contact us

Use the form on the right to contact us.

You can edit the text in this area, and change where the contact form on the right submits to, by entering edit mode using the modes on the bottom right.


Washington, DC
United States

(575) 737-8602

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

Barefoot Innovation Podcast

Crossing Party Lines with Fintech Foxes Jon Bouker, Dan Renberg and Kate Flocken of Arent Fox

Mallory Kwiatkowski

What if, even amidst all the acrimony inflaming our politics these days, we really could all get along -- at least about some things? What if, while holding true to our varied, principled views, we could communicate, civilly, across the partisan divide? What if, in fact, we could even enjoy doing that?

Might it be possible to get some things done?  

We’re posting today’s show the day after President Trump’s State of the Union address, and just a few weeks into the tenure of the very unique 116th Congress. We’ve just gone through the holidays with families worrying that political debates might ruin their dinner gatherings. We’ve just gone through the government shutdown, and now the deadline for avoiding the next one is just a week away. It feels like half the country is arguing about politics and the other half has tuned out, figuring, why bother, since Washington is gridlocked and nothing can get done anyway.

Amidst all the collective angst about our political discourse, I found myself, one afternoon last fall, in a meeting with the leadership team of the government affairs group at the law firm, Arent Fox. One partner, Jon Bouker, is a Democrat. Another, Dan Renberg, is a Republican. And as we talked, they kept making me laugh. Watching them interact, watching them brainstorm together, watching them riff on each other’s points, I realized we could all use a little more of whatever makes them effective.

So I asked them to come on the show, along with fintech expert Kate Flocken from the firm’s emerging technologies group, to share with you, our listeners, the secrets of how to get things done in a polarized and partisan environment. We recorded it, actually, on Day 32 of the 35 day shutdown.

Their first piece of advice is to forget the notion that nothing can get done. As Dan pointed out, the House has about 100 new members, and that is more than 20% of the total institution. This makes it a whole new organization, full of opportunities for fresh starts. Also, for those of us working in technology, we suddenly have a huge new cohort of members of Congress who are digitally-native -- who grew up with technology as a core part of their lives. We’ve never had this before. It can make whole new debates possible. And as my guests say, we’re even seeing the Congressional rules start to modernize.

Beyond that, my guests shared insights on how to be effective with policymakers and regulators -- especially for startups.  Is it best to lie low and hope the government won’t notice you? Or is it smarter to go talk with them -- state or federal regulators, and legislators? Should you get to know your members of Congress and their staffs? If so, how do you do that? Who should you reach out to? Why would they want to talk with you? And what would happen if, sometime soon, you suddenly face a crisis, a regulatory or enforcement issue, and your company’s very first government interactions have you on defense, dealing with people who don’t understand you? Kate shares a great story about that scenario. And Jon makes a memorable point that every former member of Congress has a story about what they’re most proud of, that almost always began with talking with one person.

We also had a far-ranging discussion of the policy outlook this year for tech and fintech. Will there be privacy legislation? How are policymakers thinking about consumer data protection? Or alternative data in credit underwriting? What are the dangers that Congress or regulators might accidentally strangle innovation that could help consumers? How do ideas on big topics like these gestate over time in the policymaking process? Can they sometimes seem stuck, be stuck, and then suddenly move? (The answer to that is yes, they definitely can.) And of course, Dan helpfully compares and contrasts real life with House of Cards.

My guests even take on the big question: if you’re going to meet with regulators or legislators in some marble-columned building in Washington, do you -- or don’t you -- have to wear a suit?

Links

Link to full transcription

https://www.arentfox.com/

Twitter:   @arentfoxfintech and @arentfox  

More for our Listeners

Remember to subscribe to Barefoot Innovation for the newsletter, podcast and updates, and follow me on Twitter, LinkedIn, and Facebook. And be sure to subscribe to Barefoot Innovation on your favorite podcast platform and leave a 5 star review to help us grow the show.

We have great podcast episodes in the queue. We’ll have one with Steve Cohen of Basis Technology on artificial intelligence and another from Boston with Lamont Young, who’s leading digital innovation at Citizens Bank. And we’ll talk with one of the most thoughtful people in finance, Brian Brooks, General Counsel of Coinbase.  We’ll also have a special episode on Women in Fintech, and a terrific discussion with the fascinating community bank, NBKC.

We also have three great shows coming up with Washington officials. One is with Counselor to the Secretary of the Treasury, Craig Phillips, whose team issued the Treasury fintech report last year. And we’re excited to have a second episode coming up with the Chairman of the CFTC, Chris Giancarlo. We also recorded a show in New York last month with Brett King about his new book, Bank 4.0 (available now on Amazon). I co-wrote the regulatory chapter with Brett and love the book -- it’s an amazing read.

Some of the places I’ll be the coming weeks are:

Vaduz Roundtable, "The Financial System 2030", February 15-17, Liechtenstein (invitation only)
The Honest Talks for AI on Regtech, February 27, New York (invitation only)
UNC Law's Banking Institute, March 22, Charlotte, NC
Santa Fe Group 12th Annual Shared Assessments Third Party Risk Summit, April 10-11, Washington, DC

And of course, the global summit of Innovate Finance in London, SXSW, LendIt, and the ABA’s RCC, to name a few.

I’ll hope to see you!

Support our podcast

The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.

The CFPB Innovation Director Paul Watkins

Mallory Kwiatkowski

Today’s show is a bonus episode that we added to the schedule because it has a deadline connected with it. My guest is Paul Watkins, Assistant Director of the Consumer Federal Protection Bureau (CFPB) and Director of its new Office of Innovation. And the deadline is February 11, which is the last day that the CFPB will be accepting public comment letters on its proposals for organizing a Product Sandbox and for issuing No-Action Letters on innovative products and practices. The Bureau is very interested in hearing from as many people as possible, and I really encourage all our listeners to submit input.

Few initiatives are more important to financial innovation. The Bureau has the lead with consumer protection regulation in the US and these initiatives will shape policy that will can make or break innovative solutions for consumers.

I think you’ll agree with me that Paul is as eloquent as anyone we’ve ever had on the show about why, and how, we should expand financial inclusion through innovative technology. Our listeners know that I think regulators need to have testing environments for fintech and regtech. Some agencies, like the CFPB and the UK Financial Conduct Authority, call them sandboxes. Others call them labs or pilot programs. The key is that these testbeds enable regulators to examine cutting edge innovation up close, in depth, and hands on -- something that’s very hard to do through traditional regulatory channels. The pace of tech change today is simply too fast to keep up, without new tools.

However, sandboxes are not easy to design. Consumer advocates worry that these labs could open a channel through which harmful financial products could bypass consumer protection regulations. There’s also some concern that labs and sandboxes can imply a regulatory seal of approval that would confer a competitive advantage to companies that participate in them.

Concerns also arise regarding the No-Action Letter mechanism, in which financial providers can show regulators their plans for a new product or practice and the agency, while not giving a stamp of approval, can send a letter indicating that they would not take action against the proposed activity. These NAL’s can greatly reduce the regulatory uncertainty that chills so much innovation. The current version of the CFPB’s no action letter has hardly been used, and the Bureau thinks that’s because it was designed with too little upside and too many drawbacks. Their proposal seeks to address that.

As a former bank regulator, I think these agencies have the hardest role to play in innovation. If they get the balance wrong -- by being either too heavy-handed or too lax -- consumers will pay the price. As they innovate, they will need to be building consumer safeguards into all they do -- including sandboxes and no-action letters. And they’re going to have to build up a reservoir of trust that their efforts will help, and not hurt financial customers. You’ll be interested in Paul’s thoughts on how to achieve those goals.

By the way, speaking of labs, let me encourage everyone to follow the work of FinRegLab, a nonprofit that is running sandbox-type experiments in fintech innovation. I chair FRL’s board of directors and, under its CEO Melissa Koide, it’s doing exciting work.

My conversation with Paul is wide-ranging. He talks about the CFPB’s participation in the Global Financial Innovation Network, or GFIN (the Bureau is the only US agency involved so far). He has a very thought-provoking anecdote about seeing consumer disclosures in Times Square. And mostly, he talks with great insight about how we should be doing better for consumers.

He says, innovation isn’t just useful to consumer protection. It’s central to it.

Links

Link to full transcription

https://www.consumerfinance.gov/

https://www.consumerfinance.gov/about-us/innovation/

Policy on No- Action letters and the BCFP product sandbox, Requests to Comment

The Global Financial Innovation Network

Barefoot Innovation Podcast Episode - Regulation Revolution:The Financial Conduct Authority and Digitally-Native Regulatory Design

Barefoot Innovation Podcast Episode - Regulation Innovation: The FCA’s Christopher Woolard

Barefoot Innovation Podcast Episode - The Future of Regulation: The FCA’s Regtech Leader Nick Cook

More on Paul Watkins

Paul Watkins is Director of the Office of Innovation at the Consumer Financial Protection Bureau. He oversees the Bureau’s efforts to facilitate innovation, competition, and consumer access in the markets for financial products and services. Watkins was previously the Civil Litigation Division Chief at the Arizona Office of the Attorney General, where he managed the state’s litigation in areas such as consumer fraud, antitrust, and civil rights.  In Arizona, he drafted and advocated for legislation establishing the first FinTech Sandbox in the country. Previously, Watkins practiced law at Covington & Burling LLP in San Francisco, and at Simpson, Thacher & Bartlett LLP in Palo Alto, California. He is a graduate of Hillsdale College and Harvard Law School, and a former clerk for Judge Dennis W. Shedd on the United States Court of Appeals for the Fourth Circuit.

More for our Listeners

We also have two more great shows coming up with Washington officials. One is with Counselor to the Secretary of the Treasury, Craig Phillips, whose team issued the Treasury fintech report last year. And we’re excited to have a second episode coming up with the Chairman of the CFTC, Christopher Giancarlo.

We have other fascinating episodes in the queue as we’ll have a show with Steve Cohen of Basis Technologies on artificial intelligence and another from Boston with Lamont Young, who’s leading digital innovation at Citizens Bank. We’ll talk with one of the most thoughtful people in finance, Brian Brooks, General Counsel of Coinbase. And we’ll have a special one about, and with, women in fintech.

We’ll be posting a show with Brett King on his new book, Bank 4.0. I co-wrote the regulatory chapter, and the book is a great read -- find it here on Amazon.

Some of the places I’ll be the coming weeks are:

Vaduz Roundtable, "The Financial System 2030", February 15-17, Liechtenstein (invitation only)

The Honest Talks for AI on Regtech, February 27, New York (invitation only)

SXSW, March 8-17, Austin

UNC Law's Banking Institute, March 22, Charlotte, NC

Santa Fe Group 12th Annual Shared Assessments Third Party Risk Summit, April 10-11, Washington, DC

And of course, the global summit of Innovate Finance in London, LendIt, and the ABA’s RCC, to name a few.

Remember, it’s really important that you subscribe to Barefoot Innovation on your favorite podcast platform and very importantly, that you leave a 5 star review to help us grow the show. I hope you’ll also follow along with me on Twitter, LinkedIn, and Facebook. Come to jsbarefoot.com for more information and to subscribe to the newsletter and get the latest podcasts as soon as they come out.

support our podcast

The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.



Making Hard Things Easy and Boring Things Fun with Acorns Co-founder Walter Cruttenden

Mallory Kwiatkowski

Today’s guest is Walter Cruttenden, cofounder of Acorns and founder of the gaming company, Blast.

Walter founded Acorns with his son Jeff, the company’s CEO, and Mark Dru in 2012. Acorns offers an app that enables people to round up their purchases and channel the extra money -- the “spare change” -- into a choice of investment vehicles.

The key, Walter says, is its simplicity. It’s easy to sign up, easy to understand, and easy to use. He and Jeff had an intuition that this ease factor, combined with the small amounts of money involved, would help investors at all income levels. As with robo-advisory firms like Betterment and Wealthfront (here’s a link to our episode with Betterment CEO Jon Stein), Acorns aims to use technology to profitably reach people at lower levels of wealth than are traditionally served by wealth managers. By combining the automated investment technology with a mobile-first app, Acorns has been especially successful in attracting customers in their 20’s. And of course, the earlier in life people start to save, the more they will save over in their lifetimes. We also had a great show with Ethan Bloch, CEO of Digit, which takes a different approach to savings but grounds it in the same logic -- appealing to younger savers by keeping it all very simple.

Walter is an avid gamer, and that passion inspired him in 2017 to found a new company, based on the same ideas about easy micro-investing concept. Blast is aiming to help the world’s 2.6 billion gamers save and earn money by playing their favorite games -- as the company’s site says, “In the future, we will micro-earn in a thousand ways.”

In our conversation, Walter explains how both firms work, how they make money, and how they hope to reshape their sectors. He also shares his thinking on the financial regulatory environment, whose hurdles initially dismayed him but which he has since grown to appreciate for the stability it brings to markets.

Solidifying his claim to being a Renaissance Man, Walter is also an amateur expert on the history of the solar system. His book, Lost Star of Myth and Time, has been made into a documentary.

Links

Link to full transcription

https://www.acorns.com/

https://blast.com/

Comcast & NBCUniversal invest in fintech app Acorns with a deal to produce content through CNBC

Book - Lost Star of Myth and Time

Documentary - The Great Year

More on Walter Cruttenden

Walter Cruttenden is a financial services innovator. He founded Roth Capital, a leader in funding emerging growth companies, before founding E*Trade’s iBank, which became the number one provider of online IPOs prior to its sale. Walter then invented “micro-investing,” founding Acorns with his son Jeff. On the side, he founded and took public SRS Labs, an acoustics technology, before its sale, and authored the books Lost Star of Myth and Time and The Great Year Adventures with Tommy the Time-Traveling Turtle. He wrote and produced the award winning documentary The Great Year.

Cruttenden currently serves as Chairman of Acorns, sits on its Investment Committee, acts as Director of the Binary Research Institute, and is CEO of Blast, an app that turns games into micro-savings tools.

More for our Listeners

Here is my January newsletter on regulation revolution, inspired by my “world tour” at the end of last year. And here are some other recent articles. Remember to subscribe to Barefoot Innovation for the newsletter, podcast and updates, and follow me on Twitter, LinkedIn, and Facebook. And be sure to subscribe to Barefoot Innovation on your favorite podcast platform and that you leave a 5 star review to help us grow the show.

We have great podcast episodes in the queue. We’ll have one with Steve Cohen of Basis Technology on artificial intelligence and another from Boston with Lamont Young, who’s leading digital innovation at Citizens Bank. And we’ll talk with one of the most thoughtful people in finance, Brian Brooks, General Counsel of Coinbase.  We’ll also have a special episode on Women in Fintech.

