ASHWIN KUMAR: Hey, everybody. Thank you. Thank you, everybody, for being here. I lead the startups banking-as-a-service team at Stripe, and I am so excited for this fintech panel around what’s happening in fintech.

Now, I’m going to go off script a little bit. I know that this is going to be a very exciting interchange of viewpoints. Interchange. Thank you, thank you.

In fact, I am banking on this being a fun conversation.

I see some people trickling in. It looks like you didn’t get through our KYA checks. Know your audience. KYA. It’s like KYC.

All right, ChatGPT wrote these jokes—I’m not even kidding. But it looks like—and I got a lot more. Let’s see what I got. No? Okay. They’re giving me the cut. They’re cutting me off. They’re cutting me off. Okay.

I thought this would be the one place I could say fintech jokes and people would laugh, like actually laugh, but all right, maybe I was wrong.

Okay. Well, I know somebody who is going to bring a lot more entertainment to everybody. Let’s welcome our esteemed moderator. He’s the head of content and strategy at Sardine and you might know him from his extremely popular newsletter, Fintech Brain Food, Simon Taylor.

SIMON TAYLOR: Hey, everyone. How’s it going? Thank you so much for the kind words about Fintech Brain Food. For those of you that don’t read Fintech Brain Food, I recently wrote a blog post called “Banking-as-a-service is dead.” So, how do you feel about your product being dead?

ASHWIN KUMAR: The post made me question my career, life purpose, the existence—

SIMON TAYLOR: You can question your career. Do you know what? Actually being serious. I genuinely believe banking-as-a service is the single biggest opportunity in all of financial services and that nonbank brands are absolutely the ones that should grasp this opportunity. Really, really excited by it.

There was just a report just today by QED and BCG, because we like three-letter acronyms, and they said that those revenues are going to go up 5x by 2030. So, that’s an opportunity I think we can get behind.

So, how’s that going to happen? Well, I think we’re going to invite some people on stage.

ASHWIN KUMAR: Yeah, let’s do it. All right, Simon. Take a seat. Let’s welcome Angela, Denise, Jordan, Kyle, and Ted, our panelists.

SIMON TAYLOR: Hey, everybody. How’s it going? Good to see you all. Before we get into the questions, very briefly, Angela, remind everybody what you do.

ANGELA STRANGE: Hey, good morning. Angela Strange, general partner at a16z, former product manager, and avid Brain Food reader.

SIMON TAYLOR: Love it. Thank you. Thank you, I appreciate that. Denise, how about you?

DENISE HO: Hi. Good morning, everyone. I’m Denise. I am responsible for product for BaaS at Stripe. Don’t worry, we’re not starting a fishery business, it’s banking-as-a-service. And BaaS primarily consists of three offerings, so Issuing for offering card programs to your customers, Treasury for financial accounts, and then Capital for access to loans.

SIMON TAYLOR: Jordan, how about you?

JORDAN MCKEE: Sure. Hey, everybody. Jordan McKee. I’m an industry analyst covering the payments sector for a bit over a decade, looking at innovation and emerging tech on the acquiring and issuing sides of the business, and currently lead the fintech research and advisory program at 451 Research, which is the tech research arm of S&P Global.

SIMON TAYLOR: Awesome. Kyle, how about you?

KYLE THIEMKE: I lead strategic partners at Lightspeed. Lightspeed is a commerce platform empowering SMBs with the latest technology and payments with providers like Stripe. And then also point of sale.

SIMON TAYLOR: Ted?

TED POWER: Hey, I’m cofounder and CEO of Bend. Bend is a corporate card for climate-friendly businesses. And we’re built on Stripe BaaS.

SIMON TAYLOR: So excited to have you all here. I’m so glad as well somebody had a BaaS joke. That needed to happen, so, Denise, I appreciate you for that.

All right. I’m going to start out with Angela. You are quite famous for saying that every company will be a fintech company, but don’t know if you’ve seen the news. Some things have been happening in financial services. Do you still think that’s the case or are we actually facing a crisis of confidence? Should we just stay away from fintech?

