Fintech Hustle // Pete Glyman and Kelli Schultz

Hey all, Al Dominick, unabashed fan of fintech, checking in from Cornerstone Advisors’ makeshift studio in Washington, D.C. for today’s Fintech Hustle, where I’ve got to tell you, I feel like the opening act for the band about to take the stage.

Since Kera Parkey at MX inspired my man Sam Kilmer to name this series by noting that the hustle just looks different now, I had to pull a Sam and bring both a guitar to the conversation along with a few stylish hats because this is not a coat-and-tie crowd we’re talking with.

And if you know Sam, you know he’s ready to rock both a sweet lid and some classic tunes.

He and I were talking about going Gonzo style, as only Cornerstone Advisors can, with two incredibly talented and connected guests, both fintech founders.

In a moment, you’re going to have a chance to see Kelli Schultz, president of Allied Payment Network, whom you may also recognize as co-founder and president of iPay. She also, if you’ve been to any AFT events, carries that nice little lapel pin that says past president.

With her is Pete Kight, managing director at Jack Henry. Before that, he was a co-founder at Geezeo, one of the more notable PFM companies around, especially when the fintech moniker really started to become a thing.

I’ve been asked a bunch of times since I joined Cornerstone in April, what does Gonzo, GonzoBanker or even Gonzo style mean?

I just want to make sure you understand this is our cultural nod to Hunter Thompson, who, among other things, served as political editor for Rolling Stone in the ’60s and ’70s.

When we got our start 20 years ago as a company, his style of journalism, which was focused, spirited and opinionated, really resonated with our founding team and inspired the way we approach this incredible industry of ours.

We’re going to poke the industry when it needs poking.

We’re going to take strong, informed stands, and we’re going to do our absolute best to help people think a little differently.

But we’re going to do this in line with providing wildly prescriptive, actionable advice that goes beyond cookie cutter.

Before we get rolling, just a few simple housekeeping dos and don’ts.

First, do ask questions via the chat feature.

But if you don’t know how to use the chat feature by now, we have some consultants at Cornerstone standing by who are ready to bill you, or maybe they’ll help.

Next one, don’t worry about turning on your screen.

Since we’re doing the hustle, we need to pay attention to each other. Also, we’ve disabled this feature on the platform you’re using today, so you’re welcome on that count.

Do visit Kelli and Pete’s LinkedIn pages during this webinar and shoot them connection requests with a note if you aren’t already connected with them.

And of course, you can do the same for Sam and myself.

Finally, don’t worry about requesting a copy of this episode.

This is being recorded as we speak.

It will be available on demand immediately after this webinar ends.

The same link you used to log in is the one you’ll be able to use to pull down an archived version.

Our AV team is going to put this up on the Cornerstone website.

We’re going to actively be posting and sharing this on Twitter and LinkedIn in the days and weeks to come.

We just ask that you give it a thumbs up if you like it.

Those are the housekeeping details.

Nothing too crazy here in D.C.

It’s only November 8th, Election Day.

We’ve got some things to talk about, but we’re going to keep it focused on the Fintech Hustle.

Sam, I know you like to tell a good success story or two to get things rolling.

Maybe you can help tee up our guests by relating something to both Kelli and then to Pete.

You bet. I would love to.

Hello from the home office, or kind of remote outpost office, here in Indianapolis, Indiana, from the heartland.

Good to be with all of you and great to see you again, Al.

I guess we’ve been out on the road a little bit together, and that’s been nice.

That’s a nice-looking guitar you’ve got back there too, but we’ll get to that later.

I just wanted to first give an advance shout-out to Kelli and Pete for joining us.

I’ve had mad respect for these two for the longest time.

They live at that epicenter of the fintech Venn diagram that is, what is it, have fun, be smart and get shit done.

I’ve always loved that combination of things.

That’s always been our criteria whenever people come to us and say, “Hey, what’s this Fintech Hustle thing, and who do you bring on?”

I’m always like, that’s sort of my three-point plan.

Are they fun? Do they keep it real?

Kelli and Pete have always more than embodied that.

I’m grateful they joined us.

