Purposeful AI, Tokenized Mortgages, and What Community Banks Must Do Next

Well, hello out there. This is Sam Kilmer, managing director of Cornerstone Advisors and your host of Fintech Hustle.

I am really, really pleased to be with you again today and to host a group of rock-star guests and guest co-hosts from the halls of fintech.

I’ll go ahead and start jumping right in and introducing each of them so we can get the conversation rolling.

First, we’re joined by Rava Ralph, who is the head of digital transformation at Blend.

You may have heard of them in the origination and point-of-sale fintech market.

Rava also, if I have her background right, and I think I do because we’ve met a few times, also happens to be from the halls of banking and credit union land.

She was the chief lending officer and a lender at a couple of large credit unions, and also a longtime lender, I think, at one of the large banks as well.

So she’s worked both in fintech, as currently in fintech, as well as been a lender out there dealing in credit for many years.

So welcome, Rava.

Thank you.

Thank you.

Nice to be here.

Also joining us is David Ladic, who’s a senior vice president at Zafin, who you may or may not have heard of in the product management and pricing space in fintech.

David and I have known each other a long time because I think both of us have all the battle scars over the years of being in the industry to prove it.

David was a longtime go-to-market exec at Fiserv and then FIS around core systems.

David, well, for starters, welcome.

Thanks, Sam.

Happy to be here.

Thrilled.

I think we also have one other thing in common, David, that we have a common mentor or guy, John Ally, someone that we’ve both known in our days in the business.

I’m very grateful to have worked with John, and I know you and I have talked about that before.

Absolute legend.

Couldn’t thank John enough for everything.

He’s one of our, I think, OGs in the space and one of the guys that really helped build fintech out to what it is, going back to starting in the ’90s.

Yeah.

Absolutely.

We’re also joined by Adam Epshteyn, who’s a partner at FINTOP.

I should also point out one of the hosts of one of the big rock-star events in the collision space that is investing, banks and fintechs, which is known as the FINTOP Summit.

I was just there in Nashville.

We actually had a Fintech Hustle from there as well, and it’s just a fantastic event.

I think I speak for a lot of others in the industry when I say that Adam is kind of like a ringleader of a lot of really great conversations in that intersection of all that.

So welcome, Adam.

Thank you, Sam.

Good to be here.

Glad you made it to Nashville.

I always say our conference is getting so big that there are a lot of people I don’t even get to see, but because you have your hat on, I always know where you are.

Well, and this time I had to be on the pool deck because your hallways were so chock-full of people doing deals.

I’m like, come on.

So I had to go up and invade the space of the other, I think there was a healthcare surgical conference going on at the same time, and they were having an event by the pool.

They were very gracious to allow me to film a podcast while they were having their cocktail party.

So thanks to the other folks that were there in the Hyatt Nashville that put up with that.

Good that you’re with us.

Also, my co-host with the most, who’s coming to you today, Kelly Schultz, former president of AFT.

She was at iPay through Jack Henry.

Let’s see, what else?

Allied Payment Network, which is now part of Autobooks, was part of that journey as well.

Kelly, I’m probably missing a thing or two, right?

There are a few.

I like to play startups and turnarounds.

So there are quite a few little pockets of that here and there.

But I’ve just enjoyed too many years to count anymore in the fintech space.

We don’t talk about those numbers anymore.

Reached that point now.

I am so glad to be here with you, Sam, and what a great group you put together.

So I’m excited about the conversation.

Yeah.

We’re always trying to put together a mix of people with different backgrounds.

I always just like to start by asking all of you, tell me a little bit about what you’re up to on any given day.

Rava, let’s start with you.

Tell us about a day in the life of the head of digital transformation at Blend.

Rava, tell us about your day.

Awesome.

Well, I would say it’s not the same and it’s varied every single day.

I’m an early riser.

I wake up between 4:30 and 5:00.

I do a lot of reading in the morning, which varies from The Wall Street Journal to American Banker to Credit Union Times.

Lately, I’ve had to subscribe to a lot of the fintech publications now that I’m in the fintech space.

Otherwise, I was exclusively a banker.

So now I look at, I think, Finextra, and KPMG has fintech news.

I do a lot of the fintech news.

