This week bank share prices hit multi-decade lows; they face into a real economy on its knees. After the FinCEN files leak, banks potentially face significant compliance headwinds, fixed costs, geopolitical risk, and declining top-line revenue. Not much then.

At the same time, we're truly seeing the beginnings of banks doing distribution a new way. As Goldman's partnership with Walmart demonstrates, banks at the cutting edge aren't focussing just on their app anymore (h/t FTT).  

Hypothesis: The future of banking looks less like a giant shark and whale vendors with 10-year contracts, and more like a school of fish—specialists who are best in class that move as one.  Banks will have to get really good at renting and assembling all of those services.  Big banks and especially mid-tier banks, need a way of putting all of that together. They need a spine for all of these organs to hang from.

There’s a giant opportunity for B2B fintech here. But the key is understanding how banks can integrate all of this wonderful new B2B fintech?

1. Understand the market shift, the consumer has changed, the world has changed. Banks need to become a stable voice and a force for good in the world.  

2. Understand where the problem is. Complex issues like fraud, AML, or even customer experience may be better built by specialists. Renting and assembling these best in class vendors is vital.

3. Learn from fintech, there's so much innovation happening outside the window of the bank labs. Rather than trying to R&D, watch, take notes, integrate. Like Jungle, Fintech is massive.

The macro themes this week: 

• How niche should a B2B fintech be?

• Self-driving money works better open.

• Finance should be social.

• Everything is ethical

4 Fintechs 🤑

1. Sanctionscheck.co - Sanctions checks as an API 🔌

• There are "compliance as a service" B2B fintech's (e.g., Alloy, Hummingbird, Comply Advantage) that do this and much more. But what I like about Sanctionscheck is it's a headless API for just this one thing. Niche. Neat.

• Sanctions checks are something a surprising number of companies have to do, not just banks.  This could fit inside many other offerings for many more markets in an "everything is fintech" future by breaking something niche into a headless API.

• Contrast this with Laika that just raised their $10m Series A. Who offers a concierge, "we help set up your compliance program" and then help you add complexity as you scale as a high growth startup. 

2. Astra finance - Autopilot for your finances 🚗

• Astra is an app that helps a user link multiple finance, savings and investment accounts and automate transfers between them.  

• This is very different to copilot, plum, or moneybox.  This is a router and rules engine for your money; you set and forget the rules, and good things happen. Yes.

• Astra lets the user set up their own rule sets and automate transfer to and from any account (powered by Dwolla and Plaid).   

3. Gather - Couples financing app 👩🏻‍🤝‍👩🏻

• Gather aggregates couples' bank account data to provide spend-analysis, insights, and budgeting tools.  This is another "Layer above banking" play, where the focus is service, not a financial product. Gather charges a fee for the service, and their goal isn't to monetize the financial products.  

• Finance is becoming increasingly social and multi-player. We've had joint accounts for a long time, but the multi-banked reality means that joint accounts are now inadequate. Modern couples could have 10+ accounts, each aggregated into one family budget with services like Gather.  

4. Almond - Understand the carbon impact of everything you buy ♻

• Almond is an app that links to your debit or credit cards; it then estimates your purchases' carbon impact.  The idea is to encourage you to make better purchasing choices.  

• Linking every day spend and activity to consumer behavior change is coming. For example, CoGo (which instead of card linking uses open banking) to track your overall carbon impact announced a partnership with Natwest.

• It's a matter of time until we see "auto-pilot" for offsetting. Surely.

As Ben Thompson covered in Stratechery, we're going through endless cycles of bundling and unbundling. I'm curious how big tech (or other buyers) could re-aggregate all these SaaS, the layer above banking things.

Things to know 🧠👀

1. Walmart and Goldman Partner to offer sellers capital (FTT)

• To quote Cokie: "This move is very much Goldman trying to pursue the Banking-as-a-Service strategy." 🎯 "This is the first time Goldman reused technology leaving this *literal expert in the subject* to wonder, is this true banking-as-a-service? The integration took between less than two months, but the technology was already built on the Goldman side."

• 🤔My Analysis: This has been Goldman's intention from the very beginning of Marcus.  Their tech team intentionally set out to build a platform that could embed finance and support B2B partnerships.  

• 🤔My Analysis: While banks wonder "how will Goldman enter cash management" they already have, it's just via a Bank-as-a-Service offering.  What this means for the many "AWS of banking" plays is interesting. Should BaaS be bundled from a bank or unbundled?

PS. Cokie is right, Shopify capital much?