I just love the co-founder, founder spirit that they bring even to larger companies.

I think, Kelli and Pete, you guys would agree, having myself not been a founder but having been at small startup companies, Inc. 500 and whatnot, you sort of never lose that in your blood.

No matter where you go, you have that same kind of frantic sensibility somewhere between, “We’re going to crush the world,” and, “Are we going to make payroll?”

That brings the urgency out there.

I’m glad you guys are with us.

One thing I would ask to get started, I don’t know if people who’ve joined us on the Hustle before know what a day in your life is like.

Could you tell us a little bit about what you do and how you spend your day?

Kelli, my mom always taught me ladies first, so I’m going to go with my mom on that.

What’s a day in the life of Kelli Schultz look like these days?

Are you sure you want to know, Sam?

Oh, yeah.

I think the fintech moniker works really well, not only in the fintech side of my life, but in my life in general.

I’m a mom of three, one in their 20s and two teenagers at home today.

Welcome from my home office in Hilltop in Elizabethtown, Kentucky, where I kind of do business in support of a Fort Wayne, Indiana-based company, Allied Payment Network.

A day in the life usually consists of a little bit of thought and prayer in the morning, getting the kids off to school and hoping we’re going to get through the day without any bat-phone calls.

It’s always a great day when there’s not an emergency in an early-stage company, particularly one that moves a lot of money.

Then I’m really guiding people that I’m building in the organization.

My title changes all the time.

I’ve never cared what my title is.

I’ve always been one of those people who says, “Hey, call me the janitor if you want to. As long as my paycheck is right, I don’t care.”

What I really enjoy is the hustle and building great teams out of great people in great communities.

That focus on delivering services to our community-banking network here in the U.S. is so unique and such a blessing for us.

I think we need to be really cautious in these days that we don’t squeeze it out.

All my efforts are going into that.

You’ll find me building across the company, everywhere from sales, revenue, marketing, technology and business development, all the way out to the service experience and designing that.

I get to design how our clients feel when they interact with us.

That’s an honor to be able to do.

It’s not easy to deliver on every day.

Then it becomes about all the processes and underpinnings.

So, all that said, Sam, I’m bouncing around the business, helping grow whatever area needs focus so that we can take our company from where we stand today to another successful exit ultimately.

Pete, when you’re ready for your next bill-pay company, I’ll be ready for you.

What I think I’m hearing is no titles necessary, bouncing around, there’s clearly a revenue component, but it’s mainly team building.

I love the service-delivery angle too.

Again, welcome.

Pete, take us through it.

In addition to that colorful background, I love that.

It’s like vintage California maybe, a little bit.

Yeah, it’s awesome.

A little ’70s roller-rink vibe going on.

That makes me want to put my skates on.

You don’t want to see that, Kelli.

I used to skate a lot.

What’s your day in the life looking like there, Pete?

This is actually the home office away from home.

It’s a really neat spot.

When COVID happened, my wife and I were working out of the house and wanted to try to get out of the house.

We found some office space at a local marina about a five-minute walk from the house.

We ended up renting it.

We did the paint on the wall here and made it fun.

She’s got an office upstairs.

I’ve got an office downstairs.

It allows you to leave the house in the morning, get a cup of coffee and come to work.

It’s nice to be able to have some dedicated space.

Outside of being here, as most of you know, I work for Jack Henry.

Jack Henry acquired Geezeo back in 2019.

I’d say my days are a little different than they used to be back during the Geezeo hustle, which was living, breathing and dying every day with new challenges.

But I’m really enjoying my role and the work that I’m doing at Jack Henry.

I got to spend the last couple years on digital strategy, working with fintechs and saying yes to them to make it easy for them to integrate.

That’s a fun place to be, as opposed to being on the other side of it when things were a real challenge back in the day.

Being in a position to help fintech reach our addressable market has been really enjoyable.

Then this last year, I joined the corporate-strategy team.

Within the last year or so, I’ve been focused a lot on Jack Henry’s crypto strategy.

So still quite a bit with fintech in general, but with an eye toward crypto.