Then, of course, once the day begins, I do a lot of collaborating with our Blend executive partners.

We obviously have hundreds of credit unions and banks on our roster.

So we look at not only problem solving for what the digital lending friction points are, but also looking at what we’re planning from a new product perspective or the rollout perspective, or meeting with executives, looking at prioritizing what we want to grow in the next space and looking at what would make financial services better for our members in the credit union space or our customers in the banking space.

Makes a lot of sense.

It sounds like a busy morning, and early, by the way.

You’re West Coast, right?

I am.

So by the time I’m up, everybody’s already up and ready for lunch.

So you really have to kind of play catch-up when you’re in California.

Yeah.

Good.

That’s good.

It all made sense until you said KPMG.

Who are those guys?

I’ve never heard of them, right?

KPMG.

No.

Mad respect.

All good stuff.

Hey, David, tell us about a day in the life of David Ladic.

Well, not quite as early.

But I’m East Coast, so I’m an early riser, but not quite that early.

I like to get a lot of planning done early in the morning, first thing.

I do the usual, wake up, have your coffee, read the news, similar.

But really kind of plan out the day.

We’re pretty blessed at Zafin.

We have quite a lot going on with banks across the space and partners.

So days are pretty busy with educating customers and prospective customers on the whole system-of-intelligence space, which is where Zafin lives.

Enabling data, doing something with all this data banks have been rushing to bring together over the last couple years.

Now they have it.

They just don’t know what to do with it.

So we’re the analytics and then enablement and action side of data.

I tell you, Sam, being in the industry selling giant core banking engagements for 25 years, it’s completely different because now it’s all about innovation, really driving ROI.

These aren’t systems you’re replacing.

We’re a new shiny object, if you will.

The big banks have understood this for years now.

As we go down market to tier two, tier three, it’s really educating and informing people who are at different stages of their data maturation process.

I think you see a lot of banks bringing in talent from larger banks who get it, who get that a core system and a data warehouse doesn’t equal success.

So it’s a lot of education, a lot of coming up with the right marketing messages.

Sam, you and I work together on a number of engagements.

So it’s a day full of, I’d say, 70% dealing with customers, and then the rest working on strategy on how we hone our message.

Yeah.

I’m glad you mentioned education and you mentioned the events.

I certainly mentioned in the introduction about Adam with the FINTOP Summit in Nashville, but I know both of you, because David, you and I were together at an event in Charlotte, and Rava, you and I were at an event in Washington, D.C.

It strikes me, and I know from years of this, including David, to your point about working at a core provider, how much work goes into those events.

Those things are, and I mean that as a compliment, I don’t think they’re a pain.

I think they’re so valuable.

It seems like, I don’t know if you’re having to tend to those events every day, but I suspect all of you are probably in ongoing planning for some type of group event pretty much every week of the year.

It may not take a whole day, but your whole team is focused on bringing all these people together.

I don’t really take that for granted because it strikes me that, and I don’t mean that people are prima donnas when they go to these events and you have to really watch after them, although that can be true too, but I just mean all the orchestration that a fintech team has to do to make those things work right.

You don’t take it for granted because starting a great conversation with someone, a group of people, and getting it going, there’s a bit of an art to that.

Part of that’s getting the right people in the room and encouraging them, coaxing them, nudging them to show up, and getting the right stuff on the agenda.

So I think that’s a really interesting point that you bring up because it was something I know that I’ve seen both of you work on and treat as a priority.

I’d also just kind of throw in there, and I’m sure Adam has an appreciation for this right now coming off of the Nashville event, but in my experience planning with AFT, huge thing, huge pressure there, right?

You don’t want that to flop with an industry of all your peers.

You’re a volunteer board, so there’s even more pressure there.

But I think whether you’re on the exhibiting side and you’re working the event, there’s a lot of planning that goes into that to get that right.

I’m sure David organizes his team to show up at these events in a way that you’re going to get the most ROI for attending those events and spending those exhibit dollars and working pre-work lists and all those types of things.

So whether you’re planning the event itself or planning to take advantage of the event to drive your go-to-market strategy, or speaking or whatnot, it’s a lot of work.

I think it’s timely because here we are, it’s the end of October, and I think everybody’s about to breathe for a couple of months.