ANGELA STRANGE: Ask any founder; these are rhetorical questions. Do you want a lower CAC? Do you want better retention? Do you want to better monetize your users? Obviously.

SIMON TAYLOR: Do you want to better monetize your users? Yeah, I think you do.

ANGELA STRANGE: So, what is one of the best ways to do that? By adding more products to help your users stay around and attract them, and the answer is often those are financial services. So, I think we’re just getting started.

I think one of the challenges is it’s—it’s nice and all-encompassing that we have named this industry “banking-as-a service,” but in some ways, it does a disservice because it implies, like, oh, it’s a thing. In an industry, there’s usually one or two winners and there’s tons of companies, so obviously it's crowded.

But issuing, very different from acceptance, very different from lending, very different from insurance that often gets lumped in there. And then often, you want one provider that’s very opinionated that just does all of it for you. Or sometimes you want something more modular that you can break apart. So, this is a massive space. You can slice it many different ways. Each of those buckets are very, very large.

So, obviously, I’m in the business of being bullish on infrastructure, but point one.

Point two, the market has dramatically changed, as Simon mentioned. You talk to any bank CEO and they have multiple regulators in their office from multiple different agencies. And so what has this done? They’re looking at their compliance programs, their regulation programs. They’re looking at this for their banking-as-a-service providers. They’re looking at this for their end customers. So, you could see this as “Oh no, we should all pull back, this has gotten too risky.” Or you could lean forward and say, “Hey, compliance and risk,” which used to be this just check-the-box thing, “how do you move on the offensive and really productize this and bring better software to market to solve what is now a very top-of-mind problem?”

SIMON TAYLOR: There was a phrase you used recently that compliance is a competitive advantage, and I think being great at the gnarly stuff is really, really, important. Ted, how does somebody properly invest in compliance? Do they need different providers? How do you think about that?

TED POWER: Yeah, I mean, you know, when we turn on the news and we see all of the drama around compliance, I’m very grateful that we don’t have to do any of that. And in a sense, one of the great things about building on a platform is that you essentially unbundle compliance from the sort of user experience in the sort of frontend, which is what we’re focused on.

That’s not to say that it’s easy, but certainly, the ability to start, you know, creating cards on Stripe Issuing is so much easier now than it was even just a few years ago, and a lot of that has to do with the compliance.

When we started our last company, Abacus, four or five years ago, the first thing we tried to do is to issue cards. And after spending, you know, six months and spending a lot of money on consultants, we gave up and pivoted to a sort of noncard issuing solution. So, it’s so much better these days and we’re really grateful to be able to build on top of these platforms.

SIMON TAYLOR: Thank you, Ted. Kyle, any thoughts that you would want to add?

KYLE THIEMKE: I would really just echo what Ted said. I think for us, having partners like Stripe in this space has helped us sort of take compliance at our own pace, so taking on what we’re ready for as an organization, but simultaneously having a great partner when we need support, to understand how to launch a product in the space, whether it’s Issuing or other products in the banking space. It’s been great to have Stripe helping us each step of the way.

SIMON TAYLOR: I think it’s such a crucial point. Denise, where does banking-as-a-service and BaaS and fish jokes fit into the overall product strategy for Stripe? Because you guys do a lot these days.

DENISE HO: Yeah. So, I think I have a better answer than fish jokes, hopefully. So, just a very quick recap. As I said before, BaaS is three main products, so Issuing, Treasury, and Capital. And when you couple that with Payments, we’re really able to enable platforms to deliver a complete financial home for your customers.

And what do I mean by complete financial home? So, you can enable your businesses to earn money through Payments, to store that money through Treasury and financial accounts, to spend the money, because of Issuing, and then finally, to grow your business because of Capital.

So, for fintechs, this is really exciting because you love to innovate. You have lots of incumbents and startups and you want to stand out. So, BaaS really helps build all those core, gnarly building blocks so you can really think about innovation. And then for nonfintechs, so mainly SaaS platforms, the great thing is you’re already sort of a software hub for your businesses, and being able to extend into financial services doesn’t only help improve retention but also gives you an additional revenue stream.