We also have three great shows coming up with Washington officials. One is with Counselor to the Secretary of the Treasury, Craig Phillips, whose team issued the Treasury fintech report last year. And we’re excited to have a second episode coming up with the Chairman of the CFTC, Chris Giancarlo, as well as one with Paul Watkins, who heads innovation at the CFPB. We recorded a show in New York this month with Brett King on his new book, Bank 4.0 (available now on Amazon). I co-wrote the regulatory chapter with him and love the book -- it’s an amazing read. And we’ll have a wonderfully entertaining and inspiring show with the CEO and innovation accelerator head of NBKC, on innovation for community banks.

Some of the places I’ll be the coming weeks are:

Vaduz Roundtable, "The Financial System 2030", February 15-17, Liechtenstein (invitation only)

The Honest Talks for AI on Regtech, February 27, New York

UNC Law's Banking Institute, March 22, Charlotte, NC

Santa Fe Group 12th Annual Shared Assessments Third Party Risk Summit, April 10-11, Washington, DC

And of course, the global summit of Innovate Finance in London, SXSW, LendIt, and the ABA’s RCC, to name a few.

I’ll hope to see you!

support our podcast

The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.




Biometrics, Blockchains, and Bots with David Birch

Mallory Kwiatkowski

birch.png

Today’s show is a special treat because my guest is brilliant and funny and original, and he’s also a friend. Dave Birch is a London-based author, advisor and commentator on digital financial services and Global Ambassador for Consult Hyperion. We often run into each other in different parts of the world, and in December we found time to sit down and catch up in London’s old City.

As I told Dave, I talk with people on these topics all the time, but a lot of what he says in this conversation is either different, or is said in a more compelling way, than what we normally hear. He’s definitely one of the most entertaining guests we’ve had on the show!

In our conversation, Dave explains that he’s obsessed with digital money and especially with digital identity. Echoing the episode we recorded last year with Greg Kidd of globaliD, Dave believes that our identities should be controlled by us as individuals, rather than issued to us by governments. He thinks we should be able to have multiple digital identities that we can use selectively in different ways, so that we can reveal less or more information about ourselves, tailored to the needs of each given situation. He gives great examples (I’m pretty sure this is the first time the topic of internet dating has come up on the show!)

One intriguing result of the system Dave envisions is that it might afford an opportunity for banks to become the main keepers of trusted identity. They seem uniquely positioned for that role (which, among other things, could help them stay relevant in the digital age). Dave has ideas on how banks should be able to share KYC information. He has ideas on tokens. He has thoughts on open banking. And he’s skeptical that crypto and blockchains will solve all the problems people are dreaming of for them.

As we talked, Dave kept saying, “I used to think that, but now I think this.” That way of talking captures the intensity of the learning journey he is on. He’s grappling with the hardest issue ahead of us all, namely privacy. We know our current methods of protecting privacy are not fit for today’s technology, and we don’t really know what to do about that. Dave is trying to figure that out -- to envision how to redesign the system with new ways for people to be able to protect their own information and, at the same time, to be able to use it to unlock new opportunities for themselves. And with new ways to make that happen within a system in which everyone’s information is accurate and secure.

Dave and I recorded our talk in London, in the Armourers Hall following up a great event there on insurance innovation sponsored by the Centre for the Study of Financial Innovation, or CSFI. I hope everyone listening will try to go to London this spring for Innovate Finance’s global fintech summit, which is held in these same buildings in the old Guildhall. That’s in the old City, near St. Paul’s Cathedral and the Bank of England, and the remnants of the City’s old Roman wall. I often find that thinking about new technology in ancient places like these somehow makes me learn better. Dave and I had our conversation on a cold afternoon, sitting in a draughty little room without central heating, but with a lovely fireplace keeping it warm. I found myself learning something every minute.

Links

Link to full transcript

Podcast with Greg Kidd of Global ID

Podcast with Sanjay Jain

India’s Top Court Limits Sweep of Biometric DC Program - Court case involving Aadhaar

Books Published by David Birch:

Before Babylon, Beyond Bitcoin

Identity is the New Money

Digital Identity Management

Blockchain: A Legacy of Transparency by David Birch

Scott Galloway's book, The Four

Pivot Podcast

Financial Times Article by David Birch, One Virtual Account Number to Rule Them All

Could bank account numbers be portable like mobile numbers? by David Birch

Podcast with Anne Boden of Starling Bank

More information on David Birch at www.DGWBirch.com and blog.dgwbirch.com

More on David Birch

David G.W. Birch is an author, advisor and commentator on digital financial services. He is Global Ambassador for Consult Hyperion (the secure electronic transactions consultancy that he helped to found), as well as Technology Fellow at the Centre for the Study of Financial Innovation (the London-based think tank) and a Visiting Professor at the University of Surrey Business School. An internationally-recognised thought leader in digital identity and digital money he was named one of the global top 15 favourite sources of business information by Wired magazine and one of the top ten most influential voices in banking by Financial Brand; created one of the top 25 “must read” financial IT blogs. His Twitter account was found by PR Daily to be one of the top ten followed by innovators (along with Bill Gates and Richard Branson). He was also rated Europe’s most influential commentator on emerging payments by Total Payments, and he was recently awarded “Contributor of the Year” by the Emerging Payments Association.

Dave’s last book “Before Babylon, Beyond Bitcoin: From money we understand to money that understands us,” was cited in the LSE Review of Books as one that should be “widely read by graduate students of finance, financial law and related topics as well as policy makers involved in financial regulation".

Dave graduated from the University of Southampton with a B.Sc (Hons) in Physics.

More for our Listeners

We have great podcast episodes in the queue. We’ll talk with with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast. We’ll have one with Steve Cohen of Basis Technologies on artificial intelligence and another from Boston with Lamont Young, who’s leading digital innovation at Citizens Bank. And we’ll talk with one of the most thoughtful people in finance, Brian Brooks, General Counsel of Coinbase.

We also have three great shows coming up with Washington officials. One is with Counselor to the Secretary of the Treasury, Craig Phillips, whose team issued the Treasury fintech report last year. We’ll have a conversation with Paul Watkins, who is leading the innovation initiative at the CFPB. And we’re excited to have a second episode coming up with the Chairman of the CFTC, Chris Giancarlo.

Brett King’s new book, Bank 4.0 (available now on Amazon) will be the subject of another show -- I co-wrote the regulatory chapter with him.

Remember, it’s really important that you subscribe to Barefoot Innovation on your favorite podcast platform and very importantly, that you leave a 5 star review to help us grow the show. I hope you’ll also follow along with me on Twitter, LinkedIn, and Facebook. Come to jsbarefoot.com for more information and to subscribe to the newsletter and get the latest podcasts as soon as they come out.

support our podcast

*The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.

Fintech in China and Around the World: Anju Patwardhan of CreditEase

Mallory Kwiatkowski

patwardhan.png

Happy New Year everyone! I am thrilled to be doing our first show of 2019, which I predict is going to be the breakthrough year for regtech in the United States, especially on the regulator side. So much is going on, and I’m excited to be able to help share that story with you as the year goes forward.

I want to thank everyone who has been listening to the show -- we’re actually coming up on our fourth anniversary this spring -- and also I want to invite you to help us continue growing it. If you enjoy listening, please subscribe to Barefoot Innovation wherever you listen to your podcasts and, importantly, please leave a 5-star review. That will help more people find us, which in turn will help us continue to connect and build this community of amazing people, including our guests and our listeners, whose innovations are changing the world of finance. Something I realized in 2018 is that the people driving financial innovation really are a community -- a movement. A big part of what Barefoot Innovation does is to help everyone find each other, and get to know each other. So, the more the better!

Our first 2019 show brings us a global perspective on fintech. My guest is Anju Patwardhan, Managing Director of the CreditEase FinTech VC Fund. Anju has an incredible background. I first met her when she was starting at Stanford as a Fulbright Fellow and visiting scholar, at a time when I was a senior fellow at Harvard. We made an instant connection and since then, we’ve often run into each other in interesting places around the world. Late last summer, we finally found time to sit down and talk at her office in San Francisco.

CreditEase is a Chinese company that incubates and invests in fintech, with an emphasis on expanding financial inclusion. China of course has been leading the whole world in the growth of consumer fintech, partly because of the ubiquity of mobile phones as a distribution channel. As Anju says (and as Peter Renton said in our show with him), the entire country is cashless.

In our conversation, she talks about these technologies creating potent new business models that can profitably reach massive new markets throughout the developing world. As we’ve discussed in other episodes (Podcast with Harish Natarajan, Podcast with Laura Spiekerman, Podcast with Greg Kidd), these markets are simply enormous. Anju talks about how “financial inclusion” used to be viewed as a nice goal for government and nonprofits but -- as she learned firsthand as a senior executive in two global banks -- some of these markets used to be too risky to be profitable. No more. These markets are the growth engines of today. Some of our listeners may underestimate the breathtaking scale and speed of the changes underway, including the potential for innovations in China to disrupt businesses throughout the world. Remember, these huge Chinese companies, and the B2C fintech sector there, were born digital. They can move really fast.

In our discussion, Anju zeros in on the need for fintech to reach beyond serving the “unbanked” and focus on bringing the full suite of financial services to the huge swath of the world that is “underbanked,” in that they now have access to a payments account but not yet to other financial products like loans, wealth management and insurance. This, she says, will be the next frontier of fintech growth, now that the phone has already, in essence, put a bank branch in everyone’s hand.

Anju co-authored a report called Financial Inclusion in the Digital Age, which shares a list of 100 leading technology companies promoting financial inclusion.

You’ll enjoy hearing Anju’s surprise at discovering how slow payments are in the US, and you will enjoy her musings about our regulatory structure. And I know you’ll be fascinated by her thoughts on how fintech is changing the lives of women throughout the world.

Links

Link to Full Transcription

Financial Inclusion in the Digital Age, report co-authored by Anju Patwardhan

The Global Findex Database Report

Yirendai - The first company to do lending using a mobile app

Podcast with Sanjay Jain

Fair - A mobile app for car leasing

Branch - Micro-lending in Africa using mobile phones

Upgrade - Consumer lending, education, and literacy

A Financial System That Creates Economic Opportunities, US Department of the Treasury report

CreditEase Fintech Fund

CreditEase

Twitter @crediteasecorp @anjupatwardhan

More on Anju

Anju Patwardhan is Managing Director at CreditEase for its global Fintech Investment Fund and Fund of Funds. CreditEase, established in 2006, is a leading fintech company in China, specializing in Wealth Management, Asset Management, and Marketplace Lending.

Anju is a Fellow at Stanford University’s Distinguished Careers Institute (DCI). She was also a 2016 Fulbright Fellow and Visiting Scholar from ASEAN at Stanford, where her research focused on use of technology to support financial inclusion. She is a member of the World Economic Forum steering committee on ‘Disruptive Innovation in Financial Services.’ She has also served as FinTech Industry Expert at UC Berkeley (SCET) and on the advisory board of Government of Estonia’s e-Residency program. She is an experienced board member and has served on boards of banks, fintech companies, and nonprofit entities.

An alumna of the Indian Institute of Technology and Indian Institute of Management, Anju has over 25 years of banking experience with Citibank and Standard Chartered Bank (SCB) in global and regional leadership roles, including as Chief Operating Officer, Chief Risk Officer, and Digital Banking Head. Her last role at SCB was as the Global Chief Innovation Officer. She was a member of SCB’s global executive leadership team, member of its Global Technology & Operations Management Group, and member of the Global Risk Management Group.

We have wonderful shows coming up.

We’re going to have a special one on women in fintech, with some of the leading women in the industry.  We will have a lively (and funny) talk I recorded in London with my friend Dave Birch. We’ll talk with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast. We’ll have two from Boston -- one on artificial intelligence with Steve Cohen of Basis Technologies and one with Lamont Young, who’s leading digital innovation at Citizens Bank. And we’ll have a fascinating talk with Brian Brooks, General Counsel of Coinbase.

We also have three great shows coming up with Washington officials. One is with Counselor to the Secretary of the Treasury, Craig Phillips, whose team issued the Treasury fintech report last year. We’ll have a conversation with Paul Watkins, who is leading the innovation initiative at the CFPB. And we’re excited to have a second episode coming up with the Chairman of the CFTC, Chris Giancarlo.

I’ll be speaking next week at the  FINRA Regtech Conference, on January 17th in New York.

Brett King’s new book, Bank 4.0, is out and can be bought on Amazon. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

Again, please subscribe to Barefoot Innovation on your favorite podcast platform and very importantly, please please leave a 5 star review if you enjoy the show. I hope you’ll also follow along with me on Twitter, LinkedIn, and Facebook. Come to jsbarefoot.com for more information and to subscribe to the newsletter and get the latest podcasts as soon as they come out.

Until next time, keep innovating!

support our podcast

*The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.



The Human Side of Technology -- Sopnendu Mohanty, Chief Fintech Officer of the Monetary Authority of Singapore

Mallory Kwiatkowski

mohanty.png

This is our second show with Sopnendu Mohanty, Chief Fintech Officer of the Monetary Authority of Singapore.  We recorded it at the MAS annual fintech festival in Singapore, which is a remarkable event. I think it’s probably the world’s largest financial conference, with an incredible 45,000 people attending this year from all over the world. Maybe even more surprisingly, it’s a “fintech festival” that is sponsored by a central bank!

That captures the essence of the extraordinary global role being played by MAS, by its visionary managing director Ravi Menon, and by Sopnendu, in creating a new model of financial regulation. They have staked out a unique position as world leaders in fintech and regtech innovation, not only making Singapore a magnet for fintech innovators throughout Asia and the world, but also leading on pretty much every modernizing idea that regulators, themselves, can undertake.

If you think about the kinds of innovation initiatives that regulators have been inventing around the world, MAS might be the regulator that’s the most. They have a sandbox. They have a Singapore “tech stack” to ease software development, security and interoperability. They have a robust set of multinational and bilateral agreements, including some for passporting fintech licenses between countries. They launched Project Ubin which explores use of Distributed Ledger Technology (DLT) for clearing and settling payments and securities. They have experimented with reforming the anti-money laundering Know-Your-Customer process by building a government utility-style database instead of making every bank conduct an individual KYC review. This has worked for individuals, who can now easily and instantly open bank accounts with full verification through a national infrastructure called “My Info,” because the government collected data for all residents and enables banks to share and verify information online. The KYC effort turned out to be harder for corporations -- something that MAS has been quick to acknowledge. The acknowledgement is, itself, yet another model for how modern regulators should lead today, being proactive in trying things out while realizing that some things won’t work, and that therefore, testing is critical.