I know the spring and the fall are just brutal when it comes to the travel and everybody trying to get everywhere, trying to get all the exhibit things where they need to go and all those things.

So are you guys exhausted?

Well, we still have a big October yet.

We have AFP, we have Money20/20, and we have ABA, amongst others.

So we’ve got three big conferences in the next three weeks.

I spent my morning planning those out today because those are all big events for us and our customers and prospective customers.

What about you, Rava?

Do you have a big bunch of travel coming up, or is it starting to slow down for you?

Just like David said, we’re actually in the heart of conference season.

So we have the ACUMA, the MBA, Money20/20.

There are a few conferences coming up.

Yeah.

I live in Indianapolis and have been in the Midwest most of my life.

I’ve lived in the Southeast part of my life.

But when we first moved back from the Southeast, I love autumn.

I really do.

I always thought it was really interesting, Kelly, to your point, how crazy the travel schedules are.

I’m like, here I am, I’m living in the Midwest, I’m finally enjoying autumn, and I go get on an airplane and fly to one of the coasts or something.

It’s like the time that I really want to be home.

Spring, too.

Every year you miss fall and spring.

Just to highlight the planning part of it, I was also going to say we’re kind of in a changing environment, not just from a fall perspective, but from a prioritization perspective.

This year particularly feels a little noisier because every year it’s easy to say, okay, what are you planning for next year’s development perspective?

But with 2022, 2023 and AI making its big runway, everybody’s now playing catch-up.

So there is really this feverish acceleration on AI and conversations around AI.

What would have been kind of a back-to-fundamentals, post-COVID we went to the back to the fundamentals and prioritization on what should be important, has now just elevated.

I think it’s this mad, crazy rush in investment dollars and money being spent in trying to figure out whether it’s fraud, whether it’s credit scoring, whether it’s growth and customer growth.

There’s a lot of conversation on where to put these dollars, and that’s causing its own kind of fever pitch in terms of what is a priority and where people are kind of distracted in a way from what they should be focusing on.

So these moments of conversation are important because with all this noise, you kind of have to bring it back to what’s important, what’s critical and what can be achieved in the next couple of years.

You know, it’s funny.

We call it purposeful AI because everyone wants to talk about AI just as a term.

We need to use AI as a bank.

AI is going to be in mortgage.

It’s going to be in commercial.

But they just talk about it.

We say AI has got to be very purposeful.

What are you embedding AI for?

What is AI doing for that line of business?

It’s one thing to say we’re going to have a corporate strategy, a corporate plan, how we’re going to contract for it as a bank.

But we use the term purposeful AI a lot.

Meaning, what are you trying to get?

What’s the outcome you’re trying to drive?

Is it operational efficiency?

Is it better customer intimacy?

Is it hyper-personalization?

Don’t just say AI.

Have a purpose for the AI, and then work toward how you’re going to deploy it, either embedded in the technologies you pursue or standalone in the way you deploy it as an organization.

I’ve seen that too, where we’re talking about AI as if it’s a solution trying to find a problem.

From a product perspective, it’s totally backwards.

Everybody’s trying to ride the wave and find ways to use AI.

I think it’s kind of like, let’s look at the nest of problems that we have that we need to solve, and then determine whether and how AI might be helpful as a mechanism to solve that.

But not the reverse.

Everybody kind of just gets caught up in the buzzword bingo and wants to start talking AI for the sake of AI.

I know I’ve blown my stack once or twice with a couple of groups just because I’m like, look, enough.

You don’t chase a technology.

You chase a problem and then you determine what technology do we use to solve that problem.

So I’m curious, Adam, what you think about this because you’re probably seeing so many different instances of ideas around how to use AI and how to deploy it.

What’s really resonating with you guys at FINTOP?

And I should have also pointed out, Adam, tell us about a day in your life too, man.

Exactly.

While we’re at it, we want to hear about the crazy world of banks investing in fintech and the world that you guys have created around that.

All right.

I’ll answer both questions.

I’ll weave this together.

So FINTOP, venture capital fund that has roughly 100 banks as LPs.

I mention that because we spend so much time talking to our LPs about what are their pain points and opportunities, really understanding that deeply, and then looking for fintechs to introduce them to.