Now, one of the really interesting things, though, since we were talking about compliance, right, is that if you’re starting off in fintech, you—I think you generally have maybe a misconception that it’s a bunch of API and code and you’re done. That is so not the product. So, the way I like to think about it is it’s something like 20% API and code and then 20% is compliance, 20% is actual financial engineering, like how do you actually use money to fund your program, and then 20% of it is actually operations and GTM, and then the last 20%, if you actually ship a physical card, believe it or not, is managing, like, a supply chain.

So, it’s like—so, that’s like kind of mind-blowing. It’s actually pretty complex. And so, our strategy is really to help our—to help our platforms kind of abstract away all of that, right?

SIMON TAYLOR: There are these gnarly little things that happen with a card, like somebody gets defrauded and they want to raise a thing called a chargeback, and then who do they call and what happens next? You don’t expect all of that when you’re going into it, do you, Denise?

DENISE HO: That’s right.

SIMON TAYLOR: There’s lots of—lots of little details like that that can harm your unit economics. And I think that unit economics things, aside from certain other bits in the news, probably is the biggest thing going on in tech right now is making sure people are extending their runway and making sure people are driving new revenue streams.

You know, the market is really, well, changed a little bit since 2021. I don’t know if it has for you but it certainly has for me. But what should builders have in mind as they’re scaling their company? I’m going to come to Jordan on this one because you guys—scaling business, payments is at the middle of it, like, what have you kept in mind and how has the unit economics conversation played out for you?

JORDAN MCKEE: Yeah. You know, to your point, there has been no shortage of change. Before—before this session, I was looking at some of S&P’s data on fintech funding, what we saw in the second half of last year. About $9 billion raised globally by fintechs in the second half. That’s down from somewhere to the tune of about $27 billion in H2 of 2022. So, a lot of change on the funding environment.

I think what we’re seeing is really a dramatic shift in the fintech playbook. That playbook that we’ve all known so well over the course of the past five, ten years is starting to look a lot different. It used to be about top-line revenue growth, right? Top-line revenue was the metric. It was the obsession of the company. It was about hiring aggressively, hiring for a future state. It was about building with the belief that capital would continue to be cheap and continue to be available in perpetuity. And it was about, especially for the B2C fintechs, significant spending on customer acquisition and marketing and so forth.

That’s done a complete 180. Today, it’s about profitability, right? Demonstrating that the business is sustainable and has a runway. It’s about rightsizing and doing more with less. It’s about increasingly embedded services and really thinking differently about the distribution model.

As I think about the remainder of this year, you know, what’s becoming increasingly clear is that there’s a bit of a cleansing fire that’s kind of sweeping over the fintech space. Just like a fire—

SIMON TAYLOR: Cleansing fire, I love that.

JORDAN MCKEE: It can have cleansing properties for a forest. I think the same is true for fintech. And I think what we will see are these two cohorts of fintechs emerge, those that have built something lasting, differentiated, that have product-market fit, they’ll go on the offensive, right? They’ll build by hire. The rest of the market, right, challenged, right? Hibernation, pivot, potentially running out of runway and terminating. And it just sort of reminds me of that Warren Buffett quote that continues to float around. I think it has so much applicability in fintech: “When the tide goes out, you see who’s swimming naked.”

I think a lot of fintechs have been hidden behind cheap capital, as that starts to flow out, that you really understand who has built something lasting, who has built something differentiated.

SIMON TAYLOR: It turns out revenue is vanity, profit is sanity after all. It’s classic. And cash is king.

But Angela, you know, you speak to a lot of portfolio cos. You have these conversations on the daily. What are you seeing from those that are all getting their unit economics right in fintech?

ANGELA STRANGE: I’m also wishing I asked the Stripe LLM for more jokes before this panel. Note to self for next time.

I think, listen, I think the vast majority of the press is drawing the wrong conclusions from the market right now. Like, let me take the counter. Like, there is like $5 trillion in profit trapped in TradFi, that is, old companies built in the ‘60s. Like, there are a ton of financial services problems that need to be solved.

