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Jo Ann Barefoot explores how to create fair and inclusive consumer financial services through innovative ideas for industry and regulators

Barefoot Innovation Podcast

Affordable Financial Advice: Nerdwallet CEO Tim Chen

Jo Ann Barefoot

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Tim Chen is the founder and CEO of NerdWallet, and he’s a classic American story. In today’s episode, he describes the remarkable journey he’s taken so far in his still-young life, which has had dramatic ups and downs -- (as he says, when one door closes, a bigger gate may open). NerdWallet, which he founded at age 26, now helps more than 100 million people every year shop for and choose financial products that meet their needs.

NerdWallet is a matchmaker, guiding consumers to find the financial products that fit them best, and doing it in a way that automates large swaths of the financial advisory process in order to make advice affordable for people who don’t qualify for a personal wealth manager.

Tim says, “Money is so complicated” and he talked with me about how to make it all simpler, especially for people with relatively simple financial profiles. One key is automate the process of learning about their situation and needs, without making that process intrusive or too burdensome to be practical. In our conversation, he talks about how to do this, finding the areas where people’s situations are fairly similar versus those where there’s huge variation. He talks about doing living room visits, and how surprised he’s been by the vast differences among people who look the same if you just consider top-line factors like income. He talks about how much people struggle just to know where they stand, and about being humbled by how little we know.

Tim says traditional finance has been opaque, and he wants to change that. Among other things, he wants to break the “entrenched behaviors” around, as he puts it, people basically just taking what they’re given. 

As a man who founded a company in his mid-20’s, Tim has ringing advice for other entrepreneurs, including that it really helps to be “delusionally optimistic” about your product. As a startup cofounder myself, I’ve often recalled another bit of advice, on how to set priorities and stay focused on what counts the most.

Tim also has interesting thoughts on regulation, and had recently written an op-ed on the future of the CFPB (note that we had this conversation late last year).

Finally, he shares his secrets of personal effectiveness, which I suspect you will find surprising.
 

More for our listeners
We have great shows in the queue. They include my talk in Singapore with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor. We’ll also talk with the CEO’s of two community banks -- Bob Rivers of Eastern Bank and Mike Butler of Radius bank. I was able to record three wonderful episodes at this year’s LendIt conference in San Francisco. One is with Jim Richards, recorded just a few days after he retired from his role as global head of Anti-Money Laundering for Wells Fargo. Plus I had an far-ranging conversation with my friend Greg Kidd of Global ID. And we’ll have an overview of new research done jointly by LendUp and Experian, on how to improve financial access through credit reporting. We also will have several members of Congress in the coming weeks, which I’m really looking forward to.

I hope to see you at upcoming events including:

  • Bank Director, The Reality of Regtech, April 18, New York, NY
  • Texas Bankers Association Annual Conference, May 3, Houston, TX
  • Women Corporate Directors Global Institute, May 10, New York, NY
  • Comply 2018, May 16, New York
  • Financial Conduct Authority AML Tech Sprint, May 22-4, London
  • CFSI’s EMERGE, June 6-8, Los Angeles, CA
  • American Bankers Association Regulatory Compliance Conference, June 26, Nashville -- I’ll be moderating a general session panel on regtech, and also teaming up again with the ABA for some special podcasts.

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  
 
And please send in your “buck a show” to keep Barefoot Innovation going!
 

Support our Podcast


Sponsor Bank: Cross River Bank’s CEO Gilles Gade

Matthew Van Buskirk

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My guest today is pioneering a crucial innovation within the innovation landscape in finance -- by providing banking services to fintechs through a platform-based financial services model known as the sponsor bank, or partner bank. In today’s episode, Gilles Gade tells the story of founding and building one of the leading sponsor banks, Cross River.

Most fintech companies are licensed by their states, but are not banks. That means that every one of them has to find a bank through which to clear payments and connect to the payments system (which only banks can do). That’s not easy -- many fintechs struggle with this because banks are required by their regulators to set up complex systems for due diligence and risk management in dealing with any kind of third party that could affect the bank’s soundness or its customers’ wellbeing. Over the last decade or so, this challenge, combined with the enormous potential of the fintech market, prompted a number of banks to focus on meeting this need -- Gilles points to Webbank as leading the way. These banks have to meet a range of specialized needs including, crucially, taking responsibility for the partner fintechs’ compliance with regulatory requirements.

Gilles describes founding Cross River in 2008, when the financial crisis had curtailed many kinds of consumer and small business credit, and talks about how new companies emerged to fill the gap, with either new kinds of products, or new ways of creating access to old products. He points to fintech lenders -- like Affirm, Lending Club, and Sofi -- and also to payments-focused companies like Coinbase, Transferwise and ActiveHours, as innovators that are opening up more inclusive finance.

Gilles is especially thoughtful on regulatory issues, which he calls “by far” the biggest challenge for the fintech world. He emphasizes that the single biggest difficulty is sheer uncertainty, as technology change outstrips traditional regulatory change mechanisms. Gilles cites the Madden v. Midland litigation, with its controversy over national versus state interest rates, and the “valid when made” doctrine, as issues that need clarity so that lenders can build stable business models.

Gilles also has thoughts on the Comptroller of the Currency’s proposal for creating a special fintech charter (note that we recorded this discussion during the tenure of Keith Noreika as Acting Comptroller of the Currency). Gilles laments that we have no fewer than 12 federal regulators involved in these issues (I myself have actually counted twice that many, directly and indirectly involved). Like me, he’s optimistic about the innovation efforts of the regulatory agencies -- he mentions the OCC in particular -- and of congressional leaders like Congressmen Patrick McHenry (R-NC) and Gregory Meeks (D-NY) -- both of whom, I’m delighted to say, are going to be guests on our show.

Cross River’s emphasis on policy issues has led it to a number of leadership initiatives, including creating the Online Lending Policy Institute, which sponsors an outstanding Online Lending Policy Summit in Washington each fall, and also sponsoring the policy programming at the LendIt conference, which is coming up next month -- I’ll be there, by the way, and I hope you will too!

More on Cross River and Gilles Gade

Video about the bank

Gille Gade:

Gilles Gade is a founder of Cross River Bank (CRB) and has served as its Chairman, President and CEO since its inception in 2008 as an innovation-driven state-chartered bank and a provider of fully compliant financial solutions to the marketplace lending and payments sectors. Gilles has over 20 years of experience in investment banking and venture capital including as Co-Founder and Managing Director of Chela Technology Partners and Chela Internet Ventures, a boutique investment bank and venture fund focusing on emerging technologies and telecommunications; technology investment banker at Barclays Capital; and FIG investment banker at Bear Stearns. He started his career in 1990 at Citicorp Venture Capital, after graduating from the MBA Institute IMIP (Groupe IPESUP) in Paris with an MS in International Management.

More for our listeners

Our upcoming shows will include Nerd Wallet CEO Tim Chen; Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor; and the CEO’s of both Eastern Bank and Radius Bank. As I mentioned we’ll also have shows soon with two members of Congress, one a Republican and one a Democrat, and some other very special guests.

I hope to see you at upcoming events including:

Support our Podcast

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going!



Digitally Native Finance: Starling Bank CEO Anne Boden

Matthew Van Buskirk

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Today’s episode is like a crystal ball glimpse into the future of banking, narrated by my guest, Anne Boden, the thoughtful and charismatic Founder and CEO of Starling Bank in the UK.

Anne has years of experience at large banks, including in IT roles. At one of them, she led an effort to develop an innovation transformation. It brought her to a critical conclusion:  that the only way to create a really innovative bank is to start “from scratch.” When the UK government in 2013 responded to the financial crisis with a new type of charter, Anne founded Starling.

Starling was the first of what the UK calls “Challenger Banks,” designed to foster increased market competition. It is also a “digitally-native” bank, built as a fully digital business, for the digital age.

Starling is mobile-only. It operates on open platform principles and leverages the new personal data rules in Europe. These say that financial data belongs to the consumer, not the bank, and require companies to implement the customer’s instructions to share account information with any entity the consumer chooses. Among other things, this makes bank accounts “portable,” and also give customers the right to terminate such arrangements and to control how the data can be used.

Building on this is a new emerging business model that is, again, essentially a platform. In Starling’s case, they take deposits and do payments, and then they operate what they call a “marketplace” with specialized partners that offer their customers everything from mortgages to insurance, to an array of financial management tools.

One result is efficiency.  Anne says 100 or 150 people can do work that needs 10,000 at a large bank.

Another is innovation. She talks about how hard it is to seed and propagate an innovation culture at traditional banks, and why they can’t just buy the technology they need and plug it in. As she puts it, “some poor CIO somewhere has to be brave enough to press the button.”

Anne also notes that the as the platform model disaggregates traditional functions, the front end of the chain -- the customer relationship and interface -- might separate off and end up in the hands of Google, Facebook or Twitter.

Our conversation included her insights on how this new model will evolve; the roles of each partner; why Starling chose to become a bank instead of offering a prepaid card; and how hard it is to do that -- the high attrition rate among those that attempt it.  

Starling customers (who, by the way, are not just millennials) have a new kind of financial life. They can simply ask Starling, by voice, whether they can afford to buy a car. They can opt to have bank statements itemize by a given shop, right down to the cheese sandwich and the diet coke. Anne says they could add calorie counts to that and can integrate it with health information from the fitness app, and suddenly, money, lifestyle, and health are integrating in new ways.

More on Anne Boden

Three decades ago, Anne Boden pioneered the UK’s first same-day payment service – and in the process transformed the future of electronic money. Today, that revolutionary zeal continues to inform her work at Starling Bank, the mobile-only current account app she launched earlier this year.

Recently recognized as one of the Global Power Women in FinTech, Anne’s worked at a senior leadership level across some of the world’s best-known financial heavyweights, among them Lloyds and Royal Bank of Scotland. It was during her tenure as CEO of Allied Irish Banks, however, that she began to explore the exciting potential of financial technology for transforming customer’s everyday lives.

At heart a tech startup with a banking license, Starling is a challenger bank built on a foundation of disruptive emerging technology, competing with traditional legacy banks and helping people develop a healthier relationship with their money.

More for our listeners

Upcoming shows will include Cross River Bank CEO Gilles Gade; Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor; NerdWallet CEO Tim Chen; and the CEO’s of two community banks -- Eastern Bank and Radius bank. And there’s much more in the pipeline!.

I hope to see you at upcoming events including:

  • CFSI’s Fintech and the Federal Government: How Policymakers and Startup Companies are Exploring Financial Innovation, March 15, U.S. Senate, Washington

  • Innovate Finance Global Summit, March 19-20, London, UK

  • Regulation and Innovation in the Age of FinTech, with FSD Africa, Cambridge Centre for Alternative Finance and RegHub, March 22-23, London, UK

  • Lendit Fintech USA, April 9-11, San Francisco, CA

  • Bank Director, The Reality of Regtech, April 18, New York, NY

  • Texas Bankers Association Annual Conference, May 3, Houston, TX

  • Women Corporate Directors Global Institute, May 10, New York, NY

  • Comply 2018, May 16, New York

  • CFSI’s EMERGE, June 6-8, Los Angeles, CA

  • American Bankers Association Regulatory Compliance Conference, June 26, Nashville -- I’ll be moderating a general session panel on regulation and AI, and also teaming up again with the ABA for some special podcasts.

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going!

Support our Podcast


Collaboration Innovation: Charlotte Crosswell and Dan Morgan of Innovate Finance

Matthew Van Buskirk

I always love it when we find innovation in unexpected places, not just in the financial products and channels and regulatory issues we discuss, but also in people inventing new ways to get things done.

Today’s guests talk about taking a very old kind of entity -- the industry trade association -- and updating it for the 21st century financial world. As often happens with innovation, the thing that’s new is actually very simple, maybe even obvious, and yet when you set it in motion, things change.

That’s what has happened in the UK in 2014 with the creation  of a new trade group called Innovate Finance. As its name conveys, it focuses on fintech innovation. What makes it so innovative and interesting to me, though, is that it has drawn members from the whole financial innovation ecosystem. They have startups, and also banks, and also the other players in the space like consulting and law firms, all actively working with regulators -- and with like-minded companies and governments throughout the world -- all on the same issues at the same time.

My guests are the group’s CEO, Charlotte Crosswell, as well as Dan Morgan. At the time of our recording, Dan was the head of policy for Innovate Finance. He has since moved on to be the FinTech Sector Specialist at the UK Department for International Trade, still working on the same issues. His move was already in progress when we recorded this episode, and I’m glad we were able to get his thinking into the dialogue.