It’s part of our due diligence before investing, but post-investment, we’re trying to accelerate the growth of the companies we just invested in.

So my day is spent talking probably 50% to banks on regular scheduled calls about what they’re doing.

The other part of the day is really talking to prospects, fintechs that we’re meeting for the first time.

We have to kiss a lot of frogs to find the ones we want to invest in.

So we’re constantly talking to early-stage fintechs.

Then regular scheduled calls with our existing portfolio companies, talking to them about their pipeline.

How do their conversations go with certain banks?

What’s the use case?

So that is my day.

It’s constantly talking with banks and fintechs, customers or potential pipeline, and existing.

In terms of AI, we’re investing thinking about the future.

So not necessarily something that you have to use today, but maybe it’s three years from now.

One of the things we talked about at the summit, we’re spending a lot of time on compliance.

Up until now, everyone’s focused on know your customer, KYC.

Now a lot of the tools are KYA, know your agent, because if a million agents are going to be pinging cores, that’s going to be a priority.

So it’s not necessarily happening today, but we have to be thinking about years from now.

For today, the banks really are just looking for back-office efficiency.

Where can I use AI to rip out costs, improve manual labor?

I’d say that in many cases we are at a tipping point where, if you think about fraud, the statistics are that the AI and the human might be equal.

But we know that the AI is probably the dumbest it’s ever going to be today, and tomorrow it’s going to be smarter, and a year from now it’s going to be smarter than the existing employee.

So starting to prepare for that world.

I think banks are going to have massive efficiency gains for the ones that lean in early.

They’ll be more profitable.

They’ll get a higher multiple.

Those are the banks that are going to start buying other banks and rolling up the industry.

I think that’s where that hamster wheel is going to really take off.

I like the concept of it’s the dumbest it’s ever going to be.

I seem like I think I should be able to apply that to my marriage.

Maybe my wife’s going to tell me today that I’m the dumbest that I’m ever going to be.

That would be a really optimistic thing, wouldn’t it?

I think with a human, I think you’re only going to be dumber tomorrow.

I think with a human, it might be the opposite.

You’re right.

The robots get better and we all get more stupid.

You’re not the best Sam agent yet, Sam.

Your agent’s going to get better.

Yeah, exactly.

Adam, I think to that point, what’s interesting, the last time we had transformation conversations, there was a lot of fear and trepidation in terms of the work that fintechs were coming in and causing all this disruption, and transformation becoming difficult because you cannot explain it to compliance or regulatory people on what that is, what the change is.

I feel this is the first time AI is actually taking some of that pain point away and people are embracing it a lot better than they did the transformation.

The curve is easier because they’re pretty sure, from a regulatory body perspective, whether it’s the OCC or the NCUA, there’s more documentation easily accessible.

So AI is not coming with a black box, but AI is coming with a very transparent documented approach, which is, I think, why there is so much adoption so early on in the process.

That’s really interesting, Rava.

One of the things in the vendor management world we’re kind of dealing with right now is this know-your-agent problem.

You’ve got banks and credit unions using AI directly themselves, which I think is one scenario.

But where we see the regulators scratching their heads and they truly don’t know what to do about this yet is the AI that is embedded in all of the tech stack throughout all of the vendor community that supports that bank or credit union.

So we’re starting to see interest from clients, from regulators, from auditors, trying to understand, how do we know what the use cases are where AI is being used in this product that I’m buying and taking to market?

How do I understand that well enough that I can explain that to my regulators?

Have either of you thought about producing a document in your diligence documentation to your clients that just says, here’s how the use cases of AI are present in our product, and just kind of leapfrogging ahead of that?

I think, in my experience, innovation outpaces regulation 100% of the time.

When that happens, regulators are playing catch-up, and then they’re trying to figure out, how is it that we get our arms around this thing we don’t really understand?

We need to learn what are all those use cases.

So just curious if you’ve thought about how to kind of jump out ahead of that and help your clients understand so that they can be smarter when they talk to the examiners about it.

We absolutely do that.

At Zafin, we’ve been ahead of the AI curve.

We’ve been using AI for years now.

In fact, we have it down to a pretty good science.

So much so that some of our clients ask us to come in and talk to them about how we govern AI, how our employees use AI.