So, let me take one false conclusion I think is often cited. Look, lending companies. The value has dropped 80%. Lending is fintech. Fintech is bad, lending is bad.

Wrong conclusion. You look at lending companies, like look at the business model of your peer lending, right? You need to acquire customers; that’s expensive. Then you need to underwrite them which, you would know, is very, very hard. And then they probably move on to somewhere else. And so, that’s just a very hard business model, which would apply to lots of different things.

SIMON TAYLOR: And it always was.

ANGELA STRANGE: Yeah. Versus let’s say that you are the operating system that helps run, you know, your hairdressing salon or your restaurant or insert your other business. And like, that’s a very sticky product that somebody uses every day. And then you layer lending on top of that. Your profit might go up 3x to 5x. So, is lending bad? No. Lending is amazing. Like, it is an amazing profit driver. It’s—just think what is the wedge product or what is the base product that somebody is going to come back to that is going to use, that is going to compound advantage, either because there is more data or other types of things, and then layer financial services on top of that.

So, still very bullish on fintech. I think the answer is what—where are you applying it and what is your business model over time?

SIMON TAYLOR: It’s funny, isn’t it? Financial services, and particularly TradFi, has an engagement problem. They all talk about how much people are in their app, but finance isn’t engaging in and of itself. What nonfinancial services companies do is engaging. Finance is admin. But finance can—financial services as a business model can unlock substantial revenue for companies that have solved for engagement. So, it’s a real sort of mindset shift.

ANGELA STRANGE: Or in some ways, it can be too engaging. I think of all the problems that you need to solve if you’re CFO of a business. Right? Like, you’re spending too much time on the minute things. You would love for it not to be engaging. So, you could almost take that argument both ways.

SIMON TAYLOR: Admin is the enemy either way. Let’s get rid of admin with LLMs.

Denise, what are you seeing? Are these trends sort of playing out? Are people driving revenue? Are they focusing on costs?

DENISE HO: Yeah, so, that’s—I think that’s a great question about trends. I think I’ll first comment on sort of the macro climate. Obviously, you know, we’re always talking about the economy. And it looks foggy and it looks a little bit cloudy. But it’s kind of really important to remember that below those clouds and fog is actually the same green pastures, which is what Angela is trying to say.

And what I mean by green pastures is that if you are actually looking at trends, especially these platforms that have really transformed businesses and consumers in the last, you know, ten, twenty years, you’re talking about folks like B2B2C platforms like Instacart or B2B platforms like Shopify, and then creator platforms like Substack. So, what do these platforms have in common? They’ve totally disrupted the way that we earn a living basically, right, whether we’re, you know, a consumer or a business.

These businesses and consumers have just a completely different bar about how they think about financial services that should work just as amazing as well as their software. So, they’re really looking for, for example, you really need to know me super well, right? I want really, really fast access. So, you know, if I want a loan, can I get it in minutes and hours and not days and weeks? And they really, you know, appreciate convenience.

And so, that’s sort of the opportunity for fintechs and I think that’s what fuels our mission. It’s really important to forget that. That change is not going away. That’s happening and it’s super important, right? So.

SIMON TAYLOR: I think that default real-time thing is something that TradFi really struggles with when everything is batch, everything takes three days. And anything that isn’t real time is risk. But with real time comes kind of risk management and you need somebody that can kind of help with some of that risk management.

DENISE HO: That’s right. And then I think it then translates into a micro trend that we’re actually seeing actively going on right now, and what’s happening is if you’re a pure-play fintech and you started off, say, for example, with a card product and you’re monetizing through interchange, you’re moving into SaaS and you’re starting to look at recurring revenue and how do you, you know, how do you bring in more services. Then the SaaS platforms are moving the other way, monetizing through financial services.

So, really, you know, I think finance and SaaS are merging. I think Angela is kind of right. You know, every company is a fintech company and it’s playing out in reality. So, that’s quite exciting.

SIMON TAYLOR: Finance is sassy after all. Who knew?