Outside of work, I spend some time flying planes, driving boats and we’ve got a 10-month-old baby at the house, so that’s keeping us busy.

That’s an adult portion right there.

Fantastic.

Even amongst all that, didn’t you tell me you were just at the Money20/20 show?

Yeah, just at Money20/20.

It was great.

I think I probably got three months’ worth of meetings in two days.

It was one of the better ones I’ve been at in quite some time, without an overconcentration in a particular area too.

It was a good event.

Pete, let me hop in and ask you then.

Sam, can we dive right into the questions?

I know we were going to free-form on things.

Yeah, absolutely. Jump in.

We get to hang out with Ron Shevlin, our chief research officer.

Ron came in after a few days in Las Vegas looking like he needed a few Corpse Revivers and some oxygen tents to prop him up.

No doubt.

That’s the snark going to the king of snark.

I wasn’t able to go to Vegas this year, so I’ve been really trying to absorb what some folks were talking about.

I made note of something Chris Nichols at SouthState wrote.

It was all around big ideas and small ideas.

I want to paraphrase him.

I think one of his big ideas was that people still don’t have a fundamental understanding of profitability and that a lot of vendors, banks and speakers have no real feel for profitability when it comes to products.

You’re talking about crypto.

Crypto has gotten pretty cold over the last six to nine months, the underlying blockchain technology notwithstanding.

When you think of crypto and how much a bank might make off customers in terms of offsetting the risk of bringing it in, that number is probably pretty small.

Do you think that big idea of knowing your profitability was something that was not discussed at Money20/20 in a way that it could have been?

And that’s to you, Pete.

I’m going to try to stump you right out of the gate.

Sure.

I think we see that with almost any new innovation.

That’s always the pushback and challenge of profitability and revenue, outside of customer adoption.

If you take it back specifically to crypto, to your point, it’s really the underlying blockchain technology that I think is the real opportunity here for financial services, as it relates to payments and a variety of other applications.

If you look at it as it relates to profitability, operational efficiencies, reducing costs and improving margins on services, I would say crypto related to blockchain and payments is hotter than ever.

It isn’t cold by any means.

Certainly, as an asset class and investment vehicle, crypto winter is a real thing.

But you could say the same thing about the U.S. securities market.

As we look at applications in financial services, profitability should be a guiding light in my opinion, along with the opportunities to reduce costs and create new and improved solutions that support consumer demand.

A lot of those opportunities are right in front of us.

I could add something to that.

I tend to agree with Pete in that crypto is a strange thing.

Just when you think it’s cold, it’s not, and vice versa.

It’s very volatile.

Everyone doesn’t have an appetite for that.

However, what I think is important for our community banks right now, as we think about profitability, is to talk about a bigger picture than what is crypto.

The bigger picture is, as a community bank, I need to attract younger generations who think that I am irrelevant today.

So macro-level profitability is gaining the customer you’re not going to get otherwise and figuring out how you’re going to show them that you’re not only relevant as a community bank, you’re not their grandfather’s bank, but you have capabilities you can deliver to that user in a way they can’t get anywhere else, and they get a relationship too.

Then, when they grow up and face that life challenge, they’re going to know who to call.

I think the profitability comes with earning the relationship.

There are also tremendous commissions to be earned on crypto trading by banks.

From a noninterest-income perspective, this is one of the first products in quite some time that has come out and allowed a bank to actually earn commission on the trading.

I think that’s a big deal for them.

Pete and I were nerding out about tokenization and other concepts at AFT out in California.

He introduced me to the NTT concept.

You’ve got non-fungible tokens, then non-transferable ones.

I try not to be too advanced in my thinking for something that’s still developing, but where I get excited about crypto is not about it being an asset class, but more of a proof of concept.

If I can look at a digital asset moving on the blockchain, it shows it can be done.

That’s where I get more bullish on the underlying technology because then you can start to think about the business outcomes that can be achieved.

You can think about how you create the plumbing needed for the future.

That’s where I look at banks needing to get a little more sophisticated even before there’s regulatory clarity.

I’m not trying to dismiss the tokens and crypto itself.