When I find myself admiring innovation outside the U.S., I always have to note that other countries have a simpler system than we do here, in terms of both industry structure and regulatory framework. Our listeners have often heard me worry that the U.S. system, and especially our multi-agency federal regulatory design, is holding us back. The UK has both a less complex banking system and basically only two regulators, which has clearly helped make them the world leader on the regulatory side of innovation (I’ll link to our podcasts with two of their top regulators in the show notes) and also one of the leaders in fintech, too. It may be that this regulatory environment is one reason that Innovate Finance could form around the full spectrum of financial entities.

In the US, our established trade associations are of course working hard to address both industry and policy issues in fintech and regtech. We’ve also had new trade groups form in the last few years, organized by fintechs and/or by big tech companies interested in the financial space. So far, though, we don’t have anything like Innovate Finance (although I know a few people thinking about starting one).

Whatever structures emerge over time, I think everyone can learn lessons from how Innovate Finance operates, and especially how it brings both incumbents and newbies into the very same discussions, the same problem-solving, together. The more I work with financial innovation, the more I know for sure that the main solution is in collaboration. Choose your metaphor -- it can be breaking down silos, or cross-pollination, or weaving separate strands together. The only way to figure out what to do, and to move quickly, is by getting the disparate kinds of players together, all the time, as a new way of life.

So, you’re going to enjoy hearing Charlotte’s and Dan’s thinking. They talk about the secrets to making this happen, why it’s easier in the UK, and why it’s getting easier for banks to innovate (hint -- that too is about breaking silos). They describe regulators who are not merely accepting change, but are helping to drive it proactively, and who have explicitly adopted an “ecosystem” approach. They describe an emerging world of shared problem-solving in areas like AML, identity and consumers owning their own data. They talk about trends among regulators around the world.

Importantly, they also describe their upcoming conference, the IFGS -- Innovate Finance Global Summit in London, March 19-20. I spoke last year and will this year again, and can say with confidence it’s one of the world’s very best. It will be back again in the beautiful, historic Guild Hall, where somehow old and timeless meets new and thrilling in a very happy mix.

More on Charlotte

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Charlotte Crosswell is CEO of Innovate Finance. She has spent most of her financial services career in market infrastructure roles, including as CEO of Nasdaq NLX (“NLX”), a London-based startup derivatives market, and serving on the board of LCH Ltd. She’s also held management positions at Nasdaq and London Stock Exchange across international capital markets, equities, xed income, OTC derivatives trading and clearing. In addition to her current work with Innovate Finance, Charlotte advises and sits on the boards of a number of technology and FinTech startups. She holds a BA with honors in French from the Southampton University and has been included in the list of top 100 Women in Finance over many years.

More on Dan

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Dan Morgan is the FinTech Sector Specialist at the UK Department for International Trade. At the time we recorded this episode he was Head of Policy and Regulation at Innovate Finance, where he led development of member policy specialist groups in digital currencies and Blockchain, payments, access to finance and data. Dan also led the Innovate Finance FinTech 2020 Manifesto and secretariat support for the FinTech APPG. He previously held senior policy roles at a number of business groups including the CBI, BRC and ABI. Dan has worked across a range of sectors and policy areas including insurance, SME finance and retail tax reform.

More links

More for our listeners

Here are some of the shows coming up. We’ll have Cross River Bank CEO Gilles Gade, talking about the “sponsor bank” model for fintechs working with banking partners. We’ll be back in London with the CEO of Starling Bank, Anne Boden. We also have conversations with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor. Back in the US we’ll have shows Nerd Wallet CEO Tim Chen and the CEO’s of two community banks.

I hope to see you at upcoming events including:

  • CFSI’s Fintech and the Federal Government: How Policymakers and Startup Companies are Exploring Financial Innovation, March 15, U.S. Senate, Washington
  • Innovate Finance Global Summit, March 19-20, London, UK
  • Regulation and Innovation in the Age of FinTech, with FSD Africa, Cambridge Centre for Alternative Finance and RegHub, March 22-23, London, UK
  • Lendit Fintech USA, April 9-11, San Francisco, CA
  • Texas Bankers Association Annual Conference, May 3, Houston, Texas
  • Bank Director, The Reality of Regtech, April 18, New York, NY
  • Texas Banker’s Association Annual Conference, May 3, Houston, TX
  • Woman Corporate Directors Global Institute, May 10, New York, NY
  • Comply 2018, May 16, New York
  • CFSI’s EMERGE, June 6-8, Los Angeles, CA
  • American Bankers Association Regulatory Compliance Conference, June 26, Nashville -- I’ll be moderating a general session panel on regulation and AI, and also teaming up again with the ABA for some special podcasts.

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going!

Support our Podcast


Finance and the Fourth Industrial Revolution: Tim Pawlenty, CEO of Financial Services Roundtable

Jo Ann Barefoot

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Today’s guest is a familiar name and face for everyone who follows U.S. politics. He is Tim Pawlenty, CEO of the Financial Services Roundtable. Tim was previously Governor of Minnesota and became well-known to most of us when he ran for the 2012 Republican presidential nomination. He’s been a prominent voice on public policy for many years.

He was also a speaker on a panel I moderated last fall at Money 2020 on financial innovation and regulation. We decided to continue that conversation back in Washington at his office at the Roundtable, which is the trade association representing the largest U.S. banks and financial companies.

Tim is one of the most thoughtful people we’ve had on the show, with perspective on all the issues and strong opinions, clearly expressed. He shared his predictions for how fintech will, and won’t, change banking, including its competitive structure, and including the likelihood of rising competition for the customer’s trust. He talks about the big tech companies competing with banks not in terms of whether it will happen -- he thinks that’s a given -- but rather when and how, and how that will ultimately be regulated. He has thoughts on the respective strengths and weaknesses of banks versus companies like Amazon or Apple.

He thinks cybersecurity is the top challenge and talks about the foundational, structural difficulty of taking the internet -- which was designed to be open and distributed -- and trying to plug its security gaps with patches (he cites a Roundtable event where Steve Wozniak offered somewhat discouraging advice on this).

Tim is an optimist that technology will make financial services vastly better for most people. He’s also an optimist about banks and fintechs finding synergies and increasingly partnering. He thinks a few -- a very few -- fintechs, will change the world.

He’s less optimistic about U.S. financial regulators getting good at truly coordinating as technology changes finance. As he puts it, the regulatory structure is horizontal, not vertical. That will make it hard to develop the harmonized thinking, and actual standards, that could help the system move forward.

Big banks will play an enormous role in shaping the digital transformation of finance. More than small banks, they have the resources to be innovation leaders. More than fintechs, they have both resources and also expertise in how to be regulated companies, which takes some learning. More than either, they’ll be going head-to-head with big tech entrants into finance. At the same time, more than any of these other players, big banks are hard to change, by virtue of sheer size and history and also the legacy of being, in some ways, creatures of regulation. They are often on the defense on regulatory and political and public concerns about banking.

Tim Pawlenty says banking is the “plumbing” of the economy, and therefore needs to work. I would add that big banks are the main pipes. When they do innovation well, their many millions of customers will benefit -- most financial consumers today are served by these large institutions. If they do innovation badly, or if the regulatory process impedes the move to modernize them, the future will be a whole lot more complicated. As he says, the plumbing has to work.

Here are other episodes we’ve done with innovation leaders at large banks -- Wells Fargo, Citigroup, and US Bank.

More on Tim Pawlenty

Tim Pawlenty is President and CEO of the Financial Services Roundtable, which

represents the leading financial service companies in the United States. He previously served as Governor of the State of Minnesota (2003-2011), overseeing a $50 billion biennial budget, 30,000 employees and over 20 agencies and departments. As governor, he was also responsible for disaster preparedness and response, appointment of judges, and serving as Commander-In- Chief of Minnesota’s National Guard. His work as governor included promoting international business opportunities through trade missions to nine countries. He chaired the

State Board of Investment, which addressed more than $60 billion in investments. His education, health care and energy initiatives were widely cited as among the most innovative in the nation.

Mr. Pawlenty served as Chair of the National Governors Association (2007-2008), Chair of the Education Commission of the States (2008-2010), and Chair of the Midwest Governors Association (2006-2007). From 1986 to 2000, Mr. Pawlenty practiced law in the areas of criminal prosecution, civil litigation and appeals. He was also Vice President of Corporate Development for Wizmo, an early stage technology services company. He has been a board member of numerous companies.

Mr. Pawlenty served in the Minnesota House of Representatives (1993-2003) where he was elected Majority Leader by his colleagues (1999-2003). He received a B.A. from the University of Minnesota with Phi Beta Kappa and PhiKappa Phi honors. He received his J.D. from the University of Minnesota Law School.

More links

More for our listeners

In case you missed it...be sure to listen to our recent show with Nick Cook of the UK Financial Conduct Authority on The Future of Regulation. Especially if you’re a regulator, or know some regulators, this one is recommended listening on how we can move to digitally-native regulation.

We have wonderful shows coming up. One is with Cross River Bank CEO Gilles Gade, talking about the “sponsor bank” model for fintechs working with banking partners. We’ll have two in London, with the CEO of Starling Bank, Anne Boden and another with Innovate Finance CEO Charlotte Crosswell. We also have conversations with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor and Nerd Wallet CEO Tim Chen.

I hope to see you at upcoming events including:

Support our Podcast

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.



The Data Economy: A Lively London Debate on Fintech in Europe and Africa

Jo Ann Barefoot

This is the most fun show we’ve done in ages, or maybe ever. My friend Jean-Stephane Gourevitch offered to gather some really interesting people in London to talk about the data economy. We finally sat down last fall, during London’s Regtech Rising conference, and wow, did we talk.

Jean-Stephane himself is French, based in London, and works with fintech startups throughout the world. His guests were, first, Edward George, who leads both research and the UK representative office for the pan-African bank, Ecobank. We also had Fiona Ghosh, a top London lawyer in the financial and fintech space -- Fiona is a partner at Addleshaw Goddard. Our other two participants have both founded young fintechs. Lukas Zoerner is CEO of Mespo, a fully independent robo money saver. And Luca Schnettler, from Germany, has founded HealthyHealth, which uses data to change the insurance world and to make people...healthier.

We had an incredible conversation. We talked about how Europe’s new data regulations -- PSD2 and the GDPR -- will change banking and fintech (which, by the way, is a revolution that’s being under-discussed in the United States). We covered the opportunities that fintech is opening up in the developing world and especially Africa, where suddenly it’s possible, through the mobile phone, to bring banking to hundreds of millions of people who couldn’t be profitably served before. We talked about the future of cash. We figured out what regulators need to do.

For me, probably the most riveting moments were a debate that broke out between the two fintech CEO’s -- both millennials -- who turned out to have strikingly different views about how data should be used, and also about consumers’ responsibility for securing their own wellbeing. I’ve never heard a discussion quite like it.

So, we had six people around the table, counting me. It was a yeasty mixture of nationalities, languages, ages, continents, professional expertise, products, and target markets -- and with everyone having a whole lot to say.

More about today’s guests

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Jean-Stephane Gourévitch

Jean-Stéphane is an expert of the strategic, public policy and market aspects of digital/mobile payments, mobile money, digital/mobile banking, digital/mobile commerce, fintech, the data economy and innovation ecosystem with over 25 years global experience at senior management levels and a mix of corporate and entrepreneurial experience. He has held senior management positions with International telecom operators including Everything Everywhere Ltd. (EE), Orange, France Telecom, Verizon Business, Colt Technology Services Ltd. He has worked for OFCOM, the UK digital communications regulator. He also has held senior positions with Deloitte Consulting and with strategic marketing and PR/Communications firms.

Jean-Stephane created his own management consulting company 5 years ago, combining strategic, public policy and commercial vision about digital convergence, fintech, insurtech and the data economy. He also has global experience mentoring and advising entrepreneurs and start-ups, in particular very young entrepreneurs.

A frequent speaker on fintech, payments and insurtech, Jean-Stephane has addressed events such as Fintech Connect Live, Pay Expo, and Money2020. He is also an independent conference director, creating programs/content for major conferences such as Fintech Connect Live in London, INPAYCO Digital Payments in Toronto and Paris, Mobile Payments: Regulation, Risks and Opportunities in Berlin and London, the Africa Fintech Forum in Abidjan, Ivory Coast.