Take a moment to picture this enormous conference with its massive exhibit hall, with huge, high-tech display booths from all the world’s leading financial and technology companies, and picture the throngs of people trying to navigate it. To make that easier, the conference suspended huge signs from the ceiling, easily seen from far away. I was struck by the fact that this year, one of those signs read, “Regulators.” Below it were innovative regulators from all over the world.

I often think about, and often quote, something Sop said to me in our earlier podcast. That episode is called, We Have Less Time Than We Think, and we recorded it at an international regulators conference in Jakarta sponsored by the Omidyar Network and the Gates Foundation. During that talk, I was expressing admiration for the many initiatives MAS was taking, but I observed -- as Americans often do on this topic -- that Singapore has an easier challenge than we do, because they basically have one regulator and just a handful of banks, whereas we have dozens of regulatory bodies and thousands of banks. Sop answered me by saying, “but the US has the talent.” He said that we, in the US, should be able to lead the world in regulatory modernization, given the abundance of world-class talent in our tech and financial and regulatory sectors.

I think he’s right, and I’m excited to say that, as we reach the end of 2018, the US regulators are clearly moving forward in innovation leadership. We’ll have more on those exciting developments in upcoming podcasts!

Sop, of course, was the busiest person at the MAS festival, and, given its size, that’s saying something! To record this talk, we ducked into a private VIP lounge away from the hubbub, except that people were lining up outside hoping to get his attention. Recording as we did in the moment, on the festival’s last day, the talk captures the excitement in his voice about the progress MAS is making, and his powerful insight that as their work in regulatory innovation matures, they have come to focus on the human side of technology. Not tech for tech’s sake, or for the financial industry’s sake, but for solving people’s real problems. He talks about the need to fix the trust deficit, in finance and technology, and to make new tech truly work for people, and not hurt them.

I first met Sop on a panel I moderated at MIT’s fintech conference while I was at Harvard a few years back. These days, I see him every few months in some setting around the world. This fall I saw him at Money 2020 in October, and at the MAS festival in November, and at a meeting in Seattle in December. Every time I encounter him, I can see that he’s pulling even further away from the “pack” -- all the rest of us -- in his thinking. He explains in the podcast that the secret to this is that he is constantly listening to and learning from people, throughout the whole financial ecosystem, all over the world.

So, that makes us all incredibly fortunate to be able to listen to, and learn, from him.

Links

LINK TO FULL TRANSCRIPTION

Podcast with Sopnendu Mohanty published on August 16, 2017

Ravi Menon, Managing Director of MAS, Speech at SFF

Podcast with Sanjay Jain, CIO at CIIE on Aadhaar and the India Stack

More on Sopnendu Mohanty

Sopnendu Mohanty is the Chief Financial Technology (Fintech) Officer of the Monetary Authority of Singapore (MAS). He is responsible for creating development strategies and regulatory policies around technology innovation to “better manage risks, enhance efficiency and strengthen competitiveness in the financial sector.” Prior to joining MAS, Mohanty was with Citibank as their Global Head of the Consumer Lab Network and Programs, which included driving innovation programs and managing innovation labs across multiple geographies globally.

Mohanty has spent 20 years in the APAC region and held various roles in technology, finance, productivity, and business development. He was Citibank’s APAC regional head of Branch operations along with heading the Consumer Innovation Lab in Singapore. He spent a significant time in Japan, where he was Citibank’s Retail Business Development head and also did leadership stints in various functions within operations and technology. Globally, he played a significant subject matter expert role in driving Citibank’s global smart banking program, to transform the bank’s physical network into a digital-first, smart, innovative, client centric and delightful customer engagement center.

Mohanty has co-authored various patented work in area of retail distribution in the financial sector. He is based in Singapore, loves traveling, reads history and pursues culinary innovation as a hobby.


More for our listeners

We have more great podcast episodes in the queue. We’ll talk with Anju Patwardhan of CreditEase and Stanford University, and with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast. We’ll have two from Boston -- one on AI with Steve Cohen of Basis Technologies and one with Lamont Young, who’s leading digital innovation at Citizens Bank. And we’ll have an especially provocative and entertaining show I recorded in London, in the old City at Armourers Hall, with my friend Dave Birch.

Next year’s calendar is filling up.  My first speaking event of 2019 will be the  FINRA Regtech Conference on January 17th in New York.

Also watch for upcoming information on my collaboration with Brett King on his new book, Bank 4.0, which you can now buy on Amazon. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

If you enjoy listening to Barefoot Innovation, please be sure to post a review! It will help new listeners find us. Please also follow along with me on Twitter, LinkedIn, and Facebook. Come to jsbarefoot.com for more information and to subscribe to my newsletter and get the latest podcasts as soon as they come out. And don’t forget to send in your dollar a show, to keep it all going.

Finally, as we close the year, let me share my excitement about the breakthroughs we’re seeing in fintech and regtech, and let me express my gratitude to all of you -- for listening to the show and for sharing your ideas and energy. I think we’re building a community of people who see the chance to do better for financial customers through innovation, and are joining together, and are leading the way.

I’ll look forward to seeing you in 2019!

Support our podcast



The American Dreamers: Earnup Cofounders Matthew Cooper and Nadim Homsany

Mallory Kwiatkowski

EarnUp - Matthew Cooper.jpg
EarnUp - Nadim Homsany-.jpg

One of the things I love about our Barefoot Innovation conversations -- and about fintech, for that matter -- is the passion you find in so many founders, these people who really believe they can do better for consumers. You hear it in the voices of many of the guests we’ve had on the show, the note of excitement, the sense that they can almost see a better future. They’re often people from the technology world who looked at some traditional, stuck feature of the financial system and said to themselves, I can do better than this. Today’s guests are wonderful examples. They are Matthew Cooper and Nadim Homsany, cofounders of EarnUp.

EarnUp is a fintech platform that intelligently automates loan payments, to help people pay on time, manage their finances more easily, and build financial health. It lets consumers put funds aside when they can afford to, and then makes their loan payments for them, allocating funds in the way that will get the person out of debt most quickly. Matthew and Nadim say 200 million Americans have debt, and that they owe $20,000,000,000,000 -- I promised them to write that out so we can all ponder those 13 zeros. They say 60-70% of Americans live paycheck to paycheck, and they think 70% of delinquencies are avoidable, caused by the complexity of bill paying and money management. They have found, so far, that EarnUp reduces delinquencies by 30% and saved their customers $400 million as of when we recorded this conversation, last summer.

I was especially interested in an EarnUp feature they call Smoke and Fire -- when they see the early warning signs of “smoke” that someone is in danger of paying late, they squash it quickly, before it becomes a fire. That’s a powerful idea, considering the high share of financial expense that many people pay just for being late. I did a podcast with Al Ko of Mint last year, who made a similar point.

In our talk, Matthew and Nadim talked about the regulatory environment for businesses like theirs and how to improve it. They described their business model, which is B2B2C, signing up customers through banks and financial companies like Freddie Mac, Framework Homeownership, and GreenPath Financial Wellness. They also explained that the business model is double-bottom line, aiming for both profit and social good. They were 2016 participants in the Financial Solutions Lab of the Center for Financial Services Innovation -- something I’m delighted to report since I chair the CFSI board.

We’ve had a lot of guests who are working on this thorny, but solvable problem -- how to make it just flat EASIER to keep up with the bills, find the smartest way to pay them off, and figure out how to plan for financial wellness and health. EarnUp has a fascinating solution.

Links

Link to full transcription

Podcast with CSBS President John Ryan

More on Matthew and Nadim

Matthew is EarnUp’s Co-Founder & CEO. He is the son of a minister and a teacher and has lifelong passion for supporting marginalized communities through volunteer work and advocacy. Matthew previously worked at Clearlake Capital, a $3B private equity firm focused on software and financial services industries. Prior to Clearlake, Matthew worked with NCB Capital, a $12B asset manager, leading private equity investments in the emerging markets. Before that, Matthew was at McKinsey & Company counseling Fortune 500 clients in the financial services and retail industries. He graduated magna cum laude from Princeton University. His Twitter handle is @MatthewWins.

Nadim is the son of immigrants who arrived in the US with virtually nothing. His upbringing instilled in him a passion for helping people build financial resilience and independence. Prior to EarnUp, Nadim worked at Serent Capital, a $600M private equity firm, focused on tech-enabled services. Nadim previously led investments with NCB Capital, a $12B asset manager and worked at McKinsey & Company, advising large banks.

Nadim also practiced IP and technology law at Kirkland & Ellis. He holds a JD degree from Harvard Law School and graduated with highest honors from Rutgers University. He’s on Twitter @nhomsany.


More for our listeners

We have more great podcast episodes in the queue. We’ll talk with Anju Patwardhan of CreditEase and Stanford University, and with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast. We’ll have an extended talk we recorded in Singapore with Sopnendu Mohanty, the Chief Fintech Officer of the Monetary Authority of Singapore. We’ll have two from Boston -- one with Steve Cohen of Basis Technologies and one with Lamont Young, who’s leading digital innovation at Citizens Bank. And we’ll have an especially provocative and entertaining show I recorded last week in London, in the old City at Armourers Hall, with my friend Dave Birch.

I completed the last public event of my 2018 fall “world-tour” yesterday with the Boston Regtech Meetup. Next year is already getting busy. Among other things, I’ll be at the FINRA Regtech Conference on January 17th in New York.

Also watch for upcoming information on my collaboration with Brett King on his new book, Bank 4.0, which you can now buy on Amazon. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

If you enjoy listening to Barefoot Innovation, please be sure to post a review! It will help new listeners find us. Please also follow along with me on Twitter, LinkedIn, and Facebook and come to jsbarefoot.com for more information and to subscribe to my newsletter and get the latest podcasts as soon as they come out. And don’t forget to send in your dollar a show, to keep it all going.

Until next time, keep innovating!

support our podcast



Try Something New: Lend Academy and LendIt Founder Peter Renton

Mallory Kwiatkowski

peter renton.png

Today’s show is coming to you from London. I’m here to speak at the LendIt Fintech Europe conference, and I’m delighted to say that my guest is the cofounder of the LendIt Fintech conference series, Peter Renton, who is also the founder of Lend Academy.

This is Thanksgiving week, a fact that of course does not resonate over here -- nor did it in Singapore, where I spent last week at the Monetary Authority’s enormous fintech festival (it attracted nearly 40,000 people). I’m circumnavigating the globe on this trip, and every conversation I’ve had is adding to the palpable sense of excitement that’s rising, worldwide, about the digital transformation of finance.

No one understands that transformation better than Peter Renton. Now and then we have a guest who understands the entire financial innovation landscape, and Peter is one of these. LendIt holds conferences on three continents, including one in China, and his work takes him everywhere. He sees everything that’s going on.

So, of course, I asked him what he thinks are the most exciting things happening in fintech today (I should note that we actually recorded this conversation a few weeks back).  

The first trend he cites is that big banks are finally figuring out how to play in fintech, in larger numbers and new ways. As examples he points to Chase’s Finn mobile bank, and especially to Marcus at Goldman Sachs. The latter has caught the attention of every large bank by aiming to combine the advantages of a sophisticated major institution and brand with the advantages of a from-scratch startup that can innovate nimbly -- since Goldman never had a traditional retail bank. It’s a fascinating experiment.

Another theme Peter emphasizes is financial inclusion, which has also become a major focus of the LendIt events. As we’ve discussed many times on the show, cells phones are bringing financial access to nearly everyone on earth (Peter notes that there are now more cell phones than people). Beyond that, technology is driving expanded financial inclusion by generating alternative data that can help people qualify for financial services even if they don’t have traditional credit histories. He cites examples like Lenddo using new data to determine if customers are good credit risks, without having any financial data whatsoever.  

A highlight of our conversation is Peter’s description of how China is “leapfrogging” the financial services model of countries that have more mature systems. They have skipped over checking accounts and plastic cards and instead jumped straight from cash to ubiquitous mobile payments. He tells of using his phone to buy a 15 cent banana from a street vendor, and even of encountering beggars on the street who take mobile payments as well. He also describes the enormous scale of the Chinese fintech players, beyond anything anywhere else in the world. As he contrasts their new, constantly updating technology with the archaic, Cobol-based tech stacks in US banks, you can envision a new competitive marketplace in the years ahead.

Our conversation covers many other issues, from how blockchain technology might change the world, to predictions for Big Tech entering financial services, to the future of AI in finance. I especially love the advice he offers to  banks, startups, and regulators, alike. He says, “Try something new.”

Peter’s own story is fascinating, beginning with a family business in Australia, moving to the US, investing in marketplace lending, falling in love with the P2P premise, and then deciding to start a conference and fintech media firm. That includes a podcast show, which I’m pleased to say I’ve been a guest on. His journey has made him wise about the whole transformation underway, and made our conversation dense with insight.

LINKS

Link to Full Transcription

Lend Academy Podcast with Jo Ann Barefoot

Lenddo

FinRegLab

Amazon and Their Push Into Fintech - Article by Peter Renton

My Podcast with Chris Woolard and Nick Cook

My Conversation with Chris Larsen of Ripple at Lendit

My Podcast with Chris Larsen

https://twitter.com/LendAcademy

https://www.lendacademy.com/

http://www.lendit.com

More on Peter Renton

Peter Renton is the founder of Lend Academy, the leading news and educational resource for the marketplace lending industry. He is also the co-founder of the LendIt Conference, the world’s first and largest conference series dedicated to the fintech and online lending industries.

In 2018 those brands combined to form LendIt Fintech News, Powered by Lend Academy.  Its offerings include the Lend Academy podcast launched in 2013 and the longest running investor forum.

Peter is also the author of The Lending Club Story, about the world’s largest P2P lender. He has been interviewed by the Wall Street Journal, New York Times, Bloomberg, Fortune, NPR, CNN, Fox Business News, the Financial Times, TheStreet.com and dozens of finance blogs and other publications.

More for our listeners

We have more great podcast episodes in the queue. The next episode is a talk with the co-founders of EarnUp. We’ll also talk with Anju Patwardhan of CreditEase and Stanford University, and with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast. And we’ll have an extended talk we recorded last week in Singapore with Sopnendu Mohanty, the Chief Fintech Officer of the Monetary Authority of Singapore.

I’m about half-way through my fall “world tour,” with more great conferences coming up including:

Also watch for upcoming information on my collaboration with Brett King on his new book, Bank 4.0, which you can now buy on Amazon. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

If you enjoy listening to Barefoot Innovation, please be sure to post a review! It will help new listeners find us. Please also follow along with me on Twitter, LinkedIn, and Facebook and come to jsbarefoot.com for more information and to subscribe to my newsletter and get the latest podcasts as soon as they come out. And don’t forget to send in your dollar a show, to keep it all going.