DENISE HO: That’s right. And did you—the other thing that I think is probably also worth commenting on is like given these trends, right, where are we investing at Stripe, right, is two good topics to talk about.

I would say the first aspect of it is really a better together story. So, when Stripe products work together, we’re really able to deliver convenience as well as quicker access to working capital.

My personal favorite example is actually Stripe Capital. So, the Stripe Capital product helps offer loans to small business if you’re a SaaS platform on Stripe Connect. And you know, we work with a network of capital partners. I think Angela mentioned earlier, underwriting is really, really hard, right?

One of the things we do is we’re able to determine who is more or less eligible because of the historical data that we have on payments. And then on top of that, we make it actually super convenient so that you can also essentially autorepay your loan with payments. And so, like, it’s pretty sweet, right. And that makes the process very nice.

So, that’s one of many, many examples of things we’re doing to sort of really build better-together products.

And then I think the second area that is really awesome is we try to leverage the collective wisdom of all of our platforms and users. And we’re one of the few providers that will, you know, we work—you see Ted here with an early-stage startup, series A, C, pre-IPO, IPO’d, all the way to Fortune 500. And what that does is that it brings, you know, the urgency and the innovation that the earlier-stage companies want along with the durability that the larger organizations want. It’s really nice because, as you grow up, we sort of have the capabilities sort of ready for you for the next stage of growth. And so, kind of stressful to work with so many user groups but also really rewarding.

SIMON TAYLOR: My CEO at Sardine, Soups Ranjan, says that most risk problems are data-science problems—and because they are data-science problems, I need more data. And sometimes collecting all of that data is really, really hard. So, having a platform where it all sits and somebody that can orchestrate that for you reduces the effort of an engineering team that they kind of have to go through, whether they’re Fortune 500 or way below that.

And I’m going to come to Ted on the next question, which is, how are you prioritizing your offerings? You know, was card the wedge product? How are you thinking about like where you go from there?

TED POWER: Yeah, I mean, so, we will never be a hundred-year-old bank. You know, for the folks in this room that are working at startups, you know, there are certain things that banks do very, very well that they are sort of uniquely able to do. But conversely, banks tend not to have software in their core competency.

And if you think about the sort of commercial or business use cases around you know—whether it’s bill pay, or accounting sync, or aging payments to vendors, or carbon accounting, or whatever it might be—those are pretty gnarly problems and there’s a huge amount of value in the data that’s just sort of flowing through these financial transactions. And that’s a huge opportunity for you guys to be able to build something really great on top of that sort of data stream.

So, that’s what we focus on is the things that we are uniquely able—we have sort of an advantage to build on. There’s the old—I think it’s Jeff Bezos’s quote about “only focus on what makes your beer taste better.” If anything is just the sort of core, you know, operational stuff, those are things that, as much as possible, you should partner with someone else on. And so, that’s what we’re focused on is the things that we’re sort of uniquely able to build.

SIMON TAYLOR: Work with specialists. I’m interested, Kyle, how you think about it as well at a different stage of organization. And not just thinking about how you’re prioritizing products but also kind of reflecting on really a macro point as well, how you’re thinking about that strategy as an at-scale business.

KYLE THIEMKE: I mean, some great points just on really providing value and meeting customers where they are ultimately focused. We’re focused on reducing noise. So, I think there was a degree of that filtering that happens because our customers are looking for us to save them time. They’re running their business and they can’t afford to have all these things sort of taking their attention away from what they are focused on, which is the thing they’re good at.

So, for us, we’re really focused on embedding financial products that make sense, that meet our merchants where ultimately they have the need.

So, one great example of that is Lightspeed Capital, which is powered by Stripe’s technology. We have just seen enormous growth of that product. And it’s great because, Denise, similar to what you were saying, excuse me, we are using that transaction data to ultimately feed into dynamic offers that are meeting merchants with capital when they need it to grow their business.

So, some great opportunities that we’re seeing and continuing to embed those services into our products. And we’re excited for the future of potential new offerings with Stripe’s platform. But certainly a great deal of making sure that we’re not creating more noise with what we’re doing and we’re ultimately rolling out features that our merchants are looking for.