As a mentor and advisor to 24 fintech, insurtech and digital technologies startups and to young entrepreneurs in Europe, Africa, Asia, Latin and North America, Jean-Stephane’s expertise lies in strategy, business development, regulatory affairs, public policy, Government Relations, stakeholder relationships management, communication and PR.

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Edward George

Twitter @DrTeddGeorge

Dr. Edward George is the head of the UK representative office of pan-African bank, Ecobank, as well as being head of group research. Edward oversees the teams in the London office, with a focus on corporate banking, financial institutions/international organisations and research. As head of research he also manages a team of nine analysts based across Middle Africa covering the fixed-income, currencies and commodities space. His specialties include soft commodities and agribusiness, trade and trade finance, and disruptive technology.

Edward is also the bank’s specialist on Francophone West Africa and Lusophone Africa. Prior to joining Ecobank in March 2011 he worked for The Economist Intelligence Unit (EIU) for seven years as a Senior Editor in both the Commodities and Africa Departments. There he was responsible for producing and editing reports on Lusophone and Francophone Africa, as well as on 25 industrial raw materials, food, feedstuffs and beverages. Before joining the EIU, Edward worked as a freelance writer covering the politics and economics of Sub-Saharan Africa. A linguist by training, Edward is fluent in French, Spanish and Portuguese and holds a PhD in Political Science from the University of Bristol. His PhD thesis on the Cuban intervention in Angola was published as a book by Routledge in 2005 and as a paperback in December 2012.

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Luca Schnettler

Luca started HealthyHealth  in January 2017 to realize his vision of using digital means to innovate the insurance sector and help customers become healthy individuals. Before having any partners or advisors, Luca was able to persist and focus on the objective, following his goal and passion of building a company that truly changes customers perception on Insurance and helps them to improve their health.

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Lukas Zoerner

Twitter @lczoerner

Lukas Zoerner is the Founder and CEO of Mespo, a fully independent robo money saver that detects and executes savings opportunities for consumers. Mespo has established a UK's market first partnership between a FinTech such as Mespo and a Credit Union, My Community Bank. Mespo won the UK's Fintech For All 2017 Financial Inclusion challenge in the category "New Fintechs".

Lukas previously worked in Morgan Stanley's investment banking division advising Power & Utility companies across EMEA. He holds a degree in business administration from the University of Mannheim in Germany.

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Fiona Ghosh

Fiona is a Partner in Addleshaw Goddard's Commercial Group, specialising in complex commercial, IS, payment and FinTech arrangements, particularly in the financial services sector where she has focused her practice for more than a decade. Fiona heads the firm’s FinTech Group. Her work has included bringing new payment solutions, including ApplePay, Samsung Pay and Android Pay, to market. She is an appointed expert on the editorial board of the Payments & Fin Tech Lawyer journal. Fiona's expertise also includes outsourcing and other complex commercial arrangements in the investment banking, retail banking, insurance and asset management sectors. She has longstanding experience in strategic advisory work, negotiation and drafting of multijurisdictional business process outsourcings, including back and middle office, platform integration, facilities management and global administration services for multinational corporations, banks, asset managers and global insurers.

A leader in her field on advice relating to strategic alliances and joint ventures, Fiona has led several international joint venture arrangements for the provision of pensions, credit cards, loans, mortgages and related insurance products acting for both retailers and for providers. She also specialises in advising in the field of retail payments including payment services and commercial arrangements relating to digital and mobile payment solutions, payment aggregation and merchant acquiry in the UK, US and further afield. Fiona is a regular speaker at international conferences and events on FinTech and payments law including Pay Expo Europe, the Westminster Forum Projects and Digital Payments Intensive.

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Watch for our upcoming shows, including two more from London. One is with the charismatic CEO of Starling Bank, Anne Boden (who was referenced in today’s show with high praise), and the other is with Innovate Finance CEO Charlotte Crosswell. Back in the U.S., we’ll have three fascinating CEO’s -- Financial Services Roundtable head Tim Pawlenty; Nerd Wallet CEO Tim Chen, and Cross River Bank CEO Gilles Gade. We also have an inspiring conversation with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor. And we’re going to do a special one in San Francisco with my cofounders of Hummingbird Regtech -- so, stay tuned!

I’ll hope to see you at upcoming events where I’ll be speaking:

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going. Till next time, keep innovating!

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The Future of Regulation: The FCA's Reg-Tech Leader, Nick Cook

Jo Ann Barefoot

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What if regulation, as we know it, might disappear? Regulation will never stop, of course, but what if some of it will take on a new form, shaped by technology?  What if we’re entering into a new era of what we could call “digitally-native” regulation, that’s as agile and intuitive about regulation as digitally-native consumers are about consumer technology?

Of all the shows we’ve ever done, I think this is the most mold-breaking and thought-provoking. My guest comes from the agency that is leading the world in modernizing financial regulation for the digital age, and he leads the team that’s doing it.

Nick Cook is the head of Regtech and Advanced Analytics for the United Kingdom’s Financial Conduct Authority. The FCA’s innovation leadership is world-renowned, especially for their Project Innovate and its “regulatory sandbox,” which allows careful testing of new financial technology that could benefit consumers. Less well-known, though, is a newer initiative, launched about 16 months ago, to explore regtech.

As we’ve discussed in other shows, the term “regtech” is used in two ways. It refers both to regtech for regulators -- technology to enhance their own activities, and to regtech for the industry, to improve or streamline regulatory compliance. The FCA is working on both halves of this equation, and true to form, they’ve invented an innovative way to explore it. They aren’t using a sandbox for regtech (although the Bank of England has a sandbox-like “Fintech Accelerator”). Instead, Nick’s team has been convening what they call “tech sprints.” They invite a diverse set of participants -- banks, fintechs, tech companies, lawyers, consultancies, academics and others -- to come together for problem-solving exercises designed like hackathons. Sometimes for a day or two, and sometimes longer, they work on how new technology could be applied to a regulatory challenge like “digitizing” the rule book or streamlining regulatory reporting.

Nick and I recorded this discussion at the Regtech Enable conference in Washington in December, where he had just shared an update on their work from the stage. At the time, they were in the midst of a two-week sprint that had two objectives.

The first is to try to make regulatory reporting requirements “machine-readable,” and therefore much easier to navigate, including for innovative companies that often struggle just to know what rules apply to them.

The second -- even more profound -- is to explore whether some regulations can also be made “machine-executable” -- could regulatory guidance, in some cases, be issued in the form of computer code, and therefore be self-implementing?

This is an idea that’s been under discussion for about a year, including at a regtech roundtable I hosted last spring as a Senior Fellow in the Harvard Kennedy School Center for Business and Government. The same conversations have included a second concept the FCA is also pursuing, namely that new, high-tech regulation should be introduced gradually and should be optional for the industry. Gradual rollout would enable policymakers to start small and learn, while voluntary adoption opens up a practical road to changing our complex system with minimal disruption.  

The FCA’s tech sprint on machine executable reporting ended a few days after we recorded this podcast. They will be sharing its results in the coming months, so be sure to watch for it!

Let’s step back and think about what’s underway here. Finance is being transformed from analog to digital design. And, right behind it, so is regulation. Digitization will do for both -- for finance and financial regulation -- what it does for everything else. That is, it will make them faster, better, and cheaper, and will create a new foundation on which people will innovate further, in ways we cannot yet envision.

A striking thing about my talk with Nick is how different he sounds from traditional regulators. It’s hard to put your finger on exactly why, but I think it’s mainly the comfort he displays with uncertainty. The same trait was evident in my earlier podcast with Christopher Woolard, who heads the FCA’s innovation strategy. Somehow this agency manages to be simultaneously bold and humble. They know they don’t have this all figured out. They even know they can’t figure it out by themselves. But they also know they can move forward, and that the way to do so is by engaging a community of diverse experts to work together. As Nick says, that can be scary, but the risks come way down, for regulators and everyone else, when solutions are developed collaboratively by people who believe in its potential to make regulation better.

I hope this episode finds its way to many regulators, including those in the US where our agencies are actively exploring innovation agendas. Nick says regtech should be easier for regulators than fintech change is. For one thing, the companies leading it are generally not regulated entities, which makes them easier to work with. In addition, no consumers are affected by regtech experimentation. It’s about how the regulators can do their own jobs better, and/or can enable financial companies to do the same. As he puts it, regulators can, therefore, put “a toe in the water,” in regtech, and then move forward.

My friend Andrew Burt of Imuta and Yale Law School helped design the FCA’s December sprint and has put out a white paper on it. And here is the FCA’s great video on how tech sprints work.

So, I’m not naive. I’ve been a bank regulator, a U.S. Senate staffer, and I’ve worked in regulatory compliance for decades. Technology won’t magically make regulation easy. These solutions won’t fit some types of regulation, and where they do fit, they will inevitably create new problems. We all know all that.

Still...Digitally-native regulation. Think about it.

More on Nick Cook

Nick leads the FCA’s RegTech activities, including the FCA’s TechSprint events - the first events of their kind convened by a financial regulator. He is responsible for creating the FCA’s Analytics Centre of Excellence to drive the organization’s use of data science, machine learning and artificial intelligence.  Nick is the FCA’s representative on the European Securities and Markets Authority’s (ESMA) Financial Innovation Standing Committee and an advisor to the RegTech for Regulators Accelerator Programme. Nick joined the Financial Services Authority (the FCA’s predecessor) in 2009, initially in its Enforcement and Market Oversight Division. Prior to joining the regulator, Nick qualified as a chartered accountant at KPMG Forensic.

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Just before Christmas, I finished my 7 week, three-continent “World Tour.” I think 2017 was the pivotal year for moving both fintech regulation and regtech toward becoming priority issues at regulatory agencies throughout the world. 2018 will take it all to the next level.

We’re starting the year with amazing shows in the queue. We’ll have a fascinating London conversation with the charismatic CEO of Starling Bank, Anne Boden; another with Innovate Finance CEO Charlotte Crosswell; and another with a group of amazing innovators working in Europe and Africa, including Ecobank. In the U.S. we’ll have one with Cross River Bank CEO Gilles Gade; with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor; with Financial Services Roundtable CEO Tim Pawlenty; and with Nerd Wallet CEO Tim Chen...and many more!

I hope to see you at upcoming events including:

  • OCC Bank Information Technology Conference, January 9-12, Washington, DC

  • Innovate Finance Global Summit, March 19-20, London, UK

  • Bank Director, The Reality of Regtech, April 18, New York

  • Texas Bankers Association Annual Conference, May 3, Houston, Texas

  • Comply 2018, May 16, New York

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going. And keep innovating!

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Jo Ann



Innovating in Payments: Wells Fargo Head of Partnerships and Industry Relations - Braden More

Jo Ann Barefoot

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I could tell I was walking into an innovation lab even before I saw the space, because I could hear the ping pong game underway as I stepped off the elevator. It was great fun to be in San Francisco, on a sunny day in early fall, to talk with Braden More, Wells Fargo’s head of partnerships and industry relations -- and to see their fascinating innovation facility, which includes what they call their R&D Garage.

As Braden explains in our talk, Wells Fargo has reorganized to establish an integrated digital strategy for payments, under the leadership of their famous innovation head, Steve Ellis -- whom Braden described as the Steve Jobs of banking. They know that today’s customers expect a great digital experience, which means they won’t put up with processes that break down as they hit the old silo walls between traditional bank product groups, nor processes that merely automate old paper based, linear designs. Banking has to become fully digitized -- with all the gains in speed, cost, accuracy, and innovation that comes with digitizing anything.

Not surprisingly, a lot of this episode focuses on the challenge of how you change a large organization. Big banks are anything but nimble. It’s not their fault, it’s just their nature -- their size, their complexity, and their reliance on legacy IT systems that have accumulated, in most cases, over years and decades of mergers and acquisitions, and never been fully integrated with each other. On top of that, every move that big banks make faces regulatory requirements and close regulatory scrutiny, and regulators, for good reason, tend to frown on fast change -- especially the kind championed by small fintech innovators who love concepts like “minimum viable product” and (God forbid), “fail fast.”

However, all the big banks know they do have to change, and also that they have to speed up -- dramatically. That’s because the technology change is speeding up. Its curve is exponential, which means that both the opportunities and risks are outstripping organizational models and cultures that were hard-wired many years ago -- even decades or centuries ago -- for linear change.