It’s pervasive across all of our 900-plus employees.

Whether you’re in sales or you’re in development or you’re in marketing, AI is on everyone’s desktop.

So from a customer perspective, we’re very sensitive to the experiences our customers have.

Smaller banks, not as advanced.

Wells Fargo, Bank of America, more advanced, and everyone in between.

So when you have those scenarios where you talk about everyone likes to use AI as a buzzword, I find the people that use AI more seem to talk about it less.

We don’t talk about AI as much.

We talk about what we enable and the outcomes that it drives.

But being very specific and mindful and thoughtful, Kelly, about here’s how AI lives.

All of our data from you is anonymized.

So there you already break that barrier down with a bank’s legal counsel, for example, from a contracting perspective, from a risk perspective.

I think if you’re getting into non-anonymized data, that’s where it gets a little bit sketchier because then you’ve got a person placed with it.

So from our perspective, we’re very thoughtful about how we define what AI does, whether it’s in a product of ours that is helping enable the use of your data analytics to touch the customer in some way, or as a research and analysis tool.

But I think that division of where it lives, what it does, is the data it’s touching anonymized, is there any PII involved?

You start breaking it down from that perspective, it gets a lot less scary for risk people.

Not being a person that has PII, it’s hard for me to say what that would be like.

I can only imagine that would probably be a nightmare as a vendor.

But I think that’s, from a structural perspective, Kelly, you’re right.

Getting ahead of it, being very prescriptive, helping people understand what it’s doing in each product you might enable.

If there’s PII, etc.

I think those are key strategies.

Very smart.

I like it.

I think one of the key issues is that there’s huge divergence, one, between large banks and small banks in terms of adoption, and two, the regulatory guidance.

If you listen to FDIC chairman Travis Hill at our conference, if you listen to the Fed community bank conference yesterday with Treasury Secretary Bessent or several members of the Fed, or Comptroller of the Currency Gould earlier this week, they couldn’t be more pro-innovation.

Everything they’re saying is totally awesome for banks and fintech.

That is exactly what we want to hear.

But you get to the examiner level and the banks will tell you that the people on the ground still don’t know what they’re talking about.

They would rather say no than yes.

It remains a problem that we can’t solve.

I was actually kind of sympathetic when Travis was at our conference because the reality is the OCC has a freeze on them.

They can’t bring in the talent that they need, and so they’re stuck with existing examiners that don’t know what they’re talking about.

We need to fix that.

It’s been the case.

It’s an age-old problem.

I was in bill payment before it existed, pretty much.

We were going through the same thing.

I remember the first time the examiners came in, and honestly, it was like you could run circles around them.

They didn’t understand what they were looking at, even at our level as a vendor, let alone looking at an individual bank and their full technology stack and that kind of thing.

So it is a challenge.

They’ll catch up with it.

But I think the more we can arm our clients with something to give them rather than wait for them to come up with what that is, what we wind up doing as an industry is we wind up kind of creating regulation in a way, or what is expected and what those requirements are.

So we’re really encouraging clients to go on and get out there and get your arms around this stuff and educate your examiner on, here’s what I’ve got.

Because it’s better than waiting for them to just kind of come back with it.

Oftentimes that stuff winds up becoming some flavor of regulation or requirement.

Rava, I think you were going to add to the conversation.

No, I was just going to say, I think like David said, we’re embedded as a tech company that’s providing solutions for originations and for lending, deposits and consumer.

Blend does a lot of stuff that is working in creating better experiences.

Change management is obviously always a hot topic on how we’re going to educate not just the internal staff but the regulatory bodies as well.

I think the standout successes are being that partnership between a fintech and traditional institutions.

That’s gaining traction.

But you know who else is winning?

A lot of the fraudulent activities.

The piece that I think we just need to go hand in hand on is trying to educate them on how we can overcome fraud because I think, as we’re gaining traction in AI, we’re gaining traction in the ability for more fraud to be committed.

That’s kind of also an area that we’re working with our partners on, in making sure that we have the best tools and we have the best innovation products that can be provided.

So I think the topics we’re talking about today are so relevant because all of these are top of mind for every one of the digital partners we’re working with.

Rava, I’m curious on the other area that the regulators were cracking down on over the last couple of years, but now they’re kind of guns blazing, full speed ahead, and that’s tokenization and blockchain.