2. Greenlight valued at 1.2bn with a $215m investment (Crunchbase)

• "Greenlight Financial Technologyhelps parents teach children how to save with its app and debit card products. ""The app is $5 per month and includes parent-managed, fee-free debit cards for up to five children."

• 🤔 My Analysis: Valuation differences in EU vs. the US are NUTS.   Go Henry raised £11.8m from a crowdfunding site and reported £8.3m in revenues in 2018. If they were a US startup, they'd be well on their way. Look, I get it, Europe isn't as easy to go national, and growth is everything but still.

• 🤔 My Analysis: There is money to be made looking for quietly successful UK Fintech's and copy + paste to the USA.  While we're here, here's a french Neobank for teens that just raised 3.5m Euro. (It's quite a crowded market in France for these apps, but with the right support, traction has to be doable).

3. Privacy.com and 1Password did an epic integration (Privacy.com)

• Sometimes a video says it better than words can, but tl;dr connect 1Password with privacy.com, then at your favorite e-commerce checkout, you "create a privacy card." That's then all managed via 1Password. Elegant.

• 🤔 My Analysis: The world is moving to one-click checkouts. This is a lovely alternative to those one-click brands. Use something you already have (1Password), and get a new benefit (single-use cards for subscriptions). The nerd in me just loves this.

Good reads 📚

1. The FinCEN files an alternative opinion (Financial Crime News)

• ICYMI: There's been a massive leak of files sent to the US Financial Crime Enforcement Network (FinCen).  The leak includes over 2,000 "SAR's" (no not that SARs), AKA "Suspicious Activity Reports." The reports indicate banks have failed to prevent numerous Money Laundering, Bribery, or Corruption payments.  

• FCN interviews a Tier 1 bank insider to get an alternative perspective, and you NEED to pay attention to this. The insider points out, banks raise a SAR when they're suspicious but don't have proof. If banks exited every account that looked suspicious, they'd close far more good accounts than bad accounts.

• 🤔 My Analysis: Banks are really getting a raw deal here.  AML impacts everything you care about, human trafficking, modern slavery, corruption, arms dealing, all of it. Banks must tell the regulator they're "suspicious," but it's the governments' job to enforce the law and prosecute. Banks can only see their customer's transaction data and don't have a complete picture.  

• 🤔 My Analysis: Banks also could be using much more fintech.  Post global financial crisis and mega AML fines, banks responded with more people and process (for the most part). I really hope for all involved this is an opportunity to build back better. There are some fantastic regtech and fintech tools out there.  The UN estimates there's $2trn laundered annually, of which 2% is detected. The SAR process also gives around 95% false positives. It's so broken it's insane.

If you want a cheat sheet version of what's going on, I blogged over at 11FS.com about how AML actually works and what banks, regulators, and governments need to do better.   Yeah, that's a shameless plug, and you can click it. Shamelessly.  👆

2. India's Open Credit Network (OCEN) Explained (Tigerfeathers)

• "The idea is to create an 'open network' to facilitate the flow of credit. At a glance, this network comprises lenders, borrowers, credit bureaus, underwriters, tech companies, and - most importantly - a new class of entity called Loan Service Providers or LSPs."

• "OCEN provides a standard set of tools that represent the various components of a typical lending value chain, allowing any app, marketplace, aggregator, et al. to plug in lending into their current operations".

• 🤔 My Analysis: India just made Embedded Lending not only a thing, but they also made it a standard.  If you want to know what embedded lending will look like in the west in 5 years, look east.  PS, this is a long but excellent read from the tiger feathers, folks. Really, check it out.

3. Why self-driving money is so hard (Fintech Takes)

• Alex takes the concept of "5 levels of Autonomy" from self-driving cars and applies it to self-driving money (oh, that's elegant, Alex). Pointing out that previously To fully realize the vision (and value) of self-driving money, customers need the freedom for their money to move from anywhere to anywhere, automatically.

• Alex notes that "rules, open" is a massive step up in value for the user because self-driving finance is much more powerful when it can automate all of your finances

• 🤔My Analysis: Alex is so spot on here it hurts.  I'd been toying with why Astra's openness was a step change before I read his blog, but Alex's images and metaphor work; perfectly. Go. Read. This.

• 🤔 My Analysis: What this means for bundling and unbundling is super interesting.  This non-finance, open loop, self-driving money model only works if people see so much value they're willing to pay for it.  As the market becomes more modular, the folks who manufacture financial products increasingly become commoditized. Those who can aggregate and automate add value.

Tweet of the week

That’s all 👋