A big bank innovation model is now emerging. It usually has a few elements. There’s an innovation team, which is usually small, is charged with rapid learning. Some of it is typically walled off, so that the big organization won’t accidentally smother it. There’s a lab-type effort, with a mandate to reach beyond short term, practical applications and do some dreaming. These sometimes have an actual playful edge to them -- hence the popularity of ping pong tables and bean bag chairs. Meanwhile, other parts of big banks today are busy with projects trying to smash down some silo walls and push people into the same rooms, to work knee-to-knee on shared challenges. And there’s usually an accelerator or incubator that brings in startups and tries to learn from them, sometimes making venture investments.

Wells Fargo has all this underway, and Braden explains their philosophy on how to get the best of both worlds -- both isolating ninja-style disruptors while also making innovation central to everyone’s job. If you’re a fintech, he describes their accelerator and some of its successes, including Eye-verify, which verifies customers’ identity by scanning the whites of their eyes with a phone camera, and which has been acquired by China’s huge payments innovator, Ant Financial -- Alibaba. He also tells the story of Wells Fargo incorporating Zelle’s instant payment service into the bank, and its importance to customers who need quick cash. Our conversation ranges widely, from the future of fast payments and crypto-currency to the evolution of skills needed at banks.

Braden also previews coming attractions for 2018. One key:  he says active online and mobile users connect with the bank every 42 hours on average -- vastly more often than traditional branch customers. Converting this rich relationship into more value for both customer and bank is a key to the future.

Big banks have unique challenges in embracing innovation, but they also unique resources for solving them.

A highlight of my visit was seeing the toy room. Pepper is there -- the charming talking robot. So are 3-D printers, biometric safes, and drones -- Braden gives an example of how bank can use a drone. He even talked, intriguingly, of occasionally seeing the folks in The Garage busy making things with soldering irons. You hardly ever used to see that, in a bank office.

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More on Braden More

Braden More is the head of payment strategy at Wells Fargo. He and his team work across Wells Fargo to coordinate payment strategy, incubate new initiatives, and represent Wells Fargo in the payments industry. Braden also serves as the portfolio manager for the Wells Fargo Startup Accelerator, a program that mentors and invests in innovative companies.

Before assuming his current role, Braden was the head of strategy and planning for Wells Fargo Treasury Management. Previously he was with Wells Fargo’s Internet Services Group, and before that held positions in public accounting, management consulting, venture capital, and competitive strategy with Deloitte, Wit Capital, and Intel.

Braden graduated magna cum laude from Bowdoin College with a degree in government and legal studies. Subsequently, he earned an M.B.A. with distinction from NYU’s Stern School of Business, and a CPA license from the state of New York.

Braden lives in San Francisco, where he is active as an advocate for experiential science education. He has served on the board of directors for the Exploratorium Lab and Marin Academy. His Twitter handle is @BradenMore.

More for our listeners

I’m about to finish what I’ve called my World Tour -- travels all over the world this fall making speeches, meeting fascinating people and, happily, collecting podcasts. I’ve learned so much, so fast, about fintech and regtech, it’s hard to absorb it all. I’ll be sharing lots of thinking in the new year.

The upcoming podcasts are amazing. We’ll have one with Nick Cook, who leads the FCA’s innovation work on regtech, recorded at Regtech Enable in Washington. We’ll have Nerd Wallet CEO Tim Chen, and Cross River Bank CEO Gilles Gade. We’ll have one in London with the charismatic CEO of Starling Bank, Anne Boden and one with Innovate Finance CEO Charlotte Crosswell. We’ll also have a lively discussion with a group of amazing innovators working in Europe and Africa. We’ll have one with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor. And back in the U.S., we’ll have a show with Financial Services Roundtable CEO Tim Pawlenty...to name a few!

The 2018 schedule is filling up fast. I’ll share those events next time.

As always, please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Again, follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going. And keep innovating!

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I want to thank you for all your wonderful support this year, and I wish you a peaceful and joyous holiday season to you and yours!

Jo Ann



Regulation Innovation: The FCA's Christopher Woolard

Jo Ann Barefoot

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I’ve been looking forward to today’s show since my very first visit to the UK’s Financial Conduct Authority, over two years ago. It was clear even then that they were doing something completely new for a regulatory agency. They were innovating. Not just creating new regulations, but actually rethinking how to create them. Reinventing the regulatory process itself.

Specifically, they were responding to the novelty and especially the rapid pace of technology change in finance by creating an innovation initiative and soon thereafter, the world’s most famous regulatory sandbox.

Today’s guest is Christopher Woolard, the FCA’s head of Strategy and Competition. In this episode, he tells the story of how they first realized they had to change, how they did it, and, importantly, what they’ve been learning so far. We sat down together last month during the Money 20/20 conference in Las Vegas, where we also did a fireside chat on the regulatory stage and where, for the first time, Chris shared their new report on lessons drawn from their first several cohorts of sandbox companies.

Most of our listeners know what these sandboxes are -- they’re also sometimes called reglabs, greenhouses, or a new generation of pilot projects. They’re being adopted by a leading cadre of regulators, including a few in the United States, who have realized that the speed of innovation today is outstripping traditional regulatory processes, which means policymakers are going to have to invent something new to keep up. Part of what they’re inventing are these small, safe “testbeds” where they can get hands-on with new ideas, understand them, shape them if appropriate, and generate insights to feed back into mainstream regulatory activities. The original version, really, was in the United States in the CFPB’s Project Catalyst, which inspired the FCA to build something similar. But it was the UK’s much bigger and bolder effort that then caught the world’s attention and has now inspired several dozen imitators around the world, according to Aspen Institute research. Here is an article I wrote with more on how the program is designed.

The FCA itself grew out of the financial crisis, as the UK decided to separate prudential banking oversight from a new entity focused on “conduct.” In some ways the restructure mirrors the U.S. decision to create the CFPB after the crisis, except that the FCA’s remit is not limited to consumer protection. The UK Prudential Regulation Authority is now housed in the Bank of England in the old City, while the FCA inhabits contemporary offices out in Canary Wharf, in an area burgeoning with startups and financial companies converting old warehouses to cool new space.

In our talk, Chris describes what the FCA is doing in both the sandbox and the agency’s wider set of innovation initiatives -- and again, what they’re learning so far. He cites the FCA’s advantage over many regulators in having a mandate that includes fostering competition. He debunks some misconceptions about the UK sandbox, including that it waives or dilutes consumer protections. He touches on their work in regtech (a topic we’ll soon return to with the FCA’s regtech head, Nick Cook, in an upcoming show). He talks about the sandbox’s global imitators and also how the UK cooperates directly with other countries to ease the path for their respective innovators. And he shares his concern that if even one of these global sandbox experiments “catches a cold,” we could see a contagious loss of confidence that could undermine regulatory innovation, worldwide.

I admire the FCA’s deft mixing of a very high-profile, exciting initiative with, simultaneously, a strong note of humility. They always emphasize that they don’t have all the answers, that they’re just learning as they go. But this, you see, is actually the key. The thing they figured out -- and believe me, it doesn’t come easily to regulators (or to anyone, for that matter) -- is that it’s not going to be possible, anymore, to figure things out before acting, in the way policymakers used to do. Instead, regulatory institutions are going to have to learn to navigate permanent and daunting, technology-driven uncertainty. They won’t have the option to hold still and wait for clarity to materialize...because it won’t. They need to find ways to move ahead iteratively and collaboratively. Testing -- sandboxes and reglabs -- will be essential to that. It’s a huge change, in both process and culture, for both regulators and industry. The sooner everyone starts making this shift, the better.

The FCA’s humble tone is right and wise, but my view is that this regulator has shown not only vision, but also courage. They decided to take the risk to strike out in uncharted territory, to begin to blaze a new kind of policy pathway, and they’re inspiring many others to follow them.

More on Christopher Woolard:

Christopher Woolard is Executive Director of Strategy and Competition, and an Executive Board Member of the Financial Conduct Authority. He’s responsible for policy, strategy, competition, market intelligence, consumer issues, the Chief Economist's department, communications and the Innovate initiative. He is chair of the FCA's Policy Steering Committee and a non-executive board member of the Payment Systems Regulator.

Christopher joined the FCA in January 2013. Previously he was Group Director and Content Board member at Ofcom. He has spent most of his career in regulation or policy development including working at the BBC and in government as a senior civil servant. He is a Sloan Fellow of London Business School.
 

Here are resources and links to items mentioned in the episode:

More for our listeners

I’m in the midst of a busy set of travels that will produce some fascinating podcasts. Between November 1 and December 20, I’m traveling to seven countries -- three in Asia, three in Europe, and one in Africa -- to speak on fintech and regtech for both industry and regulators. As I mentioned, we’ll have a podcast with the Nick Cook, who leads the FCA’s innovation work on regtech, recorded at Regtech Enable in Washington. We have one coming up with Wells Fargo’s Braden More on payments innovation. We’ll have Nerd Wallet CEO Tim Chen, and Cross River Bank CEO Gilles Gade. We’ll have one in London with the charismatic CEO of Starling Bank, Anne Boden and with the trade association Innovate Finance, and also a lively discussion with a group of amazing innovators working in Europe and Africa. We’ll have one with Michael Wiegand, who heads the Gates Foundation’s work on financial services for the poor. And back in the U.S., we’ll have a show with Financial Services Roundtable CEO Tim Pawlenty...to name a few!

Plus, I’ll be recording a special series straight from the floor of the American Bankers Association conference on financial crimes, in December.

I hope to see many of you there and at other upcoming events, including these:

Please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going. See you soon!

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Real Lives: Rachel Schneider and the Financial Diaries

Jo Ann Barefoot

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If you spend a lot of time in Washington, as I do, you see a lot of issues framed around statistics about people, especially medians, and averages. For instance, policies aimed at helping lower-income people typically stratify Americans into categories, in bands above and below median income, or median incomes in their census tracts. I’ve worked with programs like this for decades -- HUD housing and mortgage programs, the Community Reinvestment Act, and many others.

And then one day, someone comes along and goes inside those data categories, and finds out what’s really happening in the lives of the people covered by them. And it turns out to be surprising.

That is exactly what today’s guest did. She is Rachel Schneider, Senior Vice President of the Center For Financial Services Innovation and co-author of the new book, The Financial Diaries: How American Families Cope in a World of Uncertainty.  Some years ago, Rachel joined a CFSI study trip to South Africa where she learned about financial diaries methodology -- intimate research that tracks the daily financial lives of individual consumer households. With funding from several organizations including the Omidyar Network, she and NYU Professor Jonathan Morduch undertook a diaries project in the United States. They identified a cross-section of America -- 235 families in a wide variety of circumstances, in communities ranging from Mississippi to Ohio to California to New York City, and had a team spend over a year with each one, mapping every bit of money that flowed into and out of each household.

Not surprisingly, they found some alarming trends, which other research has revealed as well. A full fifty-seven percent of households today are considered financially unhealthy -- including a third of those with incomes over $100,000 a year.

But by looking closely, they found much more. In particular, they spotlighted a huge issue that had been traditionally masked by the statistical averages -- namely that for many people, the most pressing problem is not actually lack of money, but rather volatility. It turns out that millions of Americans live within their means, in that they spend less than they earn, but struggle nevertheless because they have volatile and unpredictable earnings and expenses. Since they also lack savings, they can’t cushion or smooth out their expense spikes and income troughs without relying on high-cost services like payday loans and checking account overdrafts. It’s worth pondering the irony that these consumers can afford financial services, as evidenced by the fact that they do -- they actually pay more in interest and fees than other people do. But they are not well-matched to our current models of products, pricing, money management, and risk assessment.

CFSI’s research has also revealed something else: families that appear identical in the statistical averages may actually be in completely different situations. Some are rising while others are sinking. And some are overwhelmed and confused by financial management, while others are the best money managers in the population, because they have to be -- have to know exactly how much money they will earn, and when it will be in their account, and exactly how much they must pay, and precisely when, and which bills have timing leeway and grace periods and which don’t, and then must strategically plan and execute the daily, weekly, and monthly financial plan.

As we’ve discussed in other shows, innovators are working on all these problems -- more affordable smoothing solutions, easier saving, better saving psychology, effortless financial management, ladders toward good credit scores, new data that more accurately evaluate credit risk, and more. We’ve talked about those in past shows and will cover many more going forward. Most of these innovators begin by trying to understand customers’ real-life ways of using money, including by bringing in behavioral science -- recognizing that finance is not just a cerebral process but also an emotional, and social, one. The financial industry will do even better as it aligns the products offered with the ways people think and feel about them.