Until next time, keep innovating!

Support our podcast



Moving The Regulatory Mountain: CEO of JWG and Founder of Regtech Council, PJ Di Giammarino

Mallory Kwiatkowski

My guest today is one of the world’s foremost thinkers on how to modernize financial regulation through technology.  He is PJ Di Giammarino, CEO of JWG and founder of the global RegTech Council.

JWG is a multi-client platform that uses AI natural language processing to ease and enhance regulatory compliance. PJ started the RegTech Council several years ago as a grassroots effort to connect the public and private sectors working toward regulatory technology. The Council, which I’m a part of, is based in London and works with over 100 organizations and 240 participants all over the world.

Two years ago, few people in the US had even heard the term regtech. Today the sector is booming, with rising venture capital investment and a growing group of regulatory agencies that are directly driving change. It has become clear that we’re in the process of digitizing finance, and that therefore, we can -- and must -- digitize financial regulation too. We have to do that partly to make it better, since when things get digitized -- from phones to cameras to sending messages to hailing taxis -- they get better, faster and cheaper, all at once. We also need to do it because traditional, analog regulatory and compliance systems just won’t be able to keep up with the change underway in finance. As they lag behind, risk will skyrocket, both for customers and for the system. At one point in our talk, PJ points to what he calls “the waves and waves of human suffering” that come from managing things the old way. The regulatory and compliance worlds simply have to speed up, and they have to be made capable of handling a LOT more data, and they’ll have to do that in real time.

One way of thinking about this is that regtech is to regulation what fintech is to finance. Just as fintech innovation is profoundly changing financial services, regtech innovation will revolutionize regulatory processes. In fact, they’re both being driven by some of the same people -- tech innovators who came into the financial sector with fintech startups and when they got there, discovered the regulatory situation and said, in effect, “I can’t believe we do it this way.”

The technology already exists to do better. What we lack is institutional and cultural capacity to leverage it. PJ thinks of this challenge as a mountain -- an enormous, complex ecosystem of finance and financial regulation that looks completely different from different angles. To shift it to a holistic, scalable system, we’ll have to change the regulatory processes themselves, including that governments have to create uniform standards that enable frictionless connection and efficiency. Moving mountains isn’t easy, and his advice is to start small with concrete projects and small teams that have senior access, and then to connect these up with each other. That process is underway throughout the world. In our talk, PJ gives the example of a podcast with Dan Gorfine, Director of LabCFTC in the US, in which Dan calls up Nick Cook, who leads the FCA’s Regtech activities in the UK, and Nick picks up the phone. That’s progress.

PJ says the RegTech Council follows the wisdom of the crowd but is focused mainly on three key areas. The first is KYC and money laundering -- how do we solve bigger problems, better? The second is regulatory reporting -- specifically, how to do digital reporting? And the third is managing regulatory change -- how to introduce technology into that process?

Regtech has emerged faster outside the United States than inside, partly because our uniquely complex US regulatory structure makes it so hard to get traction here. PJ talks about how large banks struggle to adopt new technology, and offers some advice for regtech startups: “hunt in packs,” teaming up to offer banks compelling solutions.

He also talks about JWG’s RegDelta System, which can take any kind of document from any jurisdiction in any language and marry up to a bank’s policy using AI-driven natural language processing.

For listeners interested in regulatory and compliance modernization, this episode is a goldmine of insight, information, and inspiration. It’s also an urgent call to action. PJ says we have to move beyond “toe-in-the-water” dabbling with regulatory technology, and commit to the hard work of changing this system to a modern one.

We need to convert it to a digitally-native design.

It’s a mountain of work and PJ’s efforts are at the forefront.

LINKS

Transcript of episode

JWG

RegTechFS

JWG Press Release on RegDelta Project with BMO Harris
CFTCLabs

My Podcast with Dan Gorfine

My Podcast with FCA’s Nick Cook and Chris Woolard

My Podcast with FCA’s NIck Cook

Milken Institute

Milken Report, RegTech: Opportunities for More Efficient and Effective Regulatory Supervision and Compliance

G30

Financial Stability Board

World Economic Forum

More on PJ Di Giammarino

PJ is an author and international public speaker on the role of new technology for the financial services infrastructure. Based in Europe for 20 years and London for 15, he has served as founder and CEO of JWG Group, a think-tank that has been recognised globally by regulators, financial institutions and technology firms since 2006.  JWG helps senior executives in the public and private sectors regain control of global regulatory change by adopting a technology-enabled, standardised and collaborative approach.

PJ is the driving force for progressive change behind a wide range of RegTech forums.  He is an active member of the International Organisation for Standardization, through the ISO UK committee for financial services, IST/12, and serves as the Secretary for the Fintech Technical Advisory Group. He also serves as Chairman of the Committee to Establish the RegTech Council.

More for our listeners

We have great podcasts in the queue. We’ll have a far-ranging conversation with Peter Renton, who leads Lend Academy and the LendIt conference series. We’ll talk to Anju Patwardhan of CreditEase and Stanford University, who describes fintech developments in China. And we’ll have a show with the co-founders of EarnUp, and one with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast. I’ll also be recording episodes in Singapore and London while continuing my fall speaking world tour.

A few places I’ll be speaking this fall include:

One of my trips this fall will have me circumnavigating the globe. I’ll be posting mini-videos of the highlights of my journeys on social media.

Also watch for upcoming information on my collaboration with Brett King on his new book, Bank 4.0, which you can now buy on Amazon. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

If you listen to Barefoot Innovation in ITunes, please be sure to post a review! Please also follow along with me on Twitter, LinkedIn, and Facebook and come to jsbarefoot.com for more information and to subscribe to my newsletters and get the latest podcasts as soon as they come out. And don’t forget to send in your dollar a show, to keep it going.

Until next time, keep innovating!

support our podcast




Complete Financial Inclusion: The World Bank's Harish Natarajan

Mallory Kwiatkowski

natarajan.png

My guest today is the World Bank’s Harish Natarajan, a leader of one of the most visionary and ambitious efforts underway in the financial world -- to achieve complete financial inclusion.

Throughout history, the idea of reaching full inclusion -- enabling everyone to access the mainstream financial system -- seemed like fantasy. Financial services have always been expensive to produce and deliver, making it unprofitable to serve everyone. In addition, they often involve the need to evaluate and risk-rate customers, and to verify their identity information, all of which has always been costly and complex. Mainstream services were for people who had some means and had traditional identity documents. Other people had to rely on high-cost alternatives, or had no access at all.

And then, we got cell phones. Suddenly, here was a new delivery system that could reach nearly everyone, through a channel that was already there, already built, and that could, furthermore, serve them inexpensively. No more need to build and staff high-cost branches. Everyone, today, can have a bank branch in their hand.

Recognizing this new opportunity, the World Bank set a transformational goal -- that every adult on earth should have financial access by 2020.

They defined inclusion as having a transaction account, since for most people, that’s the easiest and most-needed starting point. Once that exists, other services can be added on top of it, from lending to savings to insurance. As the consumer’s financial information becomes increasingly digitized and consolidated in the phone, it becomes possible for financial providers to evaluate that digital profile to extend more products. It also becomes possible to authenticate identity -- which is critical because the anti-money laundering Know-Your-Customer regulations currently block millions of people from the system because they lack traditional ID documents.

Technology is making this shift possible, but of course, it isn’t easy, nor is it a panacea. Some people still don’t have mobile phones -- although that problem is rapidly evaporating -- the UN says more people have had access to mobile phones than to plumbing since 2013. Of those who do, many don’t adopt electronic financial accounts, and many who do so become vulnerable to scams and predatory products, especially since hundreds of millions of these consumers are being exposed to financial services for the first time.

Those challenges, in turn, create an urgent need for regulatory modernization. Finance is being digitized, and regulation will have to be digitized too in order for government to protect consumers and assure financial stability. So the World Bank’s work includes a focus on modernizing the regulatory infrastructure itself, building up capacity to understand new technologies and address risk.

In this episode, Harish describes this whole transformative landscape. He talks about the Financial Inclusion Global Initiative, or FIGI, a three-year program with three partners, and three global themes -- cybersecurity, e-payments acceptance, and digital ID. He explains why people don’t have access to accounts, how digital ID can satisfy documentation requirements, and the varied regulatory models evolving in different counties. He talks the World Bank’s research on blockchain and distributed ledger technology (DLT) as critical components of a better system.

The United States has been a relatively slow adopter of mobile phones, partly because most Americans traditionally had landlines. That means cell phone adoption is much more advanced outside the United States, which in turn means that the US can learn many lessons from countries that are leapfrogging over us in digital transformation of finance and financial regulation. Much of this modernization is being driven by NGOs like the Omidyar Network, where I’m a Senior Advisor, and the Gates Foundation. For example, Omidyar and Gates have financed a Regtech for Regulators Accelerator, or R2A, which is bringing technology solutions to regulatory challenges in multiple countries.

More on Harish

Harish is Lead Financial Sector Specialist in the World Bank’s Finance, Competitiveness and Innovation Global Practice, heading a global team working on payments and market infrastructures. He is a core member of the cross-sectoral teams addressing Universal Financial Access 2020, ID for Development, government payments, Digital Economy and FinTech. Harish represents the World Bank in the working groups of the Committee on Payment Market Infrastructures (CPMI) at the Bank for International Settlements and FinTech-related working groups at the Financial Stability Board (FSB).

Previously, Harish worked with VISA Inc. in the South Asia region in various senior roles in business development, operations and risk management. Prior to VISA, he served in positions at Citigroup, Infosys and other technology companies in the areas of payment systems and retail banking.


Harish holds an undergraduate degree in Electrical and Electronics Engineering from IIT-Madras and a Post Graduate Diploma in Management, from IIM-Calcutta, specializing in IT systems and finance.

More links

Link to Full Transcription

World Bank Financial Inclusion

World Bank DLT Report

Universal Financial Access by 2020

Financial Inclusion Global Initiative (FIGI)

Payment Aspects of Financial Inclusion (PAFI)

Findex

G20 Digital Principles for Financial Inclusion

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

How to Change the World: The Gates Foundation’s Michael Wiegand

Transforming Identity: GlobaliD CEO Greg Kidd

More for our listeners

We have great podcasts in the queue. From London, we’ll have a talk with P.J. Di Giammarino of JWG and the Regtech Council. We’ll also have a far-ranging conversation with Peter Renton, who leads Lend Academy and the LendIt conference series. As part of our series focused on global developments in fintech and regtech, we’ll talk to Anju Patwardhan of CreditEase and Stanford University, who describes fintech developments in China. And we’ll have a show with the co-founders of EarnUp, and one with Walter Cruttenden, Co-Founder of Acorns and Co-founder and CEO of Blast.

A few places I’ll be speaking this fall include:

I also have a number of events coming up where I’ll be speaking directly to groups of regulators.


Watch for upcoming information on my collaboration with Brett King on his new book, Bank 4.0, which you can now buy on Amazon. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

Last year, my autumn conference circuit became a  “world tour” designed to speak in seven countries in seven weeks. I chronicled it with mini-videos about what I was learning, and since a lot of people told me they enjoyed joining in those adventures, I’m doing it again this year. My fall travels will be fewer countries but more events, in America, Europe and Asia. Please follow along with me on Twitter, LinkedIn, and Facebook and come to jsbarefoot.com for more information on it all and to subscribe to my newsletters and get the latest podcasts as soon as they come out.

Also, here’s my fall newsletter, titled Whirlwind.


Innovation everywhere!

support our podcast



Know Your Customer: Alloy CRO Laura Spiekerman

Mallory Kwiatkowski

One of the biggest challenges in fighting money laundering is satisfying the KYC, or Know Your Customer, rules. These regulatory requirements make sense in concept -- they require financial companies to verify customers’ identities before letting them connect to the system, in order to screen out high-risk people and entities and as a foundation for meeting the legal mandate to monitor financial activity for potential crime. However, the traditional verification process has always been expensive and time-consuming. In recent years it’s also been creating new problems.

My guest today has a company that is setting out to fix those. She is Laura Spiekerman, the Chief Revenue Officer of Alloy.  

The new problems are two-fold. One is that millions of people lack traditional identity documents and therefore can’t gain access to the system at all. That isn’t actually a new issue -- it’s always been true -- but it’s becoming more acute because mobile technology is making it possible for more and more people to connect to the financial system through their phones, if they can identify themselves.  In much of the developing world, hundreds of millions of people cannot, because they lack formal ID documents (a factor that tends to disproportionately harm women, members of disfavored minorities and people with low incomes).

Having large swaths of the population detached from mainstream finance, in turn, undermines economic growth and opportunity. As a result, many central banks throughout the world view KYC modernization as a top priority. For example, see my episode with Sanjay Jain who was one of the leaders of the India stack on their project that is connecting everyone in India to the financial system and mainstream commerce. Some governments are trying to create customer identity through biometric identification. Global organizations ranging from The World Bank to the Gates Foundation and the Omidyar Network (where I am a Senior Advisor) have all elevated AML as a core goal in their efforts to wide financial inclusion.

The KYC barrier also impacts consumers in the United States, including many young people and immigrants or, say, people who have moved frequently. If a financial company cannot verify identity by investing a reasonable level of time and effort, it usually will not open an account.

The second problem with the current KYC process hits the US and other developed countries even more directly. We still rely on traditional identity information like name, address and Social Security number that is, quite simply, no longer secure -- it’s widely for sale on the dark web. (Re-listen to our episode with Greg Kidd of globaliD) for more insight on that).

The solution to both problems -- both access and insecurity -- is the same: more data and better technology.

Alloy is bringing these into KYC. The company enables real-time decisioning through an API that lets a financial institution access the data it needs, in a fully transparent way, and that also provides a rules engine to control how to waterfall the data to put it into a rule. I spoke to Laura at the Comply 2018 conference in New York this year -- you’ll hear some of the conference bustle in the background.

In our conversation, Laura describes the impact Alloy can make. In retail banking, they’ve been able to automate about 98% of decisions for onboarding, as opposed to a standard of about 50%. Once the remaining 2% are sent to manual review, they have also been able to reduce manual review times by about 95%, while also seeing reductions in fraud and increases in conversions, seemingly a win-win for all.

Laura also shares her advice for other fintechs, including how to overcome the many barriers faced by regtech firms in trying to work with financial institutions. She talks about Alloy’s plans for building AI into their solutions. And she offers advice to regulators. Like me, she’s hopeful that the regulatory landscape is increasingly receptive to new technology.