I’m thinking as a bank that has typically been skeptical about the business results they could find, if you could look at it as something that proves it works, your mind might reorient itself.

I was talking to a colleague at work, and the question came up: How many of our customers want this?

How many of our customers are asking for crypto-related solutions?

My answer is actually not many of them.

Some are looking to be innovative, Kelli, to your point, to stay relevant and offer new products and services that demonstrate innovation and uniqueness in the market.

But I can tell you all of our customers want to offer products that reduce their costs and improve quality.

If you take the crypto and blockchain language out of the solution, you don’t have to educate a market on, “Here’s a lower-cost payment solution that is faster and also introduces some really neat components around order management.”

There’s your smart contract.

I think some of the challenge is stripping out some of the nomenclature to introduce products and services that ultimately, back to your profitability point, have a clear business case.

The other thing, Kelli, I think you nailed.

You talked about capabilities that make you relevant.

Pete, to your point around how many, I always think about conferences.

Is it always important that there be a bazillion people there, or is it important that the right hundred people are there?

Similarly, I’m thinking specifically about midsize banks in the United States.

Seventy percent of them are commercial banks.

As more of those commercial banks add wealth management, look no further than treasury.

There’s almost a parallel there.

To Kelli’s point, you earn fee income from treasury at the same time you’ve got pressure on consumer interchange because of legislation and other things happening.

You’ve got pressure on noninterest income on the consumer side at the same time you may very well be predominantly a commercial bank trying to add treasury to be more competitive.

How many businesses use treasury?

For most midsize banks, it’s not that many.

But the point is, it’s the right few.

You’re locking up so much of the relevance, earnings potential and future earnings risk.

One of the things I would ask you guys, and certainly I’m seeing a lot more of it, is people talking about their niches and where they really want to be good.

Crypto may not be that for everyone, but for some banks it might be an important must-have for a group of 15 or 150 clients.

I don’t know if you guys have any thoughts on that, but it strikes me that it may not be about having a whole bunch.

Every community bank and credit union needs to shape who they are, why they exist and who they’re here to serve.

When you think about who you’re here to serve, that market has certain characteristics or qualities in the niche you want to attract.

If you’re agriculture, you’d be amazed at how much P2P takes off in the ag business because we’re constantly transacting with individuals throughout the day, and it’s a really easy way to transfer money.

There are ways where that becomes a niche product.

I’ve got one in Dakota where that’s absolutely the case.

They have one of the highest adoption rates on a B2B product anywhere in the states.

It’s because of the clientele they have.

They’re more modern, progressive farmers.

Even with crypto, I don’t know if crypto is going to be it.

None of us knows that.

But what I can tell you is we have to do something.

We can’t rest on our laurels and be the bank of 1980.

We have to be current.

We have to bring forward products and reasons to engage.

Pete and I could probably go all day on engagement and banking.

They really have to have something that makes those consumers feel like, “This is the place for me. It’s got the right mix of products. This is who I am. This is someone I can count on to take care of me.”

Whether that is crypto or something else, I don’t know.

But I do know one thing.

The marketing power alone for credit unions is sending a message that something’s happening here.

We’re different.

We’re thinking differently than we used to.

Done right, that can attract new generations to bank with them that may not have given them a look otherwise.

The truth is, consumers today choose their bank on technology.

At the end of the day, it doesn’t matter what your interest rate is and it doesn’t matter where their grandfather banked.

In fact, that almost precludes that they won’t bank there.

So, at the end of the day, it really is a question of how you position yourself to be just right for that market segment you’re there to serve.

You don’t need to take over the world to do that.

Can I add and build on what Kelli just said real quick?

You talk about going to a cocktail party and creating a little bit of a conversation starter.

Sam and I do this all the time.

Sam has his hats.

That’s why I brought my hats, in case I need to toss one on.

You start to talk about things.

Anyone who’s seen Sam at an event loves his hats.

He’s really stylish.

I think fintech can be stylish to banks that they’re trying to do business with, not as a hard sales pitch, but to understand that if you’re talking about blockchain today from a bank board’s standpoint, there has to be a fiduciary duty to follow this and inject it into strategic conversations.