SIMON TAYLOR: I’m interested. I’m going to come to the analysts as well to kind of look at this. So, Jordan, as you think about what products you’re seeing in the market and where the generators of revenue are, what is the underlying financial product? Are we talking debit card? Are we talking credit card? Is it mostly in the B2B space? Help the audience think about like financial products and sequencing.

JORDAN MCKEE: Yeah, absolutely. So, you know, what’s interesting when we look at just about any industry vertical out there, in almost every scenario, there’s some sort of financial friction that is sitting between that business and its customers or its employees. And the more that a business can do to take ownership over that friction means a better customer experience, it means better engagement or product stickiness, and the revenue sort of follows from there.

When I look at in particular the platform space and thinking about vertical SaaS companies, a very logical evolution, and we’ve seen that with Lightspeed and many others, is starting with payments, right?

Many SMBs think of their vertical software platform as the operating system for their business, right? It’s scratching so many itches across their organization. And payments is a very logical extension of that. It’s so core to their operations. And once you have that payments piece in place, that starts to generate trust in terms of a financial relationship, it generates data, and that creates the beachhead to move deeper into the financial lives of your customers. And a logical extension from there, areas like working capital, from there, you know, it can be expense-management cards, business banking accounts, but really see payment processing as kind of that linchpin for vertical SaaS platforms as they think about that evolution into financial services providers.

SIMON TAYLOR: It’s so consistent that payments are the core primitive of financial services. Once you have that, everything else starts to layer on and kind of around it.

How about you, Angela? What are you seeing as like the evolution journey for the SaaS businesses?

ANGELA STRANGE: Yeah, it’s interesting. Like, one way to take it, and I think the panelists have answered well, you know, how should SaaS think about adding BaaS? I think another way to view it is what in BaaS still needs to be built? Which you get from talking to a lot of the SaaS leaders.

One way to view the world would be, you know, these big shifts have been crises. If you’re a startup founder and you’re looking for an interesting idea, having would have been three pretty world-changing waves in the last two years is this, like, this gift almost, right?

And so, if you think, what are those? One, you know, and we talk about this a lot, like, the way that companies are started has changed pretty dramatically since the pandemic, right? Like, you used to start in, take San Francisco. You’d hire your first 50 people around you and then maybe you’d have a few remote employees. I bet many people in this room have companies with fewer than 50 people in multiple different countries. So, then what do you use for your expense management? What do you use for your payroll? Think of the entire software stack that used to work very well in one country. That now is often a spaghetti-type mess. Like, very interesting opportunity.

Opportunity two that is related, if you’re a SaaS company with operations in multiple countries and you want to add cards, you want to add bank accounts, like, that often requires multiple different providers and is a much heavier lift than just in one country. That is also a pretty interesting opportunity.

And then the third we can riff on, which is others, right? Like, there was an interesting demonstration of the Stripe LLM this morning. All sorts of things going on in generative AI and we can talk about the applications in financial services. But one of the things that it does is it enables really anybody to be a pretty interesting creator.

So, if you harken back to like the early days of Stripe, right, like, I think John and Patrick are pretty famous for saying, like, we’re going to be a huge company but our customers don’t exist yet. And they were right. Thousands of businesses spawned in large part because of AWS and all sorts of other things, and many of them are Stripe customers and they grew.

So, if you think we might be at another one of those waves, powered in part by generative AI, what are all of the banking--as-a-service or different primitives that need to be built to support that?

SIMON TAYLOR: Great question to noodle on. So, given that, Jordan, is it time for like banking-as-a-service to slow down, given some of the compliance news, reset, rethink? Or should it be accelerating and doubling down?

JORDAN MCKEE: So, I still very much so subscribe to Angela’s vision that every company is becoming a fintech company. I think that’s a very real evolution, right? We’re seeing this complete transformation in the distribution model for financial services and I think we’re in early innings of that.

And when I think specifically about banking-as-a-service, it’s time to lean in, right? I think it’s time to go on the offensive. I think there’s a real opportunity for companies to take greater ownership over the financial relationships that they have with their customers.