I know you’ll enjoy my conversation with Alloy’s Laura Spiekerman!

Links

Full Transcript of Episode

Alloy on Twitter

Innovation at a Small Bank: Radius CEO Mike Butler

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


More for our listeners

We have great podcasts in the queue. We have a series focused on global developments in fintech and regtech. One is with Harish Natarajan of the World Bank, who talks about their remarkable work in global financial inclusion. Another is with Anju Padwardhan of CreditEase and Stanford University, who describes fintech developments in China. From London, we’ll have a talk with P.J. DiGiamarino of JWG and the Regtech Council. We’ll also have a far-ranging conversation with Peter Renton, who leads Lend Academy and the LendIt conference series. And we’ll have a show with the co-founders of Earnup...among many others.

Last week I spoke at the National Foundation for Credit Counseling’s NFCC Connect in Dallas, where I was very honored to receive their Making the Difference award. I’m on the NFCC board and want to share that we have a visionary new CEO, Rebecca Steele, who is bringing technology more and more into the work of credit counselors -- the people on the front lines of helping consumers make their financial lives healthier. Keep your eye on the NFCC and try to connect with its work.

Other places I’ll be speaking this fall include:

Last but not least, Money 2020, is only two weeks away and it’s going to be amazing. I’m chairing and hosting the regulatory track, which is SUNDAY, October 21, starting at 10AM. The day will include amazing speakers, including a fireside chat I’m doing with Lord Digby-Jones of the House of Lords, and an Oprah-style regulator town hall. On Monday, all ten of the senior regulators and former regulators participating in the conference will join in a mix and mingle with anyone who would like to talk with them.

And then Monday afternoon at 3:15, I’ll be on the new Revolution Stage speaking on Regulation Revolution. I’m aiming to make it the most interesting speech I’ve ever given. If you’ll be at the conference, be sure to come, and tell your friends to come too.

Also, watch for upcoming information on my collaboration with Brett King on his new book, Bank 4.0, which you can now buy. I co-wrote the regulatory chapter with Brett, and we’ll have a show and events on that as well.

Last year, I ended the fall with what I called my world tour designed as seven countries in seven weeks, ending at the Dutch Central Bank right before Christmas, and I tried to share the main takeaways from each by posting mini-videos from the scene. This year I’ll be in fewer countries but at more events, so I’m going to do the videos again -- a lot of people said they enjoyed coming along on those adventures. So please follow me on Twitter, LinkedIn, and Facebook and come to jsbarefoot.com for more information.

And yes, we’re going to revive the newsletter. One of my colleagues recently suggested we call the next post Whirlwind, because that’s what the year has been.

Innovation everywhere!

Support Our Podcast



Talking Through the Storm with Jan Lynn Owen

Mallory Kwiatkowski

jan owen 2.png

I am especially thrilled about today’s guest -- California DBO Commissioner Jan Owen -- because this episode has been years in the making. I’ve known Jan for a long time, and as anyone who knows her will attest, she’s a breath of fresh air in the regulatory world. She’s candid, she’s outspoken, she’s thought provoking, and she's fearless in tackling thorny issues. We’ve been looking for a good chance to sit down and talk, and we finally found one this summer.

As it happens, it turned out to be one of Barefoot Innovation’s most fun settings ever (and we’ve had some great ones, including beachside in Fiji at the AFI conference). Jan and I were both in Santa Fe in July for a conference and we decided to record our talk on an outdoor balcony, as a thunder storm approached. It was extremely windy, and we could smell the ozone and coming rain, and you’ll be able to hear the thunder booming, sometimes startlingly well-timed to punctuate Jan’s more pointed comments. We took our chances with the weather, staying outside as the sky darkened and dozens of lightning strikes forked down out of the clouds onto the mountains behind Jan -- I wish I’d gotten a photo of that.  In the end, we had to run for it as the rain began, first with big drops spattering the deck and then, ten seconds later, deluge! So the episode ends a little abruptly!

Jan Lynn Owen is one of the most important financial regulators in the US because she heads the California Department of Business Oversight (DBO). Since California arguably leads the world in financial innovation, the DBO is at the forefront in addressing emerging regulatory issues around fintech. Importantly, state regulators, unlike most of the federal ones, oversee both banks and nonbanks. The US federal regulators dominate financial policy, but they don't directly supervise nonbank startups. That means they’re not in close touch with the cutting edge of innovation, which is not in the banks -- it’s in the nonbank startups.

So having a regulator like Jan who understands both banking and fintech is invaluable. In our conversation, she shares her diverse background, including having been a banker and regulator. She describes the scope of the DBO, which is breathtaking -- 368,000 licensees, over 4,000 small business and small dollar lenders, over 300 payday lenders, over 400 nondepository mortgage companies - you get the picture.

As you would expect, we had a lively discussion about the proposal by the US Office of the Comptroller of the Currency (OCC) to create a fintech charter. Jan is famously opposed to it and I have been an outspoken advocate for it - we’ll link in the show notes to my debate on that topic with John Ryan, CEO of the Conference of State Bank Supervisors (CSBS). Jan is of course a leader in CSBS and in our talk, she describes their efforts to modernize and streamline the state regulatory systems and licensing system in ways that she believes can meet the needs of the fintech sector without the OCC establishing a new type of federal charter. (Note that my discussion with Jan was recorded in mid-July, and so predated the OCC’s July 31 announcement that it is going ahead with the new fintech charter.)

Jan points out that the fintech world has transitioned from seeking to avoid regulation to embracing it, in the realization that it helps their business model. She says this shift is putting healthy pressure on government to figure out how to regulate these novel companies, and she’s candid in saying that many of our financial laws and rules are old and out of date. In our talk, she invites input from anyone and everyone on how to fix them.

The OCC fintech charter was not the only issue on which Jan and I disagree. If you read the news, you probably already know that she’s been outspoken in her skepticism about regulatory sandboxes -- and our regular listeners know that I think regulators really need them. Much of the issue comes down to how they’re designed, and we had a good conversation about the dos and don'ts of sandboxes, reglabs, and innovation hubs. The key is to give regulators a safe space to do easy experimentation, mainly to accelerate their own learning, while still assuring full consumer protection. (Since Jan and I spoke, the Bureau of Consumer Financial Protection also announced that it will launch a regulatory sandbox.)

Before we fled the rainstorm, I asked Jan to talk about a speech she’s been giving titled “Sex, Drugs, and Skinny Jeans” (a perfect example of her style). The “sex” topic is the #MeToo movement, including Jan’s personal experience with workplace sexual misconduct. The “drugs” issue is, of course, how to regulate the financial issues raised by legal marijuana in states like California, since federal law still bars banks from opening accounts for these cash-rich businesses. And “skinny jeans” is about the culture clash between traditional, suit-and-tie finance and the jeans-and-tee-shirt worldview of Silicon Valley. We’re going to have to bridge that divide, if we want to optimize the technology change coming to the financial world.

Enjoy this thunderous episode with Jan Lynn Owen.

Links

LINK TO FULL TRANSCRIPTION

Podcast with John Ryan - Conference of State Bank Bank Supervisors President

Recent Speech at Lendit


More on Jan Lynn Owen

Jan Lynn Owen was appointed the first-ever Commissioner of the California Department of Business Oversight by Governor Edmund G. Brown Jr. on July 1, 2013, following a merger of the departments of Corporations and Financial Institutions. Previously, Ms. Owen served as Commissioner of Corporations.

Prior to becoming Commissioner, Ms. Owen was the principal at The Jan Owen Group; a strategic initiatives manager at Apple Inc.; vice president of government affairs at JP Morgan Chase; state director of government and industry affairs at Washington Mutual Inc.; and executive director of the California Mortgage Bankers Association.

From 1999 to 2000, Ms. Owen was acting commissioner of the Department of Financial Institutions, following on her role as deputy commissioner from 1996 to 1999. She also served for several years as a consultant to the state Senate Banking Committee.

Ms. Owen is an alumna of California State University, Fresno, where she earned her degree in Economics.

More for our listeners

We have great podcasts in the queue. We have a series focused on global developments in fintech and regtech, including Harish Natarajan of the World Bank and Anju Padwardhan of CreditEase and Stanford University, who talks about fintech developments in China. From London, we’ll have a talk with P.J. DiGiamarino of JWG and the Regtech Council. We’ll also have a really thought-provoking show with Peter Renton, who leads LendAcademy and the LendIt conference series. We have a regtech firm coming up, Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML. And we’ll have a show with the co-founders of Earnup. So, lots to look forward to!

The fall conference circuit is exciting. Some of the places I’ll be speaking are:

I’ll also be speaking at several events hosted by US regulators this fall. It’s great to see so many of them really digging into the issues surrounding fintech and regtech.

Also, watch for upcoming information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well.

If you listen to Barefoot Innovation on iTunes, please leave a five star rating and also remember to send in your “buck a show” to keep it going. Come to jsbarefoot.com for today’s show notes and to join our email list, so you’ll get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter, LinkedIn, and Facebook.

Support our podcast



Machine-Readable Regulation: Compliance.AI CEO Kayvan Alikhani

Mallory Kwiatkowski

kayvansfbusinesstime.jpg

What if regulations were machine-readable? What if, when regulatory changes come out, financial companies wouldn’t have to download hundreds or thousands of pages of rules and read them all? What if they didn’t have to rely on lawyers -- their own, and also the legions of legal experts and consultants who translate rules for the industry as a whole, to help them understand what to do? What if, instead, they could run new rules through a machine-based review, and get all those answers automatically? For very little money?

Banks would be able to update compliance processes much more easily. Startups could easily find out what rules apply to them. The results could feed into other new, high-tech tools, to automate and streamline implementation.

A lot of people are working on this concept, both at regulatory agencies and at regtech firms. One leader in that effort is my guest today, Kayvan Alikhani, Co-founder and CEO of Compliance.ai. We both were speakers this year at the Comply 2018 conference in New York, and while we were there we found a chance to sit down and talk.

Kayvan and Compliance.ai set out to solve the problem that today’s solutions are aging, rigid, slow, and expensive. Among other things, these systems fall behind the deluge of regulations that hit the financial sector every year. Compliance.ai looked at which industry most needed its new tech and chose finance, in part, based on research findings that compliance teams spend at least 30% of their time just chasing changes.

Compliance.ai aims to automate the manual work of collecting, cleaning up, and parsing data and figuring out what is relevant to its customers, using machine-readable technology. Their software can speed up and simplify much of the work done today by traditional GRC -- governance, regulation and compliance -- systems. More basically, they are trying to redesign the whole model of importing data manually, analyzing it in spreadsheets, communicating on it via email, and all the rest.

While today’s regtech innovation is mostly point solutions for particular use cases, remember that they’re converging. Machine-readable technology will meet up with other new ways of capturing and using data, from cloud computing to blockchains, and we’ll see big breakthroughs when these connections really take.

Kayvan is especially thoughtful about artificial intelligence. AI has incredible power to save massive time and money in compliance processes. I myself have no doubt that AI and machine learning are the future of regulation and compliance. However, getting to that future is a journey, and Kayvan describes how it is likely to go, and especially steps that will be needed to surmount reluctance by both industry and regulators to adopt AI they don’t fully understand, by gradually building up understanding and trust and by assuring that AI meets the standards needed for accuracy and fairness.

Significantly, regulators themselves are working on machine-readable regulation too. In particular, the UK’s Financial Conduct Authority (FCA) is aiming to “digitize the rulebook” by tagging regulations with machine-readable markers. In the US, the Commodity Futures Trading Commission is exploring the same concept. We’ll link in the show notes to our episodes with both agencies.  

Regtech firms like to emphasize the time and money they can save the industry, which in turn sometimes leaves compliance professionals worried about robots taking their jobs. One lesson from my talk with Kayvan is that there’s a mountain of human compliance work ahead. The machines are going to do the rote tasks, and the higher math. The people, with their deep expertise in both rules and the complex systems around them, are going to be freed up to do ever-more meaningful work, better than ever before. They will be busy shaping these new tech tools, and they will be using them to tackle the work only they can do -- the deep dive analysis, the hard cases, the systemic reforms. They’ll have less frustration, less boredom, and more traction in achieving the big goals that our laws and regulations were written to further, from protecting consumers to expanding financial inclusion to catching money launderers. At my regtech firm, Hummingbird, we say our mission is to give compliance people superpowers. Compliance leaders are going to emerge as heroes in their companies as they produce better results, cut costs, cut risks, and help lead their organizations, especially banks, into the twenty-first century.

I asked Kayvan to help us envision a day in the life of a compliance professional a few years into the future. He paints a fascinating picture, and he says it’s going to be beautiful. That’s not usually a word we associate with regulation and compliance.

Links

LINK TO FULL EPISODE TRANSCRIPTION

A day in the life of a compliance officer - Part 1

A day in the life of a compliance officer - Part 2

A day in the life of a compliance officer - Part 3

Chris Woolard and Nick Cook Podcast

Podcast with Nick Cook

Podcast with Dan Gorfine, LabCFTC Chief Innovation Officer and Director

Podcast with CFTC Chairman Christopher Giancarlo


More on Kayvan Alikhani

With more than 25 years of experience in hi-tech, Kayvan leads operations, strategy, sales, and marketing for Compliance.ai. Most recently, Kayvan led the identity strategy at RSA, and represented EMC on various industry alliances such as the FIDO board. He is Co-Founder and CEO of PassBan (acquired by RSA), a company focused on mobile identity assurance. Kayvan also led strategy at LiteScape (as CTO and later as CEO), creating security and mobile identity solutions for VOIP-based networks. He was Co-Founder and CTO at BeNotified, a cloud mobile communication service provider. Prior to that, Kayvan co-founded AVIRNEX, a cloud-based enhanced fixed- and mobile-communication service provider.

More for our listeners

We have great shows coming up. We have a wonderful episode with the California Banking Commissioner, Jan Lynn Owen. We’ll also have another regtech firm, Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML. We have one with the co-founders of Earnup. From the global perspective, we’ll have the World Bank’s Harish Natarajan; one with Anju Padwardhan of CreditEase focused, among other things, on fintech developments in China; and one with P.J. DiGiamarino of JWG and the Regtech Council. We also have a great show in the queue with  Peter Renton of LendAcademy and the LendIt conference, one of the most thoughtful people we’ve talked with.

I’ll be speaking this fall at some great events:

If you listen to Barefoot Innovation on iTunes, please leave a five star rating to help us continue to build the show, and remember to send in your “buck a show” to keep it going. Also come to jsbarefoot.com for today’s show notes and to join our email list to get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter, LinkedIn, and Facebook.