As it relates to mortgage, one of our LPs is Figure.

They recently went public.

They have a $10 billion valuation now.

They’ve got the proof of concept on the origination of home equity loans on-chain and that they are ripping out costs relative to legacy providers.

I’m just kind of curious, your roadmap in terms of blockchain and where you see things headed, because it just feels like this administration is pushing tokenization and blockchain rails so hard and fast that that’s another area that the banks are at risk of being left behind.

It’s such a good point, Adam.

In fact, Blend has a couple of different products, which we call Rapid Home Equity, Rapid Refi.

I think banks and credit unions are super excited.

First of all, because finally there seems to be an opening and rates may come down and people can start affording these homes that people want to move out of or move into.

Unlike the Figure concept, which charges a lot more, credit unions have the benefit because of their nonprofit status and actually have very low rates, and they continue to help.

So many of our partners, large and small, are investing in a lot of those tokenization programs, but we don’t need to use tokens because we have invested in all the operational efficiency programs that allow us to bring those forefront and make that product and process easier.

So definitely an area of hot topic.

In fact, the Rapid Home Equity that Blend has is one of the hottest products in the market, and we’re getting a lot of our credit unions and banks who are utilizing them.

But if the future of securitization is on-chain, don’t you have to originate fully on-chain?

The reason why home equity has taken off is because you can get around certain legacy processes, like title, that are still in the basement of some city government.

How do you move fully on-chain if we believe the future of securitization is on-chain?

Don’t you have to originate and start that process on-chain?

It does, but I think you’re solving for an infrastructure problem that is definitely looking at the process in general.

So whether it’s securitization on-chain or securitization of the product, I think the real issue is the needs and what is expected of the product itself and the outcomes.

You can serve it different ways, whether you package it differently for its members or not.

I think the ability to offer the product in its full gamut without putting on all the controls, I think what Figure has done particularly has broken it up in a process, but that product is vastly different than what the banks and credit unions offer.

So that’s why the Figure product, while being called a home equity product, is actually not a home equity product at all.

That’s why they’ve kind of played around with the product, but it’s not the true, in a true sense, product that credit unions and banks offer.

In fact, it’s a completely opposite product.

Because the product that Figure is offering is called a HELOC.

HELOC is not QM-oriented, and the banks and credit unions don’t offer that product the way Figure has it.

So maybe I’m not understanding the question completely, Adam.

The point of blockchain technology in my mind is that you’re replacing trust with truth.

I’m representing, I don’t have to, it’s not like I’m taking a picture of a lien and saying, you can trust me, I have a lien.

It’s actually on the blockchain.

But you have to originate on-chain for that to be true.

That’s why it doesn’t work for putting some sort of commodity on-chain.

It doesn’t really matter because I still have to trust that that commodity is sitting in a warehouse somewhere.

Whereas if the mortgage is originated on-chain originally, we replace trust with truth, which is the big promise.

Actually, just to tie a couple conversations here together, whether it’s for loan payments or what you would call service-level agreements or covenants being enforced and those kinds of things, I think something back to your point, Kelly, that I’ve always thought from a vendor-management perspective that blockchain has promise in the future in terms of enforcing things like service-level agreements.

Basically, you want to call it auto-enforcing.

It’s not like I have to track all my uptime and everything.

It just automatically adjusts my payments based upon the things that can be seen on-chain.

To me, that’s always been kind of an interesting piece, the intersection between contracts, whether it’s a contract between a lender and a borrower or between a bank and a fintech or whatever that is.

It’s almost like you want to call that automatic fulfillment or automatic contract execution and adjustments.

I know we’re a ways off on this, but that always struck me as a really interesting use case.

I think the idea of the single source of truth, and I think, Adam, I’m catching up to what you were asking, but the single source of truth, whether it’s increased efficiency, enhanced transparency, or being able to get those multi-party digital signatures.

I’m not entirely sure it has to be done one particular way.

But if that’s where everyone will move toward it, I think we’re all working toward what I would call the blockchain methodology, but just approaching it differently, whether you’re a fintech or based in a credit union.

So I’m curious, from the consumer’s perspective, do they care what the technology is in the back end?