For this deeper understanding, nothing is more illuminating than Rachel’s book. In today’s show, she helps us get to know some of the people the Diaries tracked, see a little bit into their lives, and learn the strategies they use to make ends meet. In the process, she gives us a lot to think about, beyond the statistics.

So...buy the book! It’s in the show notes at jsbarefoot.com. And meanwhile, enjoy my conversation with Financial Diaries author Rachel Schneider.

More about Rachel and her work

Rachel Schneider is a Senior Vice President at CFSI, and co-author of The Financial Diaries: How American Families Cope in a World of Uncertainty. The Financial Diaries connects the findings of the ground-breaking U.S. Financial Diaries research project, which collected highly detailed data about how 235 households save, spend, borrow and plan over the course of a year, with the broad trends upending the economic lives of American families. It uncovers the emergence of a hidden inequality, in addition to disparities in income and wealth – an inequality in access to steady finances. It provides a framework for how to develop products and policies that can help.

Rachel is highly sought-after as a consultant and speaker, Her research has been featured in the nation’s top publications, including the New York Times, Wall Street Journal and many others, and she speaks frequently at a broad spectrum of events.

Though she began her career as an investment banker at Merrill Lynch & Co., Rachel credits her commitment to the potential for innovative finance to solve major social problems from her days as a VISTA Volunteer (now AmeriCorps). She holds a J.D./M.B.A. from the University of Chicago, and a B.A. from UC Berkeley. She lives in New York City with her husband and their two children. She occasionally “competes” in triathlons, which are getting easier to “win” as the number of competitors in her age group shrinks. She says the same cannot be said for improvement in her piano skills.

Here are other resources, including items mentioned in the episode:

More for our listeners

The next two months will bring a podcast bonanza to Barefoot Innovation, with amazing shows coming up. I just recorded a fascinating one with Christopher Woolard of the UK Financial Conduct Authority on the FCA’s innovation initiative, including lessons learned so far from their famous regulatory sandbox. We’ll also have one with the Nick Cook, who leads the FCA’s innovation work on regtech. We have one coming up with Wells Fargo’s Braden More on payments innovation. We’ll have Nerd Wallet CEO Tim Chen, and Cross River Bank CEO Gilles Gade. We’ll record one in London with the trade association Innovate Finance, and on this side of the pond, we’ll have a show with Financial Services Roundtable CEO Tim Pawlenty...to name a few!

And, I’ll be recording a special series straight from the floor of the American Bankers Association conference on financial crimes, in December.

I hope to see many of you there and at other upcoming events. My speech schedule is packed solid from now to the end of the year, which is an indicator of the fast-growing interest in fintech regulation and in regtech. I recently spoke at five events in four cities in four days, and here is some of what’s coming up.

Please remember to review Barefoot Innovation on iTunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

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Meanwhile, don’t stop innovating!



Big Banks and Big Ideas: Citi FinTech's Andres Wolberg-Stok

Jo Ann Barefoot

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My guest today is Andres Wolberg Stok, Global Head of Policy at Citi Fin Tech. We got to know each other this year on a panel at FinXTech in New York, and something I immediately noticed is that he has a special way of talking about innovation -- a very fresh way with words. It might be because he’s lived all over the world, or because he was once a journalist -- see his biography below for a sampling of his journalism adventures, which sound like plots of action/adventure movies.

All large banks have innovation initiatives -- labs, accelerators, incubators and the like. They’re all looking at issues like blockchains, big data, artificial intelligence and human-centered design -- such as, creating a user experience that customers will actually love. Banks have plenty of innovative people, of course -- in our talk, Andres quotes CEO Michael Corbat saying that Citi is actually a technology company with a banking license. However, very few banks of any size have really innovative cultures. This is partly because most are mature organizations, and also because banking has been heavily regulated for so long, which tends to foster conservative, risk-averse cultures and decisionmaking. In today’s world of rapid technological change, banks need innovation (and many innovators need banks as well). It’s important that the big banks are investing in learning how to do this well.

Citi Fin Tech was formed in late 2015 to pursue what Andres calls “fintegration.” The impetus was a critical insight: they realized that their customers’ standards had fundamentally changed. Instead of comparing Citi to other banks, there was a new yardstick -- comparison to technology firms. That set a new, high bar.

Andres explains how they’re tackling this challenge. He describes the new kinds of skills they hire. He explains their focus on agile methodology and co-creation of products and learning to experiment. He talks about building multidisciplinary teams that work concurrently on initiatives, instead of sequentially in the old waterfall-style process that could divert an innovation from what had originally made it exciting. He talks about obsessing on the consumer experience and doing thousands of focus groups to understand what customers really think.

He also talks about how the bank should “feel in the palm of the customer’s hand.” He calls mobile an “exoskeleton” for the human mind, connecting us to all the world’s information, all the time. He talks about the issues ahead in AI, privacy, and data aggregation, including the challenges for regulators. He says the key, for regulators, is to understand the upside benefits of technology, not just the risks.

Andres explains how Citi Fin Tech works with innovators, including startups -- note that he invites people to come and work with them using their API’s and data. That site is at https://developer.citi.com.

I think my favorite insight is that banks need a new model that’s open, not closed. He says the customer relationship used to be one-to-one between a bank and its customers -- and of course, the regulations are still mostly built for that. Now, though, there are multiple parties -- consumers use apps and “modular” financial relationships. If the bank wants to continue to be at the core of that customer relationship, they will have to build an open model -- and regulators will have to change with it.

As you listen, think about how regulators and also community banks could get access to this kind of hands-on experience with financial innovation. The sooner they do, the faster the system and its customers will benefit from, as Andres puts it, “breaking a few windows and letting in fresh air and sunshine.”

More on Andres

Andres Wolberg-Stok interfaces with regulators and policymakers around the world as the Global Head of Policy for Citi FinTech, a new unit spearheading the transformation of Citi’s Global Consumer Banking business into a mobile-centric “Bank of Tomorrow”. He joined Citi from an international personal finance startup and has served in a variety of digital roles, first for Citi Latin America, then for Citi's U.S. consumer businesses, and now globally.

Andres was one of the founders of Citi FinTech from his previous role as Global Head of Emerging Platforms and Services for Citi’s Consumer businesses. In 2015, Andres turned Citi into the world's first bank with an Apple Watch app. Earlier, as Citi Consumer's first global head of mobile banking, he invented Citi Mobile Snapshot, a patented 2014 breakout feature that made Citi the first major U.S. bank to offer no-login account access.

Prior to becoming a banker, Andres was an international correspondent and senior news executive. He had tea with mass-murderer military dictators; was driven, blindfolded and at gunpoint, around the capital of Paraguay after midnight; was arrested in Tierra del Fuego on suspicion of being a British spy; and raced in a car at 120 mph along the edge of a minefield in Croatia. He finds most days in banking very manageable.

More for our listeners

Please remember to review Barefoot Innovation on ITunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

It was great seeing lots of you at the Online Lending Policy Summit this week in Washington. I’ll hope to see many more of you at upcoming events:

We have wonderful shows coming up. One is with Braden More, who leads an innovation payments initiative at Wells Fargo. Another is with Giles Gade, CEO of Cross River Bank. And we’ll have several from Money 2020, including Nerd Wallet CEO Tim Chen and the FCA’s Chris Woolard, whom I’ll also be talking with there in a fireside chat.

Speaking of Money 2020, I’m excited that the AML regtech firm I’ve cofounded, Hummingbird, has been selected to do a startup pitch there. Be sure to come and watch!

See you there!



The VC Perspective: Miles Reidy of QED Investors

Jo Ann Barefoot

Reidy 2.png

This episode is a special treat because it’s both fascinating and fun. My guest is Miles Reidy, partner at QED Investors in Alexandria, Virginia. Many people know that QED was founded by former leaders of Capital One, including Cap One co-founder Nigel Morris. They have a terrific track record of investing, focused mainly especially on fintech.

Miles and I discussed two topics. One is the outlook for regtech, which he’s excited about and so am I. The other, which I know is going to be an audience favorite, is how to find and work with a venture capital firm.

On regtech, Miles talks about the technology that’s about to make compliance both more accurate and less expensive, at the same time. He talks about compliance costs rising at 20% a year, the impossibility of traditional compliance systems preventing human errors, and how we can now move beyond old sampling-based compliance processes to 100%, real-time data that enables a financial company to know, for sure, if it’s compliance or not. I’m excited about it too, because technology is breaking the old binary choice between spending more for better results, or spending less and sacrificing performance. Innovators are making it possible to be better and cheaper, both. On regtech, he also has a cautionary note for the U.S., where our regulatory complexity creates headwinds for innovation.

The second half of the show is about working with VC’s. I talk all the time with venture firms and have done some angel investing myself, but most of Miles’ insights were new to me. He shares what he’s learned, especially, from seeing people do all these things wrong, at every stage, from how to approach a VC firm cold (he describes one thing to be sure NOT to do), to how the startup should evaluate the VC, to how to work with the VC when your firm hits problems, which it will.  

He’s especially interesting, I think, on what questions to ask a VC directly, from where their funding comes from and where the fund is in its maturity cycle, to how it handles adversity (he describes the four typical scenarios, three of which are bad!). He also has advice on truly doing diligence on them, including by talking with their companies. The typical startup is so eager for money that it gets seduced by it, and can pick the wrong firm.  

Miles also explains how he evaluates potential investments. Which factors count more than others? What key metric does he want to see that the founders totally understand?  What weaknesses are fatal? And once the company is funded, what are the common mistakes? What mistake is most dangerous for a young CEO? How do you avoid the death trap of hitting the end of the funding runway before you can take off (hint: “sip” on your funds).

After we turned off the mic, I asked one more question that people often raise, which is whether fintech and financial regtech firms should focus on the great east coast VC’s that specialize in the field -- Miles mentions several in the episode -- or try to get backing from the big, famous firms in the Bay Area. There are pros and cons to each, in terms of sector knowledge, sector network, reputation “glamor,” and drawing in talent. Miles has the answer:  get both.

If we were scoring shows by how many times the guest makes me laugh, I think this one might be the winner. I know you’ll enjoy my fascinating conversation with Miles Reidy.

More about the episode

This is the November conference QED is co-sponsoring (I’ll be speaking) RegTech Enable

Here is the past podcast I mentioned with Sanjay Jain on the India Stack Sanjay Jain Podcast

And here’s more on Miles:

Miles Reidy is a Partner at QED. Previously he was the Chief Financial Officer for Audax Health, Inc., which offered a digital health engagement product.Miles reoriented the business strategy, built out the analytics functions, raised capital, and oversaw the sale of the company to United Health/Optum.  Prior to Audax, Miles was Chief Operating Officer and Chief Financial Officer for Network Solutions, one of the largest domestic providers of Internet hosting and marketing services to small businesses, and Executive Vice President and Chief Financial Officer for Sears Holdings Corporation.

Miles spent almost a decade in several executive roles at Capital One Financial Corporation, including Executive in Charge of Banking Integration, Chief Corporate Planning / Financial Strategy Officer and Chief Financial Officer of Capital One Bank and Credit Card. His responsibilities included development and implementation of the corporation’s capital and financial strategies, oversight of the card businesses’ financials and consumer analytics, and strategic planning.

Miles serves on the Boards of the Royal Bank of Canada, US, Heinz School of Public Policy at Carnegie Mellon University, and the Easter Seals of Baltimore/Washington. He is also a investor in Fenway Summer. He holds a B.S. from Georgetown University and a M.S. from Carnegie-Mellon University.

More for our listeners

Please remember to review Barefoot Innovation on ITunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

I’ll hope to see you at the events where I’ll be speaking this fall:

  • RegTech: Compliance Transformed, October 3-4th, Brooklyn, NY

  • BAI Beacon/Fintech Stage, October 4-5, Atlanta, GA

  • CFSI Network Summit, Fireside Chat with Thomas Curry, October 5, Chicago, IL

  • FISCA, October 5-8th, Las Vegas, NV

  • Money 20/20, October 25th, Las Vegas, NV (I’ll MC the Sunday regulatory track, host a town hall with senior regulators, moderate a panel, and do a fireside chat with the FCA’s Chris Woolard. Be sure to come for Sunday!)