I’m so grateful that you listen to Barefoot Innovation. Our audience is growing rapidly all over the world, and hardly a day goes by without someone telling me how much they enjoy the show or how they were helped by an insight shared by one of our wonderful guests. Let’s keep that going -- and let’s all keep innovating!

support our podcast

Transforming Identity: GlobaliD CEO Greg Kidd

Mallory Kwiatkowski

pasted image 0 (1).png

It’s always extra fun when we have a show where the guest talks about the days when Jack Dorsey hacked him and lived in his backyard. For today’s conversation, I’m joined by my friend Greg Kidd, Co-founder and CEO of globaliD. I’m predicting right now that this one is going to be a Barefoot Innovation fan-favorite.

Greg has an unusual background. He was involved from the early days of Ripple, Twitter, and Square. Unlike most Silicon Valley innovators, though, he’s also been a banking consultant and worked for the Fed Reserve Board. He is famously a big thinker (I like to tell him that people sometimes have no idea what he’s talking about, although I promise that doesn’t happen in this show).  I remember the first time I met him -- we walked into a party at the same time one night in San Francisco, and were still talking, barely inside the door, two hours later. This is actually the longest episode we’ve ever done, because he’s just fascinating to listen to -- I couldn’t tear myself away.

We recorded it this spring in globaliD’s space at the Digital Garage in San Francisco, where Greg shared his vision of what’s ahead in finance, commerce, and technology. We talked about the magnitude of the shifts he sees, and his passionate belief that new technology should be used to empower people, not control them. The secret to that, Greg says, is decentralization. He thinks blockchains and distributed ledgers are as revolutionary as the internet was. And he thinks, above all, that we should decentralize control over people’s identities. As he says, government-issued identities are inherently insecure -- they create huge centralized “honeypots” of data that attract hackers -- and they can invite misuse by government itself.

Greg's firm globaliD is building an alternative. Its software can be downloaded to the phone to create an individual token of identity that can attach a unique name, which then can collect identity proofs, or “attestations,” based on the person’s electronic footprint and relationships. The individual can customize how to share identity information for different purposes, shielding sensitive information for some uses and revealing it in others, in order to protect privacy. Because the underlying information lives in the individual’s device, not a government or corporate database, it’s relatively secure from cyber-attack.

As mobile phones approach ubiquity worldwide, this kind of system can also expand financial inclusion by authenticating millions of people who lack traditional credentials and therefore can’t enter the mainstream financial system. We've done other shows on this (I suggest re-listening to the one on the India stack and Aadhaar card with Sanjay Jain). Governments throughout the world are working on this, especially in countries where much of the population (often, especially, women) lack documents and therefore can’t satisfy the bank Know-Your-Customer regulations. A few years ago I ran into Greg in Fiji at the annual summit of the Alliance for Financial Inclusion. He was speaking there on how to use mobile phone-based data to help refugees identify themselves to authorities, to make it easier to screen people even in the midst of mass migrations and humanitarian crises.

The US needs updated identity methods too. Our analog-era systems like social security numbers are no longer secure -- too often buyable on the dark web. Digital solutions will be coming here soon.

Greg also gets excited about making innovation work with regulation. He says we don’t have to end up in George Orwell’s world, nor in Mad Max’s, as he argued in this memorable piece.

I promise this episode will leave you with some new ideas.

Links

Link to Episode Transcription

www.hardyaka.com

Podcast with Anne Boden

More on Greg Kidd

Greg Kidd is the CEO of globaliD and the former chief risk officer at Ripple. His work taking his own startup public (Dispatch Management Services) on the Nasdaq is book-ended by time at Booz Allen, Promontory, and the Board of Governors of the Federal Reserve. He was an initial investor and advisor for both Twitter and Square, and his investment firm Hard Yaka continues to back many fintech and regtech companies. His leadership pursuits include work at Outward Bound and the National Outdoor Leadership School (NOLS).

More for our listeners

We have many more great podcasts in the queue. We have a wonderful episode with the California banking commissioner, Jan Owen (which is extra exciting because we recorded it outside with lightning and thunder through the whole thing). We’ll also have other regtech firms, including Compliance.ai, which is creating machine-readable regulations, and Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML. And we have one with the co-founders of Earnup. There are many more in the works.

The fall events schedule is filling up. Some of the places I’ll be speaking are:

If you listen to Barefoot Innovation on iTunes, please leave a five star rating on the show to help us continue to grow. Come to jsbarefoot.com for today’s show notes and to join our email list, so you’ll get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter, LinkedIn, and Facebook.

support our podcast

Meanwhile, keep innovating!

Congressman Gregory Meeks on Win-Win Fintech

Mallory Kwiatkowski

meeks photo.png

We have such a special guest on today’s show. Gregory Meeks is the United States Congressman representing the Fifth District of New York. He is also a leading member of the House of Representatives Committee on Financial Services. I was able to sit down with him, in his Capitol Hill office on one recent, hot summer day, to talk about how technology is changing consumer finance and, especially, how it can expand financial inclusion.

Congressman Meeks has been bringing breakthrough leadership to this issue on Capitol Hill.  As he says in our conversation, his views are grounded in his own experience growing up in public housing in Harlem, where he learned firsthand the struggles faced by low-income families in making ends meet, and also in getting access to credit. He talks about his own parent’s situation in being able to purchase a home, and the effect it had on his family. As a passionate advocate for these communities, it’s hugely important that he believes some of the solutions for them lie in fintech.

I think it’s fair to say that many advocates for financial inclusion are still skeptical that fintech is a good thing. Obviously it sometimes isn’t, and clearly there are many questions that need to be  addressed as these new technologies expand. As someone who has worked with financial inclusion efforts for decades, however, I think these new tech innovations are actually the best hope we’ve ever had for building a truly affordable, accessible and healthy financial system for everyone.

As we’ve discussed in other shows, fintech is attacking all the things that cause people to have unhealthy financial lives, other than lack of money itself. It is sharply reducing the costs of providing financial services, by leveraging both mobile delivery channels and new kinds of data. It’s enabling accurate underwriting of the millions of people who can’t qualify for good loans because they lack traditional credit files -- again, using new data and data analytics. It’s helping people build digital identities, which equips them to satisfy the Know-Your-Customer rules of the banking system and thereby access transaction accounts (this progress is especially dramatic in the developing world). Fintech innovation is also creating a wide array of tools that just make it easier to manage money wisely, regardless of your level of financial education. New tools are simplifying everything from saving, to budgeting and bill-paying, to new solutions for people with “gig” jobs, to getting alerts when funds are getting low. Fintech is not a panacea, obviously, but my view it that it can accomplish many of the goals we’ve been pursuing for decades through regulation, with mixed results at best. Congressman Meeks is focusing on this powerful potential.

We had a wide ranging conversation, including talking about modernizing the Community Reinvestment Act which the Congressman has called for -- here is his op-ed on that challenge. And you’ll hear his passion for building a bipartisan approach to crafting solutions that work for everyone, including how both rural and urban communities’ financial health can benefit from fintech.

The Congressman has a keen sense for how we need to embrace technology, rather than fighting it. He’s optimistic, as am I, that we are on the verge of finding truly superior ways to use new technologies to better communities.

More Links

Link to Full Episode Transcription

Fintech Charter and Financial Inclusion Op-Ed

Corporate Board Diversity Op-Ed

Twitter @repgregorymeeks

Facebook @repgregorymeeks

Congressman Meeks’ Office - 202-225-3461

More on Gregory Meeks
Congressman Gregory W. Meeks (D-NY) is now in his tenth term serving the 5th District of New York, which is one of the most diverse constituencies in the nation. He is known for working with Democrats and Republicans alike and is one of sixty-one pro-growth Democratic members who comprise the New Democrat Coalition (NDC). He co-chairs the NDCC Trade Task Force.

Congressman Meeks is a senior member of the House Financial Services Committee, having previously served as a Dodd-Frank conferee. Key provisions in the Wall Street reform law – including its stress testing requirement, the creation of the Office of Minority and Women Inclusion at the financial regulatory agencies, and the requirement that U.S. public companies that use natural resources must report their due diligence in stamping out conflict minerals– were authored by Congressman Meeks and remain in the law today.

The Congressman is also a senior member of the House Foreign Affairs Committee, where he is the Ranking Member on the Subcommittee on Europe, Eurasia, and Emerging Threats. A multilateralist with decades of experience in foreign policy, he believes the United States should build coalitions around our interests and work with other countries to build a stable and prosperous future. He co-chairs several international organization caucuses, including the European Union Caucus.
 

More for our listeners

We have many more great podcasts in the queue. We’ll have a really thought-provoking discussion with my friend Greg Kidd, Founder of GlobaliD.  We have a wonderful episode with the California banking commissioner, Jan Owen (which we recorded amidst a gathering thunderstorm that adds some drama). We’ll also have two regtech firms -- Compliance.ai, which offers machine-readable regulatory compliance, and Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML. And we have one with the co-founders of Earnup. There are many more in the works.

The fall events schedule is filling up. Some of the places I’ll be speaking are:

I’ll also be speaking again at AFI, in Russia, if we can make the schedule work.

Also, watch for upcoming information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well.

If you listen to Barefoot Innovation on iTunes, please leave a five star rating on the show to help us build it. Also please remember to send in your “buck a show” to keep it going, and come to jsbarefoot.com for today’s show notes and to join our email list, so you’ll get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter and Facebook.

support our podcast

And tell me what you’re thinking about fintech and financial inclusion. Let’s widen this dialogue to more people, and more and more ideas!



Innovation at a Small Bank: Radius CEO Mike Butler

Jo Ann Barefoot

mike butler.png

Today’s guest is Michael Butler, CEO of Radius Bank in Boston. As with our recent show with Bob Rivers of Eastern Bank (which is also based in Boston), Mike belongs to a small, but growing, group of CEOs who are truly transforming their community banks through technology. When conversation turns to the tech future for community institutions, these two banks’ names always come up.

We’ll link in the show notes to the Eastern episode and you’ll notice many common themes -- especially that both CEOs focus first and foremost on full embrace of a tech culture. Not a mixed culture, not one that’s hampered by pockets of resistance, but full embrace.

We all know it’s hard for smaller banks to keep up with cutting edge technology. I know some community bankers who say they have given up. I know many others -- maybe most -- who hope they are keeping up enough to please their customers, but can’t tell for sure how well they’re doing. And I think many worry that they have no clear idea of what the road ahead looks like. For Radius Bank, Mike explains how they analyzed this challenge. Their conclusion was that in today’s market, in which customers expect Amazon-type technology, their small bank was not going to be able to offer fully competitive full-service retail banking products. As a result, they shifted quite radically to a new strategy.

In this show, Mike tells the story of that journey, beginning in 2008 at the height of the Great Recession. He shares their reasoning that a full-service, branch-based, locally-confined strategy would actually be more risky than offering a narrow product set to a wide market, with a very low cost structure. He argues that a small bank like Radius has powerful advantages over larger ones that have more complex and rigid systems that slow them down. And he talks about how they tackled the task of building, as he puts it, a great tech platform, including for attracting deposits from a very specific niche of customers -- those who don’t want a branch, and actually prefer to bank through their phone, if the experience is wonderful.

You’ll enjoy listening to Mike describe the internal debates they undertook, including the fears around offering something like, for example, a free ATM. He says they concluded that the whole banking industry’s platform is wrong, if you want to offer a virtual product. They also realized that a key to their future is fintech companies, both as customers and as partners. He says they now think of their “branches” as being located at the “corner of Radius” and the partner company, not on a physical street intersection where they would be competing with other banks’ street. Mike says it’s “a beautiful place to be.”

He also talks in depth about making the tech great. For example, he describes getting the deposit account opening process streamlined from fifteen or twenty minutes down to three or four. He says that, behind the scenes, Radius Bank does things like Amazon, and delivers an Amazon-like experience. He also has tips on how to attract tech talent (hint -- it includes empowering young employees).

Mike has thoughts on how to modernize the Community Reinvestment Act for the digital age. More broadly, he shares insights on overall regulatory challenges which, as he says, are “not easy.” He describes tasking the bank’s risk people to figure out how to work with new-generation vendors, because, as he puts it, “we can’t just go with the big guys that look good and look safe,” if they have old and inferior technology. He describes the checklist they’ve developed to handle this modernized third-party risk management for partnering with fintechs and regtechs. He says one secret is to have a “rock star compliance person.” Another is to interact constantly with the regulators.

Listen especially closely to how he thinks about the risk in these partnerships, and specifically his thought process on how these newer tech partners are able to make any needed course corrections quickly and nimbly, and at low cost, so that even if things don’t work perfectly the first time, the bank is still ahead for having experimented or for trying a new approach. I’m hearing this thinking more and more from innovative banks, including the point that while older technology may look safe, it’s actually high-risk because much of it is too rigid, and changes too slowly, to keep up with the market.

I’ve long believed that the two top challenges facing banks, and especially community institutions, are, first, keeping up with technology and second, regulatory burden. The good news, which is sometimes hard to see, is that new technology can be the answer to both.

Radius bank is pioneering a new pathway to reaching those solutions. I know you’ll enjoy my conversation with Mike Butler.

More Links

Link to Full Transcription

Radius Bank Website

Podcast with Citi Fintech - Citi Fintech Global Head of Policy, Andres Wolberg Stock

Podcast with Eastern Bank CEO Bob Rivers

More on Michael Butler

Michael Butler is the President and Chief Executive Officer of Radius Bank. Since joining Radius Bank in March 2008, he has transformed Radius into an innovative leader in the financial services industry, focused on delivering superior customer service and leading-edge technology to its clients. He is an experienced banking executive with an extensive background in all facets of commercial and consumer banking. Prior to joining the Bank, Mike served as President for National Consumer Finance at KeyCorp in Cleveland, Ohio. He is a graduate of Providence College and the ABA's Stonier Graduate School of Banking. Mike serves as a member of the Financial Services Committee for the Greater Boston Chamber of Commerce, on the Board of Trustees for Thompson Island Outward Bound, on the Advisory Board for FinXTech, and has been active with the Habitat for Humanity program.

More for our listeners

We have many more great podcasts in the queue. They include a number of leading government officials, including Congressman Gregory Meeks and Jan Owen, the banking commissioner of California, as well as World Bank official Harish Natarajan. We’ll have an amazing show with Greg Kidd, Founder of Global ID; a show with the co-founders of EarnUp, and two regtech firms -- Alloy and Compliance.AI.