When I think about the bank failures that have been unfolding this year, in some ways, that seems to me like an opportunity for banking-as-a-service. And maybe that is somewhat of a contrarian view, but to me, it feels like these failures are kind of causing both consumers and businesses to reimagine trust in financial services. Maybe banks aren’t these, you know, sacred institutions that we thought they were. Maybe these other companies that we’ve put trust into are in an equally strong position to manage our finances and to become these financial intermediaries in our lives.

And what’s important though is—as you think about that evolution, right—to not put compliance on the back burner. It has to be a Day 1 principle. It has to be baked in from the start. We know the OCC is watching, right? The regulators have eyes on this space. And you know, for the overall sustainability of this banking-as-a-service opportunity to continue into the future, compliance has to be at the core of it.

As the regulators push on the banks, right, the banks will push on their platform partners and the platforms will inevitably push on those that are looking to deploy these capabilities, right? So, very important that compliance is really embedded in the heart of any strategy before it even starts to take shape.

SIMON TAYLOR: I love that you brought up the “T” word, the trust word, because if you surveyed consumers over the past couple of decades and asked them who they trust most with financial services, the answer was always the banks, especially in B2B. But that’s changing now. Apple is starting to win some of that, especially with their checking product that had 240,000 users and $4 billion in savings in four days. That’s a real shift in TradFi that we’re starting to see. And what happens if that comes to B2B? And what happens if there’s a generational shift of who the B2B buyer is and what they’re used to and kind of what they trust?

Kyle, what do you see from your customers when they’re thinking about trust and compliance and how are you able to offer them that trust?

KYLE THIEMKE: Sure. I mean, I think for us, we value trust a lot between our merchants and ourselves, and ultimately, they trust us to keep their financials accurate in their business. They trust us to ultimately power their payments, which is something that we rely on partners like Stripe to help us with.

But I think for us, we’re seeing that sort of shift of thinking of Lightspeed and others in the space as a one-stop-shop offering. And we’re seeing our merchants turn to us for all sorts of products as we continue to build an ecosystem around their businesses. But it all does centralize around that trust that we have to build with our merchants, and ultimately if we’ve maintained that, I think products like Capital, products like our payments product, ultimately are successful in the market.

SIMON TAYLOR: Denise, I’m going to come to you for a second on the trust thing. Obviously, the role you play is making sure that all of the regulators are happy and everybody else. How do you unlock that?

DENISE HO: Yeah. So, I mean, I think the way we think about it is you know, obviously, fintech startups, you want to move really, really fast, right? What happens when you don’t think about trust and compliance from the very, very get-go is that it almost becomes a drag over time, and if you don’t reduce that drag, you might get slower and slower, and then the extremely unfortunate event, you might stop entirely.

Our perspective is, you know, we invest in all of the platforms and companies we work with as though we are going to be around for ten, twenty, fifty, however many years. And so, it’s really important to kind of—a couple things.

A lot, especially in the US, right, banking services are provided by banks, right? So, having, you know, a very, very big network of banks isn’t just about redundancy, but it’s really about offering many different use cases, being able to offer different use cases, different setups, and different geographical needs as well. So, that’s really huge.

And then the other thing is to kind of really remember, right, that you have to contextualize the trust. No two fintechs are working on the same thing. An expense-management platform is not the same as a BNPL. So, there is no such thing as one size fits all.

We’ve actually worked really hard to sort of templatize these use cases into a playbook. I think there’s going to be a lot of innovation to, you know, over time, help automate or make it smarter, as well, in this space. But you have to think about compliance in the context of your product and your users and not like just like one size fits all, right. So, yeah.

ANGELA STRANGE: I think one way also to think about compliance is over time, you can accumulate a lot of compliance debt. Like, very similar to tech debt. And like, the industry just needs to go through a massive refactor, to take that analogy to the extreme.

Like, you talk to some of the early sponsor banks and they’ll lean forward, they’ll have six fintech clients, and they will have 30 people managing those six companies because it’s a massive spreadsheet. And finally, all of these banks, right, are looking for new tech solutions, which is the tech opportunity in compliance.