  • Regtech Rising, November 2, London

  • Monetary Authority of Singapore Fintech Festival, November 13-17, Singapore

  • University of Michigan, November 17, Ann Arbor, MI

  • RegTech Enable, November 27-29th, Washington, DC

  • UN/ITU conference on financial inclusion in Bangalore (invitation only)

  • Fintech Connect Live, December 6th, London

  • S&P’s Fintech Intel, December 13, New York

  • Dutch Central Bank, December 20, Amsterdam

We have wonderful shows coming up. I’ll be talking with Andres Wolberg-Stok of Citi Fin Tech. We’ll have a show based on my recent fascinating experience with a U.S. Army Threatcasting exercise, learning how to creatively imagine cyber risk and then pinpoint how to prevent it. At Money 2020 I’ll record a show with Christopher Woolard, who heads strategy for the U.K. Financial Conduct Authority, and one with Nerd Wallet CEO Tim Chen.                                                                                                                                                    

I’m very proud to say that the firm I co-founded, Hummingbird Regtech, has been selected to present at Money 2020 in the startup pitch session. Be sure to come and watch!

Meanwhile, keep innovating!



A Healthy Credit Card: Jason Gross, CEO of Petal

Jo Ann Barefoot

Gross 1.png

I love having guests on the show who look at something that everyone takes for granted and said, why do we do it that way? That’s what today’s guest, Jason Gross, has done with credit cards. Jason is the CEO of Petal. He and his co-founders have designed a card that has a different business model and aims at a different market.

Credit cards have always sparked mixed feelings among consumer advocates and policymakers. On the upside, they provide incredible convenience and safety, over cash. On the down side, critics worry that that convenience factor is a double edged sword -- making spending too convenient and fueling over-consumption and under-saving.

People also worry that cards are hard to understand. For decades, policymakers have tried repeatedly to solve that by regulating card disclosures and practices with requirements to  disclose the annual percentage rate and fees; make key information prominent in the so-called Schumer Box (named after New York Senator Charles Schumer); require a grace period; bar retroactive raising of interest rates; limit marketing to college students; disclose the long-term costs of paying only the minimum balance and much more. Concern about credit cards prompted Senator Elizabeth Warren, back when she was a Harvard Law professor, to begin fighting what she called “tricks and traps” in financial products, and also business models that rely on penalty fees or interest for their profitability. That concern led to the CARD Act of 2009, and then to the creation of the CFPB itself.

The Petal card is trying to solve these challenges. It’s offering simpler, more transparent terms. It addresses the overspending problem by designing the card to encourage customers to pay the full balance each month, rather than revolve. And it’s tackling a third problem, which is reaching the tens of millions of people who don’t have a credit card. For most people, these cards are the first rung on the ladder to building a credit record so that they can later get a car loan or mortgage. Millennials have tended to avoid them, partly due to coming of age in the financial crisis and becoming leery about incurring debt. Jason notes that some young people are “sponsored” into the system by parents who provided them with cards, but for those who aren’t, it’s hard to build credit.

That’s a catch 22 -- you can’t get a card because you don’t have a credit record, and you can’t build a credit record because you don’t have a card. Petal is solving that with one of the most important kinds of innovations underway in finance, namely, use of alternative data to evaluate risk. They are looking at the person’s own payment and income history, as reflected in their bank account, to determine ability to pay.

Accessing that information has become controversial, as banks worry about allowing a third party to see this data even with the consumer’s permission, in case something goes wrong. However, the ability of consumers to allow such access is the life’s blood of most of the innovation underway in consumer finance. The CFPB is evaluating the issues arising around this, including questions like who really “owns” consumers’ bank account data, whether third parties’ data uses should be regulated, and whether we need to clarify where liability should fall in the event data is misused or breached. A lot of people are working on this issue. Solving it is one of the most important steps we can take toward making finance more inclusive.

Listeners have often heard me say that I’ve spent most of my career working with efforts to promote consumer financial health and inclusion by regulating the financial industry, and that I think the results have been mixed at best! A few years ago, I realized that technology could do most of what we’ve been trying to do through policy (if we get the policy right). Petal is trying to do that -- use new data and technology to offer a product that they think will be highly profitable -- despite leaving some kinds of revenue on the table -- because consumers will choose it. Watching them will be fascinating.

More information

Articles on Petal’s September launch:

  1. https://www.paymentssource.com/organization/simple

  2. https://bankinnovation.net/2017/09/no-credit-score-say-hello-to-petal-card/

  3. http://paybefore.com/finance-and-strategy/petal-uses-machine-learning-underwrite-credit-without-credit-score/

  4. http://www.thisisgoingtobebig.com/blog/2017/9/8/introducing-petal-providing-access-to-credit-to-thin-file-consumers

  5. https://www.nytimes.com/2017/09/08/your-money/new-credit-card-option-for-those-with-scant-credit-histories.html?mcubz=1&_r=0

Jason's Article in Medium:

https://medium.com/@jasonbgross_/petal-ba2bb74718f4

My podcast with Digit CEO Ethan Block (another example of innovators leveraging bank account data)

http://www.jsbarefoot.com/podcasts/2016/2/25/effortless-saving-digit-ceo-ethan-bloch


More for our listeners

Please remember to review Barefoot Innovation on ITunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

I’ll hope to see you at the events where I’ll be speaking this fall:

I’ll also be speaking in December to the Dutch Central Bank on financial innovation in December. I do many presentations for regulators and welcome those invitations. Regulators, in my view, have the hardest and most important role to play in financial innovation.

We have wonderful shows coming up. I’ll be talking with Andres Wolberg-Stok of Citi Fin Tech. And I’m going to do one on one of the most fascinating experiences I’ve had in years -- I participated this month in the U.S. Army’s Threatcasting exercise  -- sort of a war-gaming process where we “threatcast” technology risks ten years into the future, and then “backcast” thinking about what we could do, today, to prevent the problem. It was off the chart fascinating.                                                                                                                                                                                                                                                                                                    We also have a show coming up with Miles Reidy, Partner at the venture firm QED. Miles and I had a fun and fascinating talk about two topics -- the investment outlook for regtech, and then how to find and work with a venture capital firm.

Speaking of RegTech, we’re going to have a show with Merlon Intelligence, an AML regtech firm, and also a special show with my own co-founders -- at Hummingbird RegTech. I’m proud to say that Hummingbird has been selected to present at Money 2020 in the startup pitch session. Be sure to come and watch!

Meanwhile, keep innovating!



The ABA's Regulatory Compliance Conference (Part 2)

Jo Ann Barefoot

 Gift from Gene Ludwig - Compliance isn't Mickey Mouse

Gift from Gene Ludwig - Compliance isn't Mickey Mouse

This is a very special show because we recorded it directly from the bustling floor of the American Bankers Association’s 2017 Regulatory Compliance Conference.

The RCC has long been the preeminent gathering of compliance professionals in the United States and, not surprisingly, it’s growing -- with another attendance record this year at 1800 people. That makes it one of the largest events of the US banking industry.

We gathered in Orlando this summer to grapple with the huge array of challenges facing compliance professionals, from bank compliance officers and attorneys, to industry vendors, to the regulators themselves.

The episode departs from our usual format. Instead of having one in-depth discussion with one guest, I had eight short conversations with a diverse group of compliance leaders. Each discussion is about twenty minutes. My guests, in order, are:


Part 1






Part 2





The episode kicks off with a lively discussion with Eugene Ludwig and Allstair Renee. As many listeners know, Gene was previously the Comptroller of the Currency and then founded Promontory Financial. Last year, he surprised the financial world by selling Promontory to IBM Watson, to form Watson Financial. At the conference, I also moderated a fireside chat with Gene and Allistair Rennie.  It was the RCC’s first-ever session on regtech. -- and I predict it won’t be the last.

On stage for our fireside chat, Gene Ludwig presented Alistair and me with...wait for it...Mickey Mouse ears (again, we were in Orlando). For better or worse, everyone in the room got the joke. People in finance have long complained about “Mickey Mouse” regulations that impose massive, hyper-technical requirements but produce only limited benefits. Gene’s gift signaled that technology is attacking that problem. We’re shifting from an analog-era regulatory approach to a digital-era one that will use data and machine learning to make compliance effective and efficient, through regtech. Watson Financial is part of a fast-growing regtech industry that is completely rethinking how compliance is done. Compliance isn’t Mickey Mouse anymore.

To the contrary, in fact, there was a theme at this year’s conference about compliance officers as heroes. I’ve talked in past podcasts about this idea of “heroic compliance” -- that compliance people will increasingly be leaders in shaping the future of the industry. That’s counterintuitive, since compliance has traditionally been seen as a side issue in banking. Today, however, as technology transforms both finance financial regulation, we will see compliance executives at the front, shaping how the industry moves forward. They will be gatekeepers on what innovation can and cannot take hold, blocking harmful change but also opening the doors of the banking industry fortress to allow in new, better, more affordable products, and delivery channels, that can serve more people, profitably and at scale, in ways that actively foster consumer financial health. I think we should all begin to use the hashtag, #HeroicCompliance.  

In the fireside chat, Alistair took this idea further, arguing that compliance officers may actually be the people who keep the banking industry competitive in a high-tech world. Why? As they adopt regtech, they’ll be at the forefront of innovating in how banks use data and AI -- and therefore leading the charge to break banks’ data out of it legacy silos and putting it to use -- first to transform compliance, and later, who knows? ...maybe to transform banking, itself.

The conversations in this episode vary widely. We talked about regtech; the regulatory burden on community banks (including how regtech can help); how banking is changing; how compliance is changing; how regulators should balance use of rulemaking, supervision and enforcement; the grounding of compliance in mission and ethics; and the psychology of compliance, including that people sometimes look the other way on ethical failures in order to get along. We also discussed some of the top issues of the day, like AML and TRID. My guests have a mix of experience as regulators, lawyers, compliance officers, auditors, and compliance leaders, working with a wide range of large and small institutions. They have a wealth of insight into where we’ve been, where we are today, and where we should be going.

More links

More for our listeners

Please remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

Meanwhile, I’ll hope to see you at the events where I’ll be speaking this fall:

Meanwhile, keep innovating!



The ABA's Regulatory Compliance Conference (Part 1)

Jo Ann Barefoot

 From the main stage

From the main stage

This is a very special show because we recorded it directly from the bustling floor of the American Bankers Association’s 2017 Regulatory Compliance Conference.

The RCC has long been the preeminent gathering of compliance professionals in the United States and, not surprisingly, it’s growing -- with another attendance record this year at 1800 people. That makes it one of the largest events of the US banking industry.

We gathered in Orlando this summer to grapple with the huge array of challenges facing compliance professionals, from bank compliance officers and attorneys, to industry vendors, to the regulators themselves.

The episode departs from our usual format. Instead of having one in-depth discussion with one guest, I had eight short conversations with a diverse group of compliance leaders. Each discussion is about twenty minutes. My guests, in order, are:


Part 1






Part 2





The episode kicks off with a lively discussion with Eugene Ludwig and Allstair Renee. As many listeners know, Gene was previously the Comptroller of the Currency and then founded Promontory Financial. Last year, he surprised the financial world by selling Promontory to IBM Watson, to form Watson Financial. At the conference, I also moderated a fireside chat with Gene and Allistair Rennie.  It was the RCC’s first-ever session on regtech. -- and I predict it won’t be the last.

On stage for our fireside chat, Gene Ludwig presented Alistair and me with...wait for it...Mickey Mouse ears (again, we were in Orlando). For better or worse, everyone in the room got the joke. People in finance have long complained about “Mickey Mouse” regulations that impose massive, hyper-technical requirements but produce only limited benefits. Gene’s gift signaled that technology is attacking that problem. We’re shifting from an analog-era regulatory approach to a digital-era one that will use data and machine learning to make compliance effective and efficient, through regtech. Watson Financial is part of a fast-growing regtech industry that is completely rethinking how compliance is done. Compliance isn’t Mickey Mouse anymore.

To the contrary, in fact, there was a theme at this year’s conference about compliance officers as heroes. I’ve talked in past podcasts about this idea of “heroic compliance” -- that compliance people will increasingly be leaders in shaping the future of the industry. That’s counterintuitive, since compliance has traditionally been seen as a side issue in banking. Today, however, as technology transforms both finance financial regulation, we will see compliance executives at the front, shaping how the industry moves forward. They will be gatekeepers on what innovation can and cannot take hold, blocking harmful change but also opening the doors of the banking industry fortress to allow in new, better, more affordable products, and delivery channels, that can serve more people, profitably and at scale, in ways that actively foster consumer financial health. I think we should all begin to use the hashtag, #HeroicCompliance.  