The fall events schedule is filling up. Some of the places I’ll be speaking are:

Also, watch for upcoming information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well.

If you listen to Barefoot Innovation on iTunes, please do leave a five star rating on the show to help us build it. Also please remember to send in your “buck a show” to keep it going, and come to jsbarefoot.com for today’s show notes and to join our email list, so you’ll get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter and Facebook.

support our podcast

And tell me what you’re thinking about digitizing regulation. We want to widen this dialogue.

Until next time, keep innovating!

Data that Deepens Financial Access: Experian and Lendup

Mallory Kwiatkowski

Today’s show brings us two fascinating guests.  Alex Lintner is President of Consumer Information Services for Experian, and Sasha Orloff -- who is a previous guest on Barefoot Innovation -- is founder and CEO of LendUp. They recently joined forces to explore using new kinds of data to widen financial inclusion. We all sat down to discuss it at the LendIt conference this spring in San Francisco.

Credit scores are a great tool for evaluating the creditworthiness of many consumers, but as Alex explains, not for all of them. He and Sasha think -- as do I -- that we need a fuller view into what Alex calls the consumer’s financial “reputation.” Experian estimates that 100 million people in America need this kind of broadened evaluation. We know that many consumers with low or no credit scores are actually creditworthy, and in fact could prove it if we had systems that could look closely at their financial behaviors and situations beyond reported credit history.

Traditionally, though, we didn’t have efficient ways to get that information because, in the analog age, when the current systems were designed, data was scarce and costly. Today, in contrast, we have massive volumes of digital information we can access and analyze, instantly and efficiently. This creates the ability to do what used to be impossible -- make financial services more inclusive, without sacrificing lending soundness.

Toward that goal, LendUp and Experian undertook a joint research project to look at the benefits of capturing data on customers’ performance on single-payment loans. The study produced really striking results -- the overwhelming majority of consumers in the study came out with positive impacts on their credit scores.

And as Alex explains, single-payment loans are just one kind of nontraditional data. In today’s digitized world, there are many other factors that we can begin to capture methodically and build into routine credit scores. Experian is now routinely doing this, offering a new score called Clear Early Risk.

In our conversation, Alex and Sasha share insights drawn from their own lives and talk about the many situations in which people have trouble accessing credit when they need it. Some of these consumers are young people or new immigrants with thin or no credit file. Some are facing life changes like a family death or divorce. Some are contending with emergencies like loss of a job or medical bills. Our discussion also tied these kinds of individual challenges into big shifts underway overall in lifestyle and in technology -- the advent of mobile financial services, the rise of the gig economy, and expanding use of artificial intelligence.  In addition, we touched on the future of the Community Reinvestment Act, which is due for much-needed, tech-driven modernization.

Using alternative credit risk data has complex implications for fair lending regulation, especially in the US and especially regarding “disparate impact.”  US policy bars use of credit practices that have a disproportionate adverse effect on “protected classes” like women and minorities, unless the lender can demonstrate a business need and show that less-discriminatory alternatives are not available. The criteria for proving this are not clear today, and I’m among the many people who think that clarifying them is essential to expanding financial inclusion by fostering use of new data. Despite having the best of intentions, policymakers have inadvertently made hard-to-score consumers the riskiest market to serve, due to the regulatory risk arising from uncertainty. That chills efforts to address these customers’ needs by many mainstream and high-quality lenders.

The CFPB is exploring this issue through its evaluation of alternative data and issuance of a “no action letter” for Upstart. A similar effort is underway, also, at the new nonprofit FinRegLab, which is run by Melissa Koide and funded by the Omidyar Network. I chair FinRegLab’s board, and we’re conducting empirical testing of alternative data -- specifically cash flow underwriting -- including how these new methods relate to disparate impact.

Today’s show is a glimpse of a promising future, harnessing innovative technology to produce lending that is more inclusive, and also more sound.

More Links

Episode Transcription

Podcast with Al Ko - Episode recorded last year with Al Ko of Intuit

LendUp Infograph

Alternative Credit Data trends and reports

Op-Ed by Sasha on innovation in credit scoring

More on Sasha and Alex

Sasha Orloff is CEO and co-founder of LendUp. LendUp’s mission is to provide anyone with a path to better financial health. The company builds technology, credit products, and educational experiences that haven’t existed before for the emerging middle class -- the 56% of Americans shut out of mainstream banking due to poor credit or income volatility. It has originated more than $1 billion in loans. With offices in San Francisco, CA and Richmond, VA, LendUp is backed by debt and equity financing from venture and social impact investors including Y-Combinator, Kleiner Perkins, Andreessen Horowitz, Google Ventures, Victory Park Capital and Yuri Milner’s Startfund. In June, both Nigel Morris and Frank Rotman of QED Investors joined the LendUp board of directors.

Prior to founding LendUp, Sasha held roles in risk management, finance, online acquisitions and customer insights on Citi’s consumer credit team, and most recently served as Senior Vice President on Citigroup's Venture Capital team. He previously worked for the Grameen Foundation Technology Center and The World Bank. He has a B.S. in applied math and economics from the University of California, San Diego and an MBA from Georgetown University.


Alex Lintner is President of Experian’s Consumer Information Services, overseeing the company’s US consumer credit bureau and the National Consumer Assistance Centre (NCAC). He’s responsible for all aspects of Experian’s consumer credit activities within the business-to-business marketplace, including delivery and management of value-added credit risk, marketing, and collection products to help clients manage and optimize their customer relationships. Alex was previously CEO and President of Vertafore, a $450+ million revenue insurance industry technology provider. Prior to that he was President of Intuit’s Global Business Division and also Senior Vice President of Strategy, Government Affairs and Corporate Development. He’s also spent 15 years as a consultant, starting as a Business Analyst at Dr. Hoefner & Partners in Munich, Germany and later serving as Vice President of The Boston Consulting Group in their London and San Francisco offices.

More for our listeners

Our next guest on the show will be another community bank CEO, Mike Butler of Radius Bank in Boston.  Upcoming episodes include a fascinating conversation with Congressman Gregory Meeks on financial innovation and policy; a talk I recorded this year at LendIt with my friend Greg Kidd of Global ID; and three discussions with regtech firms -- JWG in London, Compliance.ai, and Alloy.

Speaking of LendIt, I was a guest this month on Peter Renton’s Lend Academy podcast, and he’ll be on our show soon as well. I was also a guest in June on the Commodity Futures Trading Corporation podcast, CFTC Talks, with Andy Busch. And here are my two podcasts with the CFTC, one with Chairman Giancarlo and a recent one with innovation head Dan Gorfine.

It’s not too early to register for the fall’s premier fintech event, Money 2020, in October in Las Vegas. I’ll again be MC for the regulatory track, which, remember, is on Sunday -- be sure to plan accordingly!  I’ll also be speaking on the Revolution Stage, which is new this year, about regulation innovation. Also watch for Regtech Rising in December, which I’m helping to plan.

We’ll also be posting information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well, and I’ll be a guest on Brett’s great radio show Breaking Banks this week, on July 5.

Please remember to give Barefoot Innovation a five-star rating on iTunes to help us expand the show. I hope you’ll sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at www.jsbarefoot.com.  Follow me on Twitter and our Facebook fan page. And please send in your “buck a show” to keep Barefoot Innovation going!

SUPPORT OUR PODCAST

Until next time, keep innovating!

Regulatory Challenger: LabCFTC and Daniel Gorfine

Jo Ann Barefoot

Gorfine 1.png

Some organizations are so interesting that we come back to them more than once. Among US regulatory agencies, the most fascinating may be the Commodity Futures Trading Commission. Last July we ran a podcast conversation with the Commission’s Chairman, Christopher Giancarlo, which goes into greater depth about the role of the CFTC and it also contains Chairman Giancarlo’s thought-provoking statement that the top priority facing every regulatory body is to convert the rule book from analog to digital design. The CFTC is at the forefront of regulatory innovation in part because its leader is so passionate about the importance of it.

In that spirit, they recruited the perfect person to lead the LabCFTC innovation project -- today’s guest, Daniel Gorfine. Luckily for us, the CFTC was able to attract Dan into government from the fintech sector – I first met him when he was at OnDeck – and he’s been bringing an innovator’s mindset and working models to this venerable government agency.

This episode has three very meaty topics, each of which could have been a whole show.

First, Dan talks about the vision and work of LabCFTC, sharing insights about how it’s organized that I know other regulators will find helpful. He talks about how they track and facilitate innovation in the financial markets, including a “primer” they issued on rules applying to cryptocurrency. He also explains how they explore new technology for use by the agency, itself -- they call that CFTC 2.0 -- as well as “Digital Reg,” an internal think tank for rapid learning and sharing of tech insight.

Second, Dan talks with me about an exciting initiative they’ve just launched, issuing the first-ever CFTC Science Prize Competition Act challenge. They discovered this law empowering agencies to run competitions to solve regulatory problems in science and technology, and they decided to crowdsource ideas on both the problems to tackle and the process to use. Public comments are due July 24. In our conversation, Dan throws out some of the ideas he and his colleagues have thought of -- maybe regulatory data visualization tools, or machine-learning for market surveillance, or machine-readable and machine-executable regulation -- but they want to hear from you. Our listeners are among the most thoughtful people anywhere on regulation innovation, so please comment. You could even become CFTC Innovator of the Year!

Our third topic is one that rarely surfaces in the innovation dialogue, and solely needs discussion: the legal and procedural obstacles to government agencies that want to embrace innovation. We could call the topic, government modernization.

Think about it. If you were a federal agency wanting to keep up with technology innovation, you would want to be able to do a few things. You would want to be able to try out new technologies, hands-on. If the innovation was something you might adopt for your own agency, you would want to test it before you had to commit to a major procurement budget and procedure. You would also want to be able to brainstorm with a wide range of people, learning from them, thinking through ideas with them.

All of this is stunted today by well-intentioned rules that were designed long ago -- for good reason -- to prevent inappropriate influence, backroom deals, and the like. Dan talks in particular about the Anti-Deficiency Act, which restricts procurement activities and prevents the CFTC from being able to try out new kinds of tools. Another issue is the procurement process itself. I met a few months ago with people from a different agency, showing them some innovative technology that could make their regulatory work easier, and one of them said, “If we decided today that we should adopt this, we would have it in seven years.”

I’ve talked with other agencies that cite the Federal Advisory Committee Act, with its restrictions on meetings, and the Administrative Procedure Act, which structures the rule-making process and, at some stages, limits interactive dialogue. Agencies have raised concerns about various “government in the sunshine” rules, which again make it difficult to talk informally. Some can’t readily attend a breakfast or lunch event. They have to ask about the value of the meal being served and if it’s more than, I think it’s $15, they can’t eat it, or they have to go through paperwork to pay for it. And of course, there are complex approval processes for participating in various kinds of forums.

More than any show we’ve done, this one puts you in the shoes of the regulatory agency and shows how their hands are tied by procedural prohibitions and requirements. I’d love to see someone do a study, maybe a graduate thesis, on how rules that were written in an older, slower era may now undermine the ability of regulators to keep up with exponential change in technology. We could use suggestions on updating them for the digital age. And remember, it’s an issue much broader than finance.

I’ve been in and around Washington for decades and can remember the bad old days before some of these rules were created -- indeed, I remember some of the bad old practices that led to them. Still, we don’t need to straightjacket our regulators. Other countries have a much more fluid discussion between agencies and industry, and also have the ability to try things. One model is the Bank of England’s Fintech Accelerator, which explores new technology for the bank itself. And Dan and I both participated in London last month in the amazing AML Tech Sprint run by the UK Financial Conduct Authority -- which is a stunning model of innovative regulatory process. Its leaders were my guests on the last podcast we posted (which my friend Peter Renton of LendAcademy and LendIt called the “most fascinating discussion he’s ever heard on the future of financial regulation” -- if you missed it, check it out).

Meanwhile, here’s some great news. Just a few days ago, Congressman Austin Scott (R-GA) introduced the CFTC Research and Development Modernization Act, H.R. 6121. Dan refers to it in our talk – it’s bipartisan legislation to address some of these hurdles at the CFTC. We’ll link to it in the show notes. The bill would permit the Commission to collaborate on projects with fintech developers. It would also allow it to receive “gifts” for R&D purposes, including software to try out, subject to common sense safeguards.

The bill echoes work by Congressman Patrick McHenry (R-NC), who has sought to facilitate innovation by all the financial regulatory agencies. And the US agencies, themselves, are all moving ahead, too. The CFPB’s Acting Director, Mick Mulvaney, plans to launch a regulatory sandbox. The FDIC held a tremendously impressive technology forum. Five US agencies attended the UK tech sprint.

Regulation innovation is coming, and no one is more thoughtful about it than Dan Gorfine.

More links

More on Dan Gorfine

Daniel Gorfine is Chief Innovation Officer and Director, LabCFTC at the U.S. Commodity Futures Trading Commission. LabCFTC is dedicated to facilitating market-enhancing financial technology (FinTech) innovation, fair market competition, and proactive regulatory excellence and understanding of emerging technologies. Daniel is also an Adjunct Professor at the Georgetown University Law Center where he teaches a course on ‘FinTech Law & Policy.’ Daniel was most recently Vice President, External Affairs & Associate General Counsel at OnDeck, and previously served as director of financial markets policy and legal counsel at the Milken Institute think tank where he focused on technology-driven financial innovation, capital access, and financial market policy. Earlier in his career, Gorfine worked at the international law firm Covington & Burling LLP and served a clerkship with U.S. District Court Judge Catherine C. Blake in the District of Maryland. A graduate of Brown University (A.B.), Daniel holds a J.D. from George Washington University Law School and an M.A. from the Paul H. Nitze School for Advanced International Studies (SAIS) at Johns Hopkins University.

More for our listeners

We have many more great podcasts in the queue. We’ll talk with another community bank CEO, Mike Butler of Radius Bank.  We’ll have two more episodes that we recorded this year at LendIt. One is a discussion of new research by LendUp and Experian, on credit reporting, and the other is with Greg Kidd, Founder of Global ID.  We also recorded two episodes at last month’s Comply 2018 conference in New York, with two regtech firms -- Compliance.ai, which offers machine-readable regulatory compliance, and Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML.

Speaking of LendIt, I was a guest last week on Lend Academy podcast, and Peter Renton will be on our show soon as well, so watch for those.

I’m also excited we’ll have several leading members of Congress on the show in the coming weeks. So, stay tuned!

The summer conference slowdown is nearly upon us, but I hope to see you at upcoming speeches and events including:

Also, watch for upcoming information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well.