If you’re at the board level, you cannot be a fast follower on some of these conversations.

They have a responsibility to look at this.

Just because the business logic today might say it doesn’t make dollars, so it doesn’t make sense, that doesn’t cut it.

If I were to put on a fintech company’s hat and walk into a conference where there are a lot of bankers, I would not be pitching my solution.

I’d just say, “Look, if you’re interested in payments, this could be the future of payments, and it’s still maturing. Understand this is a potential outcome. This is what we’re working on. This is what we’re working toward.”

If it’s universal passporting, so you don’t have to refill out forms and KYC yourself, speak in terms bankers would understand.

“Oh, you’re talking KYC. I love that.”

At a cocktail party, that would start a discussion that I don’t know is happening all the time because people get a little sideways.

Then you can pull it back to what’s going on in payments today.

There’s a lot going on in payments.

What’s the bank’s future role in a payments ecosystem?

How do you create urgency to create a strategy if you don’t have one?

All that is where I think a lot of tech companies are trying to start their conversation.

There might be that cheap hack of talking about something everyone is still trying to get their arms around after years of talking about it as if they know it, and use that as the entry point.

Beyond crypto, I would love Pete and Kelli’s views on what they see working well in fintech right now.

Whether it’s when you’re talking to banks or other partner organizations, both your companies have a lot of partnerships.

I know, if I’m not mistaken, Kelli, you guys recently announced a funding round.

Pete, you had the acquisition of Payrailz.

People talk about there being no funding out there for fintechs.

I think what I’ve been seeing is funding may be a little more cautious.

I think it was Alexa Bonteville who said at Finovate, “The money is still there. The cost of capital and the scrutiny are a little higher.”

But it seems to me where there’s a use case that’s really solid, whether it’s Payrailz, Pete, or what you guys are doing at Allied, Kelli, money is finding its way to solid use cases.

Where it’s very speculative and dreamy, it just does not seem to play.

If I’m putting on my “what’s hustling right now” hat, it seems like really good, solid use cases are what’s working.

They’re getting the money.

Kelli, I don’t know if you want to go first, but what do you see working out there in fintech land?

First of all, there’s no shortage of money out there.

I don’t know where that’s coming from, but coming off a fundraise recently, there’s money everywhere.

The question is, are we talking about a use-case play, or are we talking about a platform play, a network play?

That’s really where it matters.

Today, if you take a look at Allied and think about us as the bill-pay company, bill pay is a use case.

Bill pay has nothing to do with who we are other than it’s a use case we use to make money.

The platform play comes into effect where we’re leveraging our real-time integrations into many bank clients, north of 500 now, in order to move money faster for whatever reason.

That reason could be to buy crypto in real time, to trade crypto, buy or sell.

It could be to pay a bill.

It could be to pay a person.

It could be to pay an invoice you’ve received.

There are lots of use cases you can layer on top of that set of rails.

For me, one of the most frustrating things in this industry has been waiting for the networks to do something.

When I say do something, I mean when we’re talking about The Clearing House and RTP, we’re talking about FedNow, these things have been in pilot forever.

The endpoints and the reach just aren’t there.

There are use cases where it makes sense to connect to them today, but they’re not what they were cracked up to be.

They were supposed to be much more extensive.

The countereffect of that for me and the companies I’m working with has been, “Well, guess we’re on our own, folks. We’re going to go build it.”

That’s what we’re doing, building out our own platforms that can move money in real time from endpoint to endpoint.

Those endpoints can extend as far out as loading your Starbucks card through your bank’s website, PayPal, Venmo, what have you.

The more we start thinking about the platform and how an endpoint to send money from or receive money to could be anything, now we’re really talking about a strategy banks can get behind through a single integration and be able to get into all of those use cases that present them with opportunities to craft their own answer to, “Who am I, and who do I serve?”

As you’re rebutting Sam, I’m thinking that when he’s talking about money being a little scarcer, I look at it as companies that are flawed aren’t getting invested in.

That’s not the way it was last year.