In the fireside chat, Alistair took this idea further, arguing that compliance officers may actually be the people who keep the banking industry competitive in a high-tech world. Why? As they adopt regtech, they’ll be at the forefront of innovating in how banks use data and AI -- and therefore leading the charge to break banks’ data out of it legacy silos and putting it to use -- first to transform compliance, and later, who knows? ...maybe to transform banking, itself.

The conversations in this episode vary widely. We talked about regtech; the regulatory burden on community banks (including how regtech can help); how banking is changing; how compliance is changing; how regulators should balance use of rulemaking, supervision and enforcement; the grounding of compliance in mission and ethics; and the psychology of compliance, including that people sometimes look the other way on ethical failures in order to get along. We also discussed some of the top issues of the day, like AML and TRID. My guests have a mix of experience as regulators, lawyers, compliance officers, auditors, and compliance leaders, working with a wide range of large and small institutions. They have a wealth of insight into where we’ve been, where we are today, and where we should be going.

More links

More for our listeners

Please remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

Meanwhile, I’ll hope to see you at the events where I’ll be speaking this fall:

Meanwhile, keep innovating!



Access For All: CIIE’s Sanjay Jain and the India Stack

Jo Ann Barefoot

Jain 1.png

My guest today is Sanjay Jain, Chief Innovation Officer at the Centre for Innovation Incubation and Entrepreneurship (CIIE). Among many high-impact achievements, Sanjay helped lead creation of one of the most ambitious government infrastructure initiatives ever undertaken -- the so-called India Stack that is connecting everyone in India to the financial system and mainstream commerce, by providing a biometric ID.

I met Sanjay at the Jakarta international regulator meeting I’ve mentioned before sponsored by the Omidyar Network and Gates Foundation and put on by FintechStage. I sat next to him at dinner one night, and was astonished to hear him explain the project and to hear others at the table describe how it’s already changing India. I’d been vaguely aware of it and knew it was huge, but had no idea how fast and transformational it is. At the conference the next day, we ducked into an idle meeting room to have this talk.

We usually think of innovation as driven by the private sector. We think of government’s role as either to protect people from innovation-related harm or as just to avoid blocking good innovation. In reality, though, government has another critical role, which is to provide the infrastructure within which new technology can work..

A core component of infrastructure is a system through which people can be accurately identified. People need to be able to prove who they are, quickly and easily and inexpensively, and in ways that can’t be faked, so that no one else can pretend to be them, and so that they won’t be excluded from opportunities because their identities are in doubt, or are too complicated to be worth the effort to verify.

This identity infrastructure doesn’t necessarily have to be provided by government -- we’ll do a show at some point with my friend Greg Kidd of Global ID, who argues passionately that it’s better to have a decentralized identity authentication system. Traditionally, though, government has played this role by giving people identity documents like birth certificates, driver’s licenses, and passports, and also unique, standardized identity markers, like social security numbers.

With old technology, that approach was the best we could do, and it worked pretty well for people who had the right documents. However, it’s never worked well for people who don’t, including many new immigrants, and certainly refugees, and of course, the very poor. The very poor have, always, been locked out of the mainstream.

All that has changed today thanks to what is arguably the most democratizing technology ever invented -- the mobile phone. As of 2013, more people have access to cellphones than to toilets. As we’ve discussed before on Barefoot Innovation, we are headed toward total financial inclusion through the phone. This means that, technologically, everyone can be connected, easily and completely and inexpensively, to everyone else. In most of the developing world, a top goal is to enable full access to the financial system and commerce, through the phone, as a primary engine for economic growth and prosperity.

However, people can only connect to the financial system if they can be reliably identified. So UIDAI -- the Unique Identification Authority of India -- has undertaken one of the largest government projects ever -- the collection of biometric identity information on every adult and every child in the world’s second most populous country. They have gathered ten fingerprints, two iris scans and facial recognition data for about 1.2 billion people. And they have done it fast!

The “IndiaStack” is being implemented in phases around four “layers”: “presenceless” identity, paperless records, cashless transactions, and consent-based use of data. At its heart is the Aadhaar card, which contains the person’s unique identity number, authenticated through the biometric ID. With this tool everyone can, among other things, open and use a bank account.

Needless to say, all this has raised concerns about privacy and data security. The project has critics, and even its advocates agree that the challenges are daunting. India’s leaders, however, believe the risks can be managed and that they are massively outweighed by the opportunity to open the doors of the economy to everyone.

I’ve spent time in rural India, including with an NGO called Rising Star Outreach that focuses on micro-finance, education and health services for leprosy communities. India is curing leprosy, but leprosy-affected people and their families still face daunting challenges. As I listened to Sanjay, I found myself remembering people I’ve met in remote villages where families live in one room, sometimes in huts with thatched roofs and dirt floors, and I also thought back to being in Chennai, in southern India, with the streets teeming with cars and lorries and motorcycles carrying five people and bicycles carrying three or four and auto-rickshaws and people carrying bundles of goods on their heads. And I thought about all the languages -- India has twenty-two official languages -- thirty that are spoken by more than a million people -- and hundreds of minor languages and dialects.  What it took these IndiaStack teams to find every single person in this huge country, and document them all -- it’s stunning.

And thanks to their effort, all these people can be connected up with everyone else in India, and eventually everyone else in the world, through a cell phone and a reliable identity.

Listeners outside the developing world may be thinking this is interesting but not very relevant to them. However, the challenge of creating reliable and safe digital identity is one of the top issues facing finance. The digital age is not only enabling new forms of identity, it’s also undermining the old forms. The dark web runs a thriving market in selling and buying personally-identifiable information including social security numbers. In the U.S., the 2015 Office of Personnel Management data breach, alone, compromised identity information like social security numbers for over 20 million people. Banks are increasingly caught up in fighting fraud and crime based on fake identities -- security experts tell me that criminals are more likely that real customers to accurately provide identification information, because they don’t make typos. Meanwhile, regulatory “de-risking” standards for Anti-Money Laundering “Know Your Customer” rules have been cutting off whole sectors of people from financial access because they come from places, industries or groups that raise disproportionate risk, and banks find it too difficult and costly to sort out the good people from the bad ones

Financial companies and regulators everywhere will need better ways to identify people, and India is blazing a trail that will yield fascinating lessons.

Sanjay’s Biography

SANJAY JAIN, Chief Innovation Officer, Centre for Innovation Incubation and Entrepreneurship (CIIE) Sanjay Jain leads efforts to help create, promote, and encourage entrepreneurship in areas around digital technology. Sanjay is also a volunteer with iSPIRT, the software product industry think tank. He has been an active member of the India Stack, Open API, and Cashless teams. He has been working with the NPCI to define the next generation payment systems (the Unified Payment Interface), as well as with regulators and other bodies to help entire processes go paperless. He has been one of the key contributors to help create, and evangelize various government open APIs, which are collectively referred to as the India Stack.

Sanjay has been responsible for the development of many large scale, high impact systems. He was the Chief Product Manager at the UIDAI, where he led the product development efforts from its early days till well after launch. The UIDAI has issued over a billion numbers to Indian residents.

Sanjay was also responsible for the creation and launch of Google Map Maker - a crowd-sourced mapping product that is responsible for Google Maps data for 170+ countries (including India). He’s been a part of many entrepreneurial teams through his career, including most recently at EkStep, Khosla Labs, and as a founder of Novopay Solutions. He holds an M.S. in Computer Science, from the University of California, Los Angeles and a B.Tech in Computer Science & Engineering, from the Indian Institute of Technology, Mumbai.

More for our listeners

I’ll be speaking this fall at these events:   

Please remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

Keep innovating!



We Have Less Time than We Think: Singapore's Sopnendu Mohanty

Jo Ann Barefoot

I met today’s guest, Sopnendu Mohanty, about 18 months ago. I moderated a panel on blockchain for last year’s MIT Fintech Conference, and Sop, who is the Chief Fintech Officer of the Monetary Authority of Singapore, was a panelist -- explaining how MAS was building a regional innovation hub that included blockchain strategies. Since then I’ve seen him three more times -- once at Harvard, which he visited with the visionary head of MAS, Ravi Menon; once when I spoke at MAS’s enormous conference last fall in Singapore; and last at a regulator gathering in Jakarta this year, where we recorded this short conversation.

The thing that strikes me most is that, when I first met Sop, he was way ahead of nearly everyone else in thinking about regulating fintech and regtech for regulators -- and that the last time we talked, he had widened that lead even further. On these issues, he might be the most forward-thinking regulator in the world.

The Jakarta meeting was extraordinary. Funded by the Omidyar Network and the Gates Foundation and organized by the amazing Fintech Stage, it drew regulators from six continents, all coming together to share problems and solutions on how to modernize regulation as technology transforms finance. Many were from the developing world, where rapid mobile phone adoption and mobile money services have outstripped traditional regulatory frameworks. Many, though, were from developed countries grappling with how to become innovative, themselves. Notably absent was the United States.

In Jakarta, Sop and I ducked into an empty conference room during a short break and had this talk, as a teaser for a longer episode on his next trip to the U.S.

Singapore is widely regarded as a top world leader in regulatory innovation, right up there with the UK Financial Conduct Authority that started the worldwide movement toward governments adopting innovation agendas. That movement is burgeoning -- recent research by the Aspen Institute finds that more than twenty nations have launched or are exploring regulatory innovation initiatives. MAS was either the second or third one, depending how you count (Australia was early too). MAS has built a “tech stack” that includes giving innovators wide latitude to try new things, as well as “co-creation” of some regulatory change with industry and a sandbox for experimentation.

I’ve become convinced that regulators actually need sandboxes and reglabs, because hands-on testing will be the only way they can learn fast enough to keep up with today’s technology change. Here’s my recent article making that argument!

In our talk, Sop explains MAS’s  “pragmatic” approach, which emphasizes small-scale experimentation, partnering with industry to solve specific problems, and learning from industry which, he says, generally knows more than government does.

When you talk with Sop, you feel a palpable sense of urgency. I think that’s why his thinking is evolving so fast -- he believes we’re running out of time. He worries that the financial system will suffer a calamitous cyber attack and that we have to move much more aggressively to “future-proof it.”

Of course, Singapore has an easier challenge than we do in the U.S., since it’s smaller and has a vastly simpler financial system and regulatory framework (every country has a much simpler regulatory framework than the United States). When I pointed this out to Sop, though, he had a response that has been haunting me ever since. I think you’ll find it thought-provoking.

I’ll be speaking again at the MAS Fintech Festival in November and urge you to come. Last year it drew a stunning 13,000 people. This year, he thinks that could double!  That would surely make it, by far, the world’s largest financial conference. It will be an exciting place to be.

So, enjoy my conversation with Singapore’s Sopnendu Mohanty!

More for our listeners

I hope to see you at some of my upcoming speaker events, including:  

Meanwhile, remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook.  And please send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

We have great new shows coming up. We’ll be posting the series I recorded from the floor of the ABA’s annual Regulatory Compliance Conference, including one with Gene Ludwig and Alistair Renee of IBM’s Watson Financial on how artificial intelligence will transform compliance. In addition we’ll have Sanjay Jain, who helped build India’s revolutionary “tech stack” project to capture customer identity on more than a billion people. We’ll have the exciting startup, Petal, and we have several coming up on anti-money laundering.

Keep innovating!



Banks and Community : CSBS President John Ryan

Jo Ann Barefoot

My favorite episodes of Barefoot Innovation are the ones that take a philosophical turn. That happened with John Ryan, the thoughtful president of the Conference of State Bank Supervisors, which is the organization that coordinates America’s state-level financial regulators.

As you would expect, John and I began by discussing the events that have CSBS in the news these days. One is the launch of its Vision 2020 project to streamline state licensing and examinations for nonbank fintechs, to address the costly and monumental task these companies face in trying to grow to national scale by getting licensed state by state. The other news, and bigger controversy, is CSBS’ litigation against the Comptroller of the Currency, seeking to block the OCC’s proposal to create a national bank charter for fintechs. From these themes, though, we went on to far-ranging pondering about the future of banking, community banks and America’s communities.

