So it's look, it's the general public believes in it. Um I think some elected officials believe in it. We just got to get the middle to come to um the same view. OK. So one last question we have about a minute left. How is the payments landscape evolving? Is there one big trend you expect to come into fruition this year. Anybody I'll start. Um So when I joined Plaid two years ago and just realized the opportunity with open banking and linking a bank account, the natural transition to many people when I was thinking about was to pay with your bank versus just account funding. Like what we've done with, you know, Ben Mo and with Robin Hood. But what I I just went to the Merchant Risk Council not long ago in Las Vegas and top 50 global merchants are there. And every one of them is thinking about how they want to drive down some efficiencies and some costs out of the ecosystem. And so they're looking at ways that they can allow to the acceptance of paying with a bank account. And that's certainly a trend that I think we'll see and perhaps by the end of the year you'll see a major retailer even launching. Yeah, we're, we're on our PSP business, our payment service provider business. I see a lot of merchants right now, especially high interest rates. Everybody's trying to save costs uh to find ways to lower costs also on the payment rails and looking for options that uh are just cheaper than the, the credit card rails uh and the debit rails. And so a account to account again outside of the US um is happening more and more it requires consumer adoption. Uh but we're seeing slow optics on this Steve. Do you have any last words? Uh Yeah, the payment space is not really my, my wheelhouse. Ok. On that note, I'd like to thank everybody for coming. The conference is over. We're going to have drinks now and thank you, my wonderful piano. Thank you for having us.