I think one comment on your trust point which I think is interesting too, is one of my other favorite expressions, is the battle between the incumbent and the startup, is whether the incumbent can get innovation before the startup gets distribution.

And in financial services, like, banks are notoriously slow at launching things, sometimes because they’re large companies, but also sometimes because they’ve got a different regulatory burden than some of the early companies. So, advantage has often been startup. And I still believe that to be the case obviously from my seat.

But now if you think about the incumbents that are launching financial services as Apple, even Shopify would fit into that category, lots of faster-moving tech companies, I think we’re going to see just a lot more interesting type products that are launched from both sides, which is ultimately going to be very good for the consumers and the businesses consuming these, but it’s going to make for a much more interesting competitive battleground.

SIMON TAYLOR: Oh, I think that’s a good place to kind of finish us off. But I want to make sure that just everybody leaves us with one last thought for the audience before we go. Ted, what would be your key learnings from the journey you’ve been on over the past six months for anybody who is thinking about getting involved in BaaS?

TED POWER: Business consumers are pretty savvy and so part of trust is just being really clear with the offering, not playing games with APY or rewards or whatever, being very straightforward.

And then also, one of the benefits of working with a respected brand like Stripe is that, you know, in our case, we’re a startup. We don’t have a big, trusted brand like Apple. So, the fact that we can use the Stripe hosted onboarded and we can sort of leverage some of the trust that is associated with Stripe is a way to sort of bootstrap the whole project.

SIMON TAYLOR: I love that. Bootstrapping by pointing at the big gorilla standing behind you. That’s awesome. Kyle?

KYLE THIEMKE: I think it’s just an overall exciting time. I was just energized by the opening keynote with all the different technology and capabilities we have at this time to embed financial services. So, it really feels like that moment where we’re growing beyond payments. Many many SaaS players in the space. We’re embedding value-add products.

So, which is to sort of say, my overall sentiment is I think it’s obviously some turbulence in the banking industry right now but also an exciting time where I think we have new technology that’s allowing us to do some innovative stuff that if ultimately it saves our customers time, I think we see ultimately adoption of those products.

So, I think it’s exciting and I would say overall, very bullish on banking-as-a-service.

SIMON TAYLOR: Jordan?

JORDAN MCKEE: Yeah. I think the exciting shift that I’ve seen is, you know, five or so years ago, if you wanted to become a fintech company, you truly had to become a fintech company, right? You had to make—if that wasn’t your core business, you had to make some very serious tradeoffs, staff up around it, right, build a risk in an underwriting model, hire, you know, full-time employees and own all of the operational requirements.

Today, there is such a great ecosystem of partners that you can tap into to abstract that complexity, to offload some of that operational burden. It’s completely reshaped the unit economics associated with launching a financial service. And I think, you know, today more so than the past, it’s never been easier to start a fintech company or launch a fintech capability, and that shift towards that as a service-distribution model I think is a really compelling change for the industry.

SIMON TAYLOR: Denise?

DENISE HO: Yeah, I would say lots of blinking lights, a lot of disruptions, but don’t worry about it. Actually, spend a lot of time with your users and your customers. Listen really closely and I think you’ll realize that there are tons of untapped, unsolved problems. And you know, stay focused on that and know that you know, when your customers invest in you as a financial service provider, they want you to be around for ten, twenty years. They don’t plan on switching where they put their money, for example. So, you know, pay attention to the fundamentals like compliance.

SIMON TAYLOR: Fundamentals. Final thoughts, Angela?

ANGELA STRANGE: There are a lot of things that still need to be built in BaaS and it’s a great time to start these companies.

SIMON TAYLOR: It is. I love the idea that compliance is a competitive advantage. I love the idea that the reality of financial services is it’s not NASCAR and it’s all speed. It’s knowing when to slow down into the corner wins the race and sort of knowing those nuances really helps, and having partners that can help you do that really makes sense.

Ladies and gentlemen, please thank this amazing panel.