On the OCC charter proposal, as John knows well, I’m for it. After talking with him, I still am, but this conversation is the best case I’ve heard anywhere about what could be at stake if such a charter were to bring more consolidation of the banking system. I don’t think it would, but his insights are hearty food for thought.

On Vision 2020, let me say that CSBS’s innovativeness amazes me.  At one point in the podcast John said, “we’re not very imaginative, but we get the job done.” Actually, I think they’re very imaginative, and I think the 2020 effort deserves its “visionary” labeling. CSBS is a century-old body and it is, after all, a body of regulators. Neither of those factors makes it a likely leader in innovation, nor does its daunting mandate of coordinating fifty wildly diverse state regulatory systems. And yet it plans to design and execute a high-tech transformation of how states license and supervise nonbanks (a process that, as John notes, is often still paper-based). I think other regulators can learn a lot from watching this model, both in how to design new systems and how to build buy-in from a complex set of stakeholders.

This innovativeness shouldn’t be surprising because, since these states are the regulators of financial innovation. With some exceptions, the cutting edge of innovation is not in the banking system (partly because banks are so highly regulated), but rather in the nonbanks -- the startups and some of the large tech firms. And those are all almost entirely regulated by the states -- the federal government plays almost no direct role and in fact has very little contact with them. (This is one reason I support the OCC fintech charter -- because it would be the single best way for the federal regulators, who dominate national financial regulatory policy, to become expert about the technologies that are rapidly transforming all of finance. Today, they have little first-hand interaction with it. All that expertise resides in the states that license and oversee the firms that are pushing out the frontiers of the financial industry. For me, this puts a huge priority on the need for the U.S. to evolve new regulatory models, because our uniquely complex and fractured regulatory structure cannot effectively cross-fertilize the rapid learning regulators need to keep up with today’s technology.

John offered plenty of philosophical thinking about all these topics, but late in the discussion we moved on to even bigger challenges, including the stresses facing America’s rural communities -- the kinds of places where people voted for disruptive change in last year’s election. John grounds his thinking about CSBS in his concern about the seemingly inexorable centralization and consolidation of banking. He worries about the role regulation plays in that, and about the future of local lending, and about the future of America.

My home in New Mexico is in a small town, and I’ve done a lot of consulting in them. Years ago, I did extensive strategic planning consulting with small banks, mostly in the Midwest. I spent a many days in little towns where, when lunchtime comes and you walk to the sandwich place with the bank president, half the people on the sidewalk greet him by his first name. There’s a reason why these banks are called “pillars of the community.”  It’s because if they disappeared, things would collapse. Talking with John made me remember one holiday-season visit with a little bank, where the management team told me they’d had to cover an emergency year-end budget shortfall for three local nonprofits, which would have failed without the help. One was a health clinic, one the library, and I can’t recall the third. The giving was a significant hit to the banks earnings, but they’d done it anyway because, quite simply, no one else could -- and because without these facilities, the town’s population would continue to shrink, and age.

Think about this question….What would happen to America’s rural communities if they lost their banks?

And what would happen to America, if we lost our rural communities?

These places are the wellspring of much of our unique national heritage. It seems to me they matter, in ways both visible and invisible.

Their problems are hard to solve. They deserve new thinking, and the future of community banks has to be part of it.

More information on John Ryan

John Ryan is president and chief executive officer of the Conference of State Bank Supervisors, the national organization of financial regulators from all 50 states and U.S. territories.  Prior to becoming president and CEO in 2011, he was CSBS’s Executive Vice President, and Assistant Vice President of Legislative Affairs. Mr. Ryan also led the financial services consulting practice at a public affairs firm and worked on the U.S. House Banking, Finance and Urban Affairs committee. He has a B.A. in political science and economics from the University of California at Berkeley.

More links

Banking Exchange - Reglabs: Time for a major regulatory experiment? (My new article advocating for a new collaboration model for U.S. bank regulators, including through reglabs and a new alternative regulatory channel.)

Karen Mills’ Harvard paper on small business lending and fintech, and my podcast with her.

More for our listeners

I hope to see you at some of my upcoming speaker events, including:  

Meanwhile, remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at  jsbarefoot.com. Be sure to follow me on twitter and facebook.  And remember, on the website, to send in your “buck a show” to keep Barefoot Innovation going.

Support our Podcast

SUPPORT OUR PODCAST

We have new episodes coming up. We’ll be posting the series I recorded from the floor of the ABA’s annual Regulatory Compliance Conference, including one with Gene Ludwig and Alistair Renee of IBM’s Watson Financial on how artificial intelligence and machine learning will transform compliance. Those also include an interesting discussion with prominent regulatory attorney Andy Sandler. In addition we’ll talk with Sanjay Jain, who helped build India’s revolutionary “tech stack” project to capture customer identity on more than a billion people. And we’ll talk with Sopnendu Mohanty, the Chief Fintech Officer of Singapore.

Keep innovating!



Breakfast with the Best - Brett King

Jo Ann Barefoot

Brett King and I see each other often, partly because we often speak at the same conferences and partly because we’re both on the board of the Center for Financial Services Innovation. For some reason, though, we went for over a year trying unsuccessfully to find time to record a podcast.

So we we ended up getting together in London. We both participated in the wonderful Innovate Finance Global Summit at the Guildhall, in the old City, where we carved out some early morning time, met at a restaurant and, and over plates of hearty eggs and bacon and mushrooms and tomatoes, had a conversation unlike any previous one in the fifty-four episodes we’ve done so far on Barefoot Innovation.

As most listeners know, Brett is a four-time best-selling author of an acclaimed series of books on the future of banking and hosts the global podcast and radio show, Breaking Bank$ -- on which I enjoyed being a guest in May. He is also the founder of the fintech firm Moven. He is a prominent media voice, and he is certainly the most popular speaker anywhere on the future of financial technology, both for his insightful content and his entertaining, unforgettable style.

In recent years, Brett has also reached beyond banking to become an overall futurist, especially in his book Augmented, looking ahead at how technology will change our lives.

I usually introduce each show by pointing out some highlights of my guests’ comments and sharing some of my own thoughts about them. With Brett, though, I’m going to skip that, because the whole discussion is a highlight. My suggestion is that you listen to all of it, and then listen again.

And maybe take some notes, because this might be the easiest way to get a glimpse of the future of finance, from someone who has been exploring far beyond the mapped frontiers for many years. On that note, be sure to watch for his next book, Bank4.0, which will go even further in predicting a transformation of finance.

More on Brett King

Brett King is a four times bestselling author, a renowned futurist and keynote speaker, the host of "BREAKING BANK$, the First Global Fintech Podcast" and the founder of Moven, with its concept of a downloadable bank account that incorporates mobile payments and banking capability, along with a gamification based money management system.

King was voted as American Banker's Innovator of the Year in 2012, and was nominated by Bank Innovation as one of the Top 10 "coolest brands in banking". His books Augmented, Breaking Banks (based on the podcast), BANK 3.0 and Bank 2.0 have al ranked as a finance bestsellers and have been released in several languages in 19 countries.

King has been featured on FoxNews, ABC, CNBC, Bloomberg, BBC, Financial Times, The Economist, ABA Journal, Bank Technology News, The Asian Banker Journal, The Banker, Wired magazine and many more. He contributed regularly as a blogger on Huffington Post. He has spoken to more than a quarter of a million finance professionals in over 40 countries in the last 3 years alone.

More for our listeners

I hope to see you at events where I’ll be speaking this year, including:  Finovate in New York September 13; Money 20/20 in Las Vegas in October; SourceMedia’s Regtech Compliance Transformed, in New York in October; Fintech Connect Live in London in December; and others -- watch the website.

I’m also speaking at a lot of regulator events. For all the regulators listening, it’s great to see you all at these, and I’m glad that there are more and more of them.  

For everyone, remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at  jsbarefoot.com. Please also join my facebook fan page, and follow me on twitter @JoAnnBarefoot.

Support our Podcast

And watch for upcoming podcasts. These include a special series I recorded from the floor of the ABA’s annual Regulatory Compliance Conference, including one with Gene Ludwig and Alistair Renee of IBM’s Watson Financial on how artificial intelligence and machine learning will transform compliance. We’ll also have a provocative discussion with John Ryan of the Conference of State Bank Supervisors. We have a lively discussion with prominent regulatory attorney Andy Sandler. We’ll  hear from Sanjay Jain, who helped build India’s revolutionary “tech stack” project to capture customer identity on more than a billion people. And we’ll talk with Sopnendu Mohanty, the Chief Fintech Officer of Singapore.

Meanwhile, keep innovating!



From Analog to Digital Regulation - CFTC Acting Chairman Christopher Giancarlo

Jo Ann Barefoot

Today’s program is a very special one -- a conversation about regulatory innovation, with the very innovative acting Chairman of the Commodities Futures Trading Commission, Christopher Giancarlo.

As regular listeners know, I’ve spent many years in and around Washington where there is a deeply entrenched belief that regulations, and regulators, simply can’t change very much. Regulators are generally, by both nature and design, deliberate, and cautious, and risk-averse. That’s exactly how they’re supposed to be. The slowness of regulatory change can be frustrating, but I think most would agree that, broadly speaking, it’s been better to err on the side of carefulness than boldness, or inventiveness, when taking regulatory actions that will ripple through big swaths of economy and often force change on whole industries and, often, millions of customers.

Today, though, the tilt toward slow and careful under stress in finance, because the world that our regulators oversee is changing too fast for the old system to work well. Our familiar regulatory models -- stable, steady, solidly-rooted -- are being bombarded by technology that is knocking them off their axes. These technology trends, which are much bigger than finance, are developing so fast, and are so powerful, that they are moving us toward a tipping over, into a new world. And in that new world, we’ll face a new paradigm -- namely, that if our regulators are going to be risk-averse, they will have to address not only the dangers of changing, but also the rising dangers of not changing. Technology is growing exponentially, pulling finance along with it, and we’re still trying to regulate it with brains and institutions hard-wired for linear change. We will increasingly face the danger of getting things wrong -- very wrong -- due to falling behind.

Fortunately, a growing group of regulatory leaders, in the United States and other countries, see this shift and are taking on its challenge. One of them is Christopher Giancarlo. Last summer, he and I spoke at the same conference in New York  and happened to sit together at lunch, where he began talking about technology and innovation in ways I’d never heard before from a financial regulator. At the time, he was a commissioner at the CFTC -- he’d been named to that role by President Obama and confirmed unanimously by the Senate. This year, President Trump appointed him Acting Chairman and has now nominated him to be the Chairman going forward. Senate action is expected soon on that -- it may well be that, by the time this show is posted, he’ll be confirmed as the Commission’s chairman.

This spring, he launched an initiative that’s called LabCFTC. Its goal to focus and build the Commission’s extensive work in fintech and regtech innovation. As he explains in our conversation, the Lab will pursue a wide range of activities, from guiding innovators about how to work with regulatory requirements, to participating in research, to building stronger collaboration among financial agencies.

I knew it would be fascinating to have Chairman Giancarlo as a guest on Barefoot Innovation, but I wasn’t prepared for the full vision that he laid out in our discussion. I think this is the single most thought-provoking and eloquent case I’ve ever heard from a senior official about why and how regulators, of all kinds, absolutely have to change.

Remember...the CFTC plays an enormous role today in overseeing financial markets. Its mandate was expanded after the financial crisis, far beyond its traditional focus on commodities. It now oversees the derivatives markets and works to reduce risks to the economy associated with the futures and swaps markets -- areas where, as he explains, technology is rapidly changing everything.

I know you’ll enjoy hearing the Chairman’s far-ranging insights, from the historical reasons why payments are cleared in three days to his eye-opening experience visiting a modern-day, high-tech family farm.

More for our listeners

Remember to review Barefoot Innovation on ITunes, and please sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at  jsbarefoot.com.  Please also join my facebook fan page, and follow me on twitter @JoAnnBarefoot.

And watch for upcoming podcasts. These include a special series I recorded from the floor of the ABA’s annual Regulatory Compliance Conference, including one with Gene Ludwig and Alistair Renee of IBM’s Watson Financial on how artificial intelligence and machine learning will transform compliance. We’ll also have a provocative discussion with John Ryan of the Conference of State Bank Supervisors; will hear from Sanjay Jain, who helped build India’s revolutionary “tech stack” project to capture customer identity on more than a billion people; and last -- but not least --  we’ll have breakfast in London with the great Brett King.