Last year, the narrative was, “Don’t worry about financing deficits. The cash will be there for you.”

Now that’s no more.

I think investors have started to become wise that there are a lot of lending businesses that kind of masqueraded as SaaS businesses for their valuations.

That’s where there’s been an awakening of sorts.

Then I think about the public markets.

Again, I teased Ron, but I don’t want him to think I was just teasing him when we were together.

I was listening to him.

I think he gave me something like 75% to 80% of public fintech stocks are down in valuation from last year.

What’s changed for fintech founders from 2021 to 2022 is, how do you preserve capital?

Reduction in force.

We’re seeing it across the board.

Get leaner.

Get faster.

Pull back on your marketing spend.

Getting to cash-flow positive, or at least break even, seems to be something that I hear quietly discussed in pretty much every fintech one-on-one I have.

Maybe I’m just trying to bail Sam out of his comment, but I do think these companies that in the past could have been attractive to an investor just aren’t going to get the same attention they would have nine or 12 months ago.

There are a couple of things I experienced during the fundraise that would explain a little more behind the comments.

You’re right that there was a lot of money invested last year and there’s not as much action this year.

What I’m hearing from investors, who by the way are all following up now, the ones who didn’t invest are following up now wanting a bite of the apple, tells me they’re still there and they’re still hunting.

What they’re hunting for is a broader play and a broader strategy.

They don’t necessarily want just this one-trick-pony company.

I think that’s the distinction.

It depends on what you’re up to and how interested they are.

Profitability, I will tell you, they are pushing on profit.

The investors are pushing on profitability.

Everybody gets uncertain in market conditions such as these.

We want to make the investment and not be penny-wise and pound-foolish, but at the same time we need to ensure our companies are on a path to self-sustainability.

That’s really what they want more than anything.

But they will go into the red.

My investors are saying that to me right now.

“You’ve got something you want to invest in? Tell us. We’ll write another check.”

So that said, I think it’s all about having the right story, the right product line or more than a product to take to market right now.

I was thinking about something Brett King pointed out to me.

He wasn’t running into situations where people were pushing hard on profitability as much as they were pushing on business model, tweaking your long-term value.

One other fintech founder we’ve had on the Hustle before said to me privately, “We have two sets of books.”

That doesn’t sound very good, but it’s sort of the name.

There are two sets of books.

There’s one set that’s standard accounting and profitability, and then another that says, “This is what we would need to do if we needed to press the panic button.”

We’re not pressing the panic button.

We’re going for long-term value.

We just have to build the confidence levels with investors that the model, whether it’s a platform play, use case or multi-use-case play, is valid and has legs.

That’s a good pushback.

I like your point around a platform play, that there are multiple points of entry and more flexibility.

You’re not just going after one trick and then trying to find another trick, a third or another module.

You’ve got a little more vision to it.

You’re building longevity.

And just for the record, I have three sets of books.

I have the, “Hey, everything’s going gangbusters. Keep your foot on the gas.”

I have the normal day-in-the-life book.

Then I have the “Oh, shit” book.

Right.

The break-glass-immediately book.

Our investors actually taught us to do that here.

One of the things I really appreciate about that is just knowing how far away from the panic button I am at any point in time and being able to manage based on that.

I think it’s important for a management team to understand that.

I’m glad to hear people say they’re doing that behind the scenes.

I think it’s a very healthy thing to do as a business, especially in an early-stage company, keeping in mind that most don’t make it.

You need to know when to cut your losses.

I’m fortunate that we don’t have to look down that path.

But I was running a payments company in 2008 as well, and I’m telling you, there are times when things will change your path in a heartbeat.

Time to get the “Oh, shit” books out, right?

Yeah, I hear you.

Pete, I would love for you to jump in here, either with reactions to any of that or just what you see working well or not working well out there.

It sounds like funding is better off than maybe I thought it was, or better than some of the things I’ve been hearing right and left.

Anything else come to mind in fintech land?

Sure.

But first, I might as well share my story.

I feel like, jeez, at least the first eight years or so, we only had that “Oh, shit” book out all the time.

Eventually, we got there.