If you listen to Barefoot Innovation on iTunes, please leave a five-star rating on the show to help us build it. Also please remember to send in your “buck a show” to keep it going, and come to jsbarefoot.com for today’s show notes and to join our email list, so you’ll get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter and Facebook.

Support our Podcast

And tell me what you’re thinking about digitizing regulation. Let’s widen this dialogue to more people and more and more ideas!



Regulation Revolution: The Financial Conduct Authority and Digitally-Native Regulatory Design

Jo Ann Barefoot

FCA1.png

This is the most unique, and the most consequential, show we’ve ever done. If our thousands of listeners all think about it and especially if you share it widely, it has the most potential to actually change the financial regulatory world for the better and also in turn, therefore, to improve the financial world, too. It goes right into the heart of the most important work, being done by the most innovative people, on redesigning regulation for the digital age.

My guests are Chris Woolard and Nick Cook of the UK’s Financial Conduct Authority. We sat down to record it on the last night of their enormous, ambitious, mold-breaking tech sprint held in London a few weeks ago. This regtech sprint, the fifth one they’ve done, focused on how to use new technology to combat financial crime. The sprints -- which are hackathons -- play a dual role, both sparking new ideas on specific regulatory challenges and also innovating in regulatory process, itself.

I’ll set the scene for you. It was a Thursday night, dinner time, in the London offices of EY, in the Canary Wharf section of the city on the Thames, just a few blocks from the FCA’s building. EY generously offered their beautiful training facility for the sprint, because the FCA’s building is too small to hold the 400 people who were there by the end, or even the 260 who had been there for three days, working feverishly, day and night, to invent new solutions for money laundering. Those people had arrived on Tuesday morning and had self-formed into sixteen small teams, usually with total strangers, in a format mixing organizations and most importantly, mixing knowledge and skill types. Regulatory experts and AML experts and lawyers had worked elbow-to-elbow with tech experts, brainstorming ideas together and then translating these, live, into computer code, using test data provided by the participating tech companies.

We sat down for this recording in a quiet conference room, just as the main gathering began to shift into post-conference socializing and bonding and celebrating over food and drink.

It was one of those special moments where everyone feels elated and excited, and at the same time, completely drained. For me, as I think I say two or three times in this show, the sprint was the most fascinating and inspiring thing I’ve ever experienced. I hope that listening to it will inspire you to take up the FCA’s challenge to build on it in your own country and with your counterparts in other countries, and perhaps to take up their offer to help. People came to the sprint from all over the world, including, I’m especially happy to say, a substantial contingent of both regulators and financial companies from the United States (and also a new nonprofit, FinRegLab, with which I’m affiliated and which is building an empirical testing environment for regtech concepts in Washington).

The FCA is at the forefront of a global regulatory awakening about the need to innovate regulatory models as technology increasingly outpaces the speed at which government can change. Its most famous innovation is its Regulatory Sandbox, which enables fintech innovation to be tested in a controlled experiment under the regulator’s close scrutiny and is being emulated throughout the world. Less well-known is their equally important innovation on the regtech side, for which they invented this creative new format, the regulator’s TechSprint.  

Both the sandbox and the sprints have three key elements essential for regulatory innovation. First, they make collaboration happen, especially between the regulatory and tech worlds. Second, they enable very fast learning by the regulator, through direct, hands-on experience. And third, and most crucially, they use experimentation. They provide a safe space for trying things out, testing, learning, shaping -- quickly and cheaply. They apply the techniques that technology innovators figured out years ago, about the need to start small, try something, adjust as you learn, and if some ideas are going to fail, let them “fail fast” in a controlled setting where critical lessons can be learned early, and no harm can be done.

These ideas are hard for people to grasp in the abstract, especially the notion that regulators need to get comfortable with learning through trial and error because there’s no other way to learn fast enough. I’m a former bank regulator and I know this idea is completely alien to regulatory culture and tradition, which have been designed, for good reason, to be careful and thorough and deliberate. A couple of years ago, a senior U.S. bank regulator told me that her agency had figured this out by spending time on the FCA’s website, reaching this epiphany that, the regulator doesn’t need to have all the answers -- even can’t have all the answers on tech change, before moving forward. It’s really the other way around. You have to move forward, to get to the answers. Chris and Nick describe the very same process -- as Chris calls it, the light bulb turning on, suddenly realizing it was riskier NOT to move, even though you’re not sure exactly what to do and what will happen. To me, the most interesting thing you’ll hear in this show is their voice as they describe this journey, the struggle toward creating a new way to work.

Again, this was the fifth tech sprint. Be sure listen to my two earlier FCA shows, one with Chris that explains the FCA’s regulatory sandbox and one with Nick on regtech. The regtech one featured the breakthrough, two-week sprint held last November, successfully proving that regulatory reporting requirements could be updated directly, computer-to-computer, by issuing a rule change in the form of code, rather than words. That one was like a regulatory moonshot -- it could eventually change regulation, itself. This new sprint last month, by contrast, focused on the specific use case that’s most ripe for regtech transformation -- anti-money laundering. The UN estimates that there’s $1.6 - $2 trillion in annual global financial crime, and that we catch less than 1 percent -- despite spending tens of billions of dollars each year. And it’s getting worse. The criminals and terrorists today use sophisticated technology and operate as networks, while banks and governments use old technologies, with data trapped in silos.

As Chris and Nick said, it will take a network, to beat a network.

Chris also said that a million children are trafficked, each year.

There’s a moment, in our conversation, where Nick says the sprint brings people to realizing that collectively, we can actually DO something about money laundering -- and you can hear the tone of excitement in his voice. For decades, we couldn’t really do much better, because we’ve had analog-era technology. Today we can use digitally-native tools. We can use them to fight crime and also to tackle nearly every other aspect of financial regulation -- all the areas where problems are so hard to solve. Financial inclusion. Consumer education. Preventing discrimination and predatory finance. Identity verification. Risk assessment. Financial reporting. New technology can make it all work better, and cost less, at the same time -- something that in the past was completely impossible.

Believe it or not, I’m actually curbing my enthusiasm for this. This is the tamped down version.

I think this is a regulatory revolution, beginning to move. Please listen to this episode, share it with everyone you know, and join in the dialogue.

More on Chris 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.

More on Nick Cook

Nick Cook 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.

More for our listeners

Full interview transcript.

We have many more great podcasts in the queue. We’ll talk with another community bank CEO, Mike Butler of Radius Bank.  We’ll have two more episodes recorded this year at LendIt. One is a discussion of new research by LendUp and Experian, on credit reporting, and the other is with my friend Greg Kidd of Global ID.  We also recorded two episodes at last month’s Comply 2018 conference in New York, with two regtech firms -- Compliance.ai, which offers machine-readable regulatory compliance, and Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML.

Speaking of LendIt, I’ll also be a guest on Peter Renton’s Lend Academy podcast, and he’ll be on our show soon as well, so watch for those.

I’m also excited we’ll have several leading members of Congress on the show in the coming weeks. So, stay tuned!

I hope to see you at upcoming speeches and events including:

Also, watch for upcoming information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well.

If you listen to Barefoot Innovation on iTunes, please leave a five star rating on the show to help us build it. Also please remember to send in your “buck a show” to keep it going, and come to jsbarefoot.com for today’s show notes and to join our email list, so you’ll get the newest podcast, newsletter, and blog posts. As always, please follow me on Twitter and Facebook.

And tell me what you’re thinking about digitizing regulation. Let’s widen this dialogue to more people, and more and more ideas!

Support our Podcast


Innovation and Community Banks: Eastern Bank CEO Bob Rivers

Matthew Van Buskirk

Rivers Photo.png

One of my goals for Barefoot Innovation is to amplify the voice of America’s community banks about the future of financial innovation and regulation. Today’s guest is perfect for this. He is Bob Rivers, CEO of Eastern Bank in Boston. At age 200, Eastern is the oldest and largest mutually-owned bank in the United States. At the same time, it is one of the most “young” and nimble community banks in adopting new technology.

Mutual savings banks were once common, especially in New England. Most have converted to stock ownership, but Bob points to Eastern’s mutual structure as a key advantage in its strategy, which includes a strong focus on social mission. He explains the bank’s roots in Salem, Massachusetts, serving people who had no bank, and describes how it evolved to emphasize empowering marginalized customers, including women. He also tells the story of his own rise to leading Eastern, from a start 36 years ago that included cleaning bank branches at night. It’s a classic community banking story, for both Eastern and its leader.

What mainly drew me to Eastern’s offices, though, on a cold day in Boston last February, was its reputation for innovation. When people talk about community banks and the technology change that’s transforming banking, Eastern’s name always comes up.

In this episode, Bob describes how their innovation strategy began six years ago, when he invited Eastern’s Chief Technology Officer, Don Westermann, out for “walkabouts” in Kendall Square, a Boston neighborhood noted for innovation. Bob and Don just introduced themselves, cold, to tech firms, hoping “to understand the mindset of the disruptive innovator” -- their goals and approaches, and also how to reach their networks. Two years into that process, they met PerkStreet Financial, which Bob describes as similar to Simple (we’ve done two shows with Simple CEO Josh Reich, who just stepped down this month -- they are here and here, still great listening.)  In Boston, PerkStreet was giving up (actually as a result of regulatory changes), when Bob met its CEO Dan O’Malley, and they went into business together. The resulting Eastern Labs set out to digitize the lending application process for small businesses, including on SBA loans. Three years later, Eastern spun off that enterprise as Numerated Growth Technologies -- whose website describes it as “Built For Banks, Incubated Inside A Bank.” Now Eastern has opened a new Lab 2.0 with plans for additional tech solutions.

In our conversation, Bob gives a road map for how a community bank can undertake this kind of innovation -- how to position it, structure it, staff it, fund it, and run it; how much capital it needs; how to price the services; how much to integrate the innovation team with the bank versus leave it independent; and how to use tech-world concepts like agile design and minimum viable products, or MVP’s. He also explains how an initiative like this can radically transform a small bank’s ability to attract tech talent, and how it can remake the bank’s culture, itself.

Bob also has views on how regulation factors into innovation. Notably, Eastern recruited Steve Antonakes, former Deputy Director of the Consumer Financial Protection Bureau and former Massachusetts Commissioner of Banks, to lead its enterprise risk function. Bob has a range of insights into what regulators are doing right, along with suggestions.

This bank has cracked the code on one of the most critical challenges facing community institutions, namely how to partner with innovators to leverage the respective strengths and weaknesses of each. As he says, fintech startups used to see themselves as replacing lumbering old banks, but most now hope instead to work with them, because these two groups need each other. Few banks of any size can innovate the way startups can. Yes, banks have always innovated, but today’s changes, coming so fast, driven by trends erupting in the wider tech world, are simply not in basic banking DNA. Few banks can build a world-class, digitally-native user experience. Few can afford and attract the data scientists for new-generation risk analytics.  Conversely, though, very few fintechs can readily get the building blocks needed to scale up, like rapid, affordable customer acquisition, or accessing stable, low-cost funding, or deeply understanding financial products, markets and regulations -- all of which are strengths every bank can bring to the table. And the good news for community banks, specifically, is that they also have natural advantages over large banks, despite having less sophisticated technology, precisely because they’re small. They can be nimble. They don’t have to turn the proverbial battleship. They can chart and follow a new course, as Eastern is doing.

Smaller banks see this logic, but most struggle to know where to start. Bob Rivers has the answer. It’s simply, start where you are and just move forward. You don’t need to figure it all out first. Really, you can’t. Instead, start small. Try things. Immerse in rapid learning. Talk to people. I’ll add, go to tech conferences and read tech publications. Do the walkabout!

I recently spoke at a state bankers association conference. On the hotel elevator, coming down to the event before my talk, I chatted with a former bank CEO, now a director. When he learned my speech was on technology, he laughed and said, “I’m too old to learn it!” I told him I was going to try to change his mind about that, because, here’s the reality: banks’ CEO’s must lead this. They don’t have to be techies -- Bob Rivers isn’t. He says he still balances his checkbook with a calculator. But he’s leading his bank into a new digitized financial world, by knowing it needs to change and embracing innovation with boldness and imagination.

More about today’s show

Link to Full Transcript of This Episode

Our podcast episode with John Ryan, CEO of the Conference of State Bank Supervisors, on banks and communities.

My cover story in Texas Banker, with tips for community banks on digital transformation.

More about Bob Rivers

Bob Rivers is Chairman and CEO of Eastern Bank, America’s oldest and largest mutual bank with two centuries of service to the communities it serves. During Bob’s tenure, Eastern has built on its long legacy of community service and philanthropy by developing a robust advocacy platform in support of various social justice and sustainability issues.

In 2014, Bob co-founded Eastern’s innovation venture, Eastern Labs, which earlier this year spun out Numerated Growth Technologies, a new fintech company offering a state-of-the-art small business lending platform.

Bob has also been personally recognized for his work in championing social justice and sustainability issues by organizations and outlets like The Boston Globe, Boston Business Journal, The Partnership, Get Konnected!, Color Magazine, the Massachusetts Immigration & Refugee Advocacy (MIRA), Asian American Civic Association (AACA), Association for Latino Professionals For America (ALPFA), El Planeta, the Massachusetts Transgender Political Coalition, The Theater Offensive and The Ad Club.

Since the podcast was recorded, Eastern Bank has opened a new branch in Roxbury Crossing, the first bank in that community to open in 20 years, reflecting the bank’s work in underserved communities.

More for our listeners

We have many more great shows in the queue. We’ll talk with the CEO of another community institution, Mike Butler of Radius Bank, which is much smaller than Eastern and is pursuing a fascinating innovation strategy.  We’ll have two more episodes recorded this year at LendIt. One is a discussion of new research undertaken jointly by LendUp and Experian, on credit reporting, and the other is with my friend Greg Kidd of Global ID.  We also recorded two episodes at this month’s Comply 2018 conference in New York, with two regtech firms -- Compliance.ai, which offers machine-readable regulatory compliance, and Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML.

Speaking of LendIt, I’m also going to be a guest on Peter Renton’s Lend Academy podcast, and he’ll be on our show as well, so watch for those.

I’m also pleased to say we’ll have several leading members of Congress on the show in the coming weeks. In addition, we’ll record a very special show at the upcoming, global AML tech sprint being run by the UK Financial Conduct Authority in London this week -- which will be, in my view, the most important regtech development in memory...for reasons we’ll talk about. So, stay tuned!

I hope to see you at upcoming events including:

Also, watch for upcoming information on my collaboration with Brett King on his new book on the future of finance -- we’ll have a show and events on that as well.

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.  

Support the Podcast

And please send in your “buck a show” to keep Barefoot Innovation going!