Some consumers will understand, but some, let’s face it, okay, there are a lot.

We all get what we’re talking about here.

But at the end of the day, most consumers, let’s say 50-plus years old, are never going to understand and don’t care.

Now those that are coming of age and have grown up in the world where the internet existed from the time they were born, and they get cryptocurrency, and they get the concept of blockchain, and they understand tokenization in a different way, I think that wave, maybe they care because they’re interested in a lot of things that have to do with identity on the chain.

Those types of concerns that they have.

They’ve seen too much online at a very young age.

Whether it’s somebody robbing their game coins or whatever the case may be, they’ve seen way too much.

But there is a portion of the generations, mine and beyond, and if I didn’t work in this industry, I might not be aware either, who don’t really understand it.

So I guess I’m really curious, what are you seeing, Adam, Rava, David, any of you, in regard to the consumer-level understanding of what’s going on?

Of course, the current administration is advancing that to some level, or at least making people curious.

But I just wonder, when the rubber meets the road, does it matter?

I think it matters when you want to sell it.

If you’re on the hook, whether it’s on transferability of the deed or negotiability of the product, making sure the authentication and signatures are valid.

Let’s face it, a home is the single most expensive and valuable product a consumer owns, for most.

A lot of the people we’re talking about have their entire life savings in that product.

So it makes a lot of sense to make sure that nobody takes that away in a way that would harm them or their future generations.

So I think from that point of view, there is a lot of concern and wanting to have the trustability and recognition that this product is authentic.

So I think if you can ensure that, then I think most people would be happy to operate on any kind of platform.

I would agree.

I don’t think the consumer cares at all what the technology in the back is.

I don’t think that matters.

I agree with Rava that there are multiple paths to success.

There’s not just one way to do it.

My view on homogeneous assets like mortgage are that it is likely, in my gut, that blockchain technology will be the cheapest way to originate those assets and therefore they will be the winners.

Again, it’s probably going to take a while.

But I do believe that we’re going to go straight to securitization markets via originating on-chain.

The other thing, I think, on the flip side of that is that more and more assets will be pledged as collateral.

So as we tokenize stocks, which Nasdaq said they’re going to do last month, and we tokenize bonds and all sorts of other types of assets, those assets will increasingly be used for loans.

That’s where consumers will start to get in touch with actually caring about how something is originated.

Yeah.

I agree with that completely.

I think we’ve got some education to do as an industry to help consumers kind of connect the dots as to what does this mean to you, I guess, is my underlying point.

I have believed for a long time it’s the way the industry should be moving.

Just a matter of kind of...

Yeah.

I think the other dynamic there, Kelly, kind of bring that topic around to David too, is I think it comes down to how the products might be priced differently.

Either because the value of being on-chain in some way to the consumer, to your point, maybe most consumers aren’t going to care.

But I think the other part of it is, to Adam’s point, if there’s automatic contract execution and enforcement, and in lending that’s what collections, other servicing, but also collections questions, you bring that cost down.

You can then pass that along to the client to where now all of a sudden you have an advantageous interest rate on the loan or some other term, or fees, significant fees waived for an on-chain origination versus a standard, slow, what we would call snail mail or something, some other to-be-named unautomated or off-chain product.

I just think it’ll be interesting to see how that plays out.

I’m really curious.

I know we’ve just got a few moments left.

I know you want to be mindful of your time.

Real quick speed round here.

Anything that you guys see?

We’ve heard about the promise of AI today, so I’ve heard about some of the positives going on in the industry.

Anything else you guys see right now that’s kind of screaming for an entrepreneur in the fintech space that’s maybe either broken or needing a mechanic?

Or maybe you see some promising young, hungry mechanics and entrepreneurs out there solving some problems.

Anything you see out there that’s broken in fintech that you feel like needs some attention and to be fixed out in the space?

I’ll say something that isn’t necessarily fintech, but just sort of within banking.

I think that the bridge to private credit needs to be narrowed more.

Again, homogeneous assets, auto credit, very easy to be in the securitization market.

Private credit has been sucking up everything in equipment finance and where you can kind of put a credit score on.

But one-off assets around CRA, C&I, that are very bespoke, I think over the next few years with AI, we’re going to get better sort of credit-adjusted ratings on, and it will make it easier to move those assets from origination at a bank to off-balance sheet.