It took some time.

It did feel good when the sun came out a little later in the company’s growth and we were able to come up for air.

But that’s part of the hustle, right, Sam?

That’s what we’re talking about when a lot of these companies are feeling those challenges today.

What I’m seeing is certainly the funding is there.

Like you’re saying, I do think, Al, to your point, it’s not all, “We’ll figure it out later. Don’t worry, we’ll have another round of cash for you if things get tough.”

There’s certainly more scrutiny.

But for the right business and the right product, there are eager investors looking to make bets.

What I’m seeing that’s working, and what I think is exciting, is there’s still a ton of innovation.

It’s typically coming from fintech.

If we look at the crypto space, a lot of that has come from DeFi.

The innovation is moving at such a fast speed.

In many cases, these end up becoming good things for our industry and traditional financial services.

A lot of the innovative products are coming from bleeding-edge fintech, coming from DeFi, and now they’re being introduced into our traditional models and existing stacks.

There are opportunities to modernize.

Another thing we’re seeing is fintechs that, like early Geezeo days, started off direct to consumer, when it was, “Just get users and we’ll figure out the business model later,” have pivoted today to B2B2C.

In my role, I’m talking to more and more fintechs that started off as direct to consumer that are saying, “We need to start making money, and here’s a path to do that.”

I think our community financial institutions are going to benefit greatly from a lot of the innovation happening in fintech, with some of these startups making that pivot to offer their services white-label or as a service.

Our banks and credit unions, and ultimately their consumers and business customers, are going to benefit from that.

I think it’s an exciting time in our space.

The innovation is exciting.

There are regulatory challenges we’re working through, which ultimately I think are still going to favor traditional financial-services companies.

But nonetheless, I think a lot of that talent and technology is coming back to our community financial institutions.

Very interesting.

I tend to agree with your optimism.

That’s all I’ve got, Sam.

Usually it is optimism, maybe to a fault.

That’s part of the brand.

But I actually think there’s always this funny thing where regulatory issues get presented in a negative view.

I almost look at it as a bit of a moat.

It makes it more difficult in some ways.

If you’re a brand-new startup coming into the U.S., for example, we see this every now and then.

We’ll talk with an industry provider coming into the U.S. and they’ll say they have a loan-origination system.

We’ll say, “Will it work for a mortgage?”

They’ll say something like, “Well, yeah, as long as a mortgage works just like a consumer loan.”

That’s just it.

It doesn’t.

That tells me you don’t know anything about this market.

The regulatory difference between a mortgage loan and consumer loan is a great example.

It’s a barrier.

That’s one of the reasons why people who get really good at mortgage loans, there aren’t that many of them.

There’s not a really long list because it’s hard and the regulatory thing is hard.

I almost view it as a plus for you guys.

Kelli, you talked about all the money you guys are moving on any given Tuesday.

When you’re moving around that amount of money in a regulatory environment like ours, you get really good at knowing certain types of things and having muscle memory around those things.

That’s not easy to replicate.

It’s almost a bit of a differentiator.

One hesitates to say a differentiator because there are hundreds of companies in our industry, but there aren’t hundreds of thousands.

Kelli, any thoughts on that?

I’ve always said, if you look around where fintech companies pop up and where payments-related ones pop up, what you’re going to find is pockets of them.

You’ll find these little hotspots around the country.

Believe it or not, you’ve got a hotspot sitting here in Elizabethtown, Kentucky, of all places.

Why?

Because it’s a knowledge business.

Payments is a knowledge business.

At the end of the day, it’s a dangerous, high-risk business.

People coming into this space who want to think about moving money or partnering with somebody don’t want to think about doing it and everything you have to control around making that very high-risk business successful, protected and agreeable for regulators.

Now I’m going to say something perhaps a little controversial here.

I know, right?

I’m on the right show.

Here’s the thing.

When we founded iPay, for example, and built iPay, the entity, the money mover that we were, was not an entity in the Nacha rulebook.

Literally.

We showed up at Council for Electronic Billing and Payment meetings, and I just listened.

I’m like, “I’m not that. I’m not that. I’m not that. I’m not that.”