Because the banks are going to need to continue to off-balance sheet more and more assets as their liabilities and betas go up due to stablecoins and tokenized deposits.

So that is a huge white space that needs to be addressed.

I think it’s coming, but it’s still early.

We haven’t worked through that.

What do you think, Rava or David?

I think we’ve talked a lot about products, product structures.

We definitely need to educate consumers better.

Banks need to do a better job of that as we talked about tokenization.

But at the end of the day, it’s about a bank’s customer getting the right product from the bank that meets their needs, that has their interest, that’s personalized to their experience.

Whether it’s I’m doing a blockchain-based mortgage and my costs are lower, so thus I’m going to give you a better proposition on other products, or it’s how I’m understanding that my customers’ needs are different now, whether they’re 18, 38, 52, 72.

We call it the 98%.

You have 2% at the front end.

You have the Chimes, the Revoluts, the Wealthsimples.

Then you’ve got the Wells Fargos, BofA, the big guys.

You’ve got everybody else in the middle.

How are you taking all the products we talk about today, the way they’re structured, the leverage that banks might have from them, and really how do you package those to help customers really understand the value proposition for your bank?

Nobody wants to be treated like a checking account with a debit card attached where I just waive fees.

People want to be known as the guy that’s got $100,000 in a wealth account and he’s starting a savings account and just had a child and there’s a 529 and those sorts of things.

So regardless of the product that we’re building, the technology, I don’t think customers care.

I think they care about how it relates to them.

More and more now they care about it at a personal level, not as, I’m a 52-year-old person at this phase of my life, but here are the things that influence my life, right?

That should influence you as my financial services provider to give me the right proposition, i.e. package of products, to make me feel valued to you and reward me for that.

So I think it’s how you bring a lot of this stuff together.

I would still say member retention and a lot of risk on the financial side as a consumer is still a top risk that I think we haven’t solved for.

All right.

If we have time, Sam, I want to chime in on this because I’m really passionate about this topic right now.

I think the entrepreneurialism needs to be coming from the community banks and credit unions themselves.

They need to understand, who am I?

Who is my ideal customer, and how do they find me?

How do I find them?

So to David’s point, because right now, you look at the market and you go look at the value propositions out there, and guess what?

Eighty percent of them are all the same.

Here’s who I am.

Here’s what I do.

I’m focused on the traditional sense of community, which is geographic in nature.

And, Kelly, let me tell you what stands in the way of this.

I can tell you this because I live it every day.

Every bank and credit union is trying to drive toward solving targeted outcomes.

Member customer growth, wallet share growth, lowering risk, attrition, holding up attrition.

They all say they have these problems.

Very few of them are thinking about how to solve them.

Then when they’re presented with ways to solve them that are nontraditional, or that’s not how my core system works, or that’s not how this system works, I think there’s a challenge from the community bank side.

I’m talking from $50 million banks or one branch to $20 billion banks.

I think the challenge is for leaders in these banks to think about addressing, solving and meeting their outcomes through the use of technology.

There are so many great fintechs.

Rava’s here and I’m here and there are others.

Everyone’s got a path.

I think it’s just opening up your mind to think a different way.

We’re at the inflection point where digital is table stakes.

If you’re worried about your digital glass, you are five years behind.

Most people are starting to get their data to a point where data is ready to be actioned on.

If you don’t know how to action on that data, you’ve done a lot of infrastructure and spent a bunch of money for nothing.

I think people need to be challenged in the community-to-mid-tier space to think differently, to understand that there are solutions out there that can drive the outcomes you want.

There are a lot of great fintechs that can do that.

I think people need to start thinking a little bit differently because the problems of the past are just that, the past.

I mean, it’s kind of a strategic direction thing.

Find your niche, right?

Then align with what products answer to that niche.

Yeah.

Listen, guys, I’m really thankful that you joined us.

I know we’ve gone a little bit over, so I know you guys have some other things.

I’ll be mindful of your time.

Rava Ralph, Adam Epshteyn, David Ladic, Kelly Schultz, thanks for joining us on Fintech Hustle.

We’ll see you out there on the next episode, everyone, and see you on the road.