Finally I said, “Hey, question. Here’s what I do. Where do I fit here?”

They had no answer.

There were no rules technically that bound us in the beginning.

That’s true today around crypto.

There aren’t rules.

Regulators are struggling a little bit with that today.

Less so on the credit-union side.

They’re full steam ahead.

The bank side is getting locked down a little bit as they try to figure it out.

The controversial statement is, if we don’t innovate out ahead of the regulators, we don’t actually think the regulators are going to do the innovation for us.

We don’t think the rails are going to get laid before there’s innovation to put on them.

At the end of the day, in order to really push the boundaries in this space, you have to be out ahead of the regulators, and we have to bring the regulators along.

Otherwise, none of the things we’re doing today, all the way back to digital banking, multifactor authentication and the whole nine yards, would exist if somebody didn’t get out ahead of it.

That’s part of why we continue to push the boundaries, to show and signal regulators, “Here’s where we think the industry needs to go in order for our community banks to be healthy.”

We’ll walk with you.

But come on with us.

Take this journey because we really do think this is important for the industry.

It takes some guts to get out there and lead them that way.

As you’re saying that, let me share some observations from talking to bank CEOs.

I know this is all around the fintech space, but in the last eight weeks, I’ve probably spent more time than I care to acknowledge with various community-bank CEOs who inevitably say their biggest wildcard today is the regulatory environment.

It’s interesting.

We started talking about crypto, and I know that wasn’t the intent of today’s Hustle, but I even think about regulation as it might impact the blockchain stuff we were talking about.

If you think about trillions of dollars potentially being reallocated on the blockchain, that means we need regulatory clarity.

Right now, that’s challenging because there are at least six federal regulators that have congressional committees at their disposal, and they’re all trying to parse out what’s going on.

That’s where I think the regulatory wildcard is not the moat that Sam described it as.

It’s really the deterrent of saying, “Am I playing football, baseball, soccer, tennis? Where am I competing?”

Give me the opportunity to have a playing field that’s level.

Competition is healthy, but I don’t want things moving every two years or every four years.

That’s not how you build a durable business model.

Yep.

It’s tough because you don’t know what’s actually going to be the thing that sticks.

But I do tend to agree with Pete.

I think blockchain, it’s time.

It’s time to do something better.

I personally worry about the age and fragility of U.S. banking technology under the hood.

Frankly, I think regulators should be worried about that and weigh that against what it is we’re looking at as a potential replacement, or a better, more secure, easier-to-control mechanism.

We just have to be real with ourselves about how ancient the technology under the hood is.

Ancient technology in no industry is a good thing.

Well, quick housekeeping note.

Al mentioned earlier about asking questions, and I would encourage our live audience.

For those of you on demand, sorry, you’re going to have to ask us questions later, but you can get ahold of us.

You know how to do that.

For those of you in our live audience right now, if you have any questions, don’t hesitate to pop those in.

Al and I will keep an eye on it and address them as we can.

We’ve got about 11 minutes left to keep the conversation rolling.

One other thing I’m noticing out there, just to get your perspectives on it, we’ve talked a little bit about payments.

We talked about crypto, which is the asset side, although there are certainly payments and lending use cases as well.

But it seems like there’s a lot going on in lending tech.

I’m picking up on a lot of people looking for tech to either drive loan volume, whether marketing systems or loan-origination systems, that are being acquired or supplemented.

I was just noticing yesterday the announcement that MeridianLink had acquired OpenClose, or was going to be acquiring OpenClose.

That would be beefing up in terms of mortgage.

I’ve certainly seen lots of movement on payments.

Kelli, to your point, there is a network effect there that I don’t necessarily think we have to worry about on the lending side, where we can maybe make some moves a little more.

We don’t have to wait around for the network effect.

The network effect helps us on the upside, but until we get that flywheel effect, sometimes it’s a bit of a slowing thing.

I don’t know if you guys are seeing any other patterns, whether it’s Pete when you were at Money20/20 or Kelli in your travels, of other categories of fintech where you’re seeing some interesting up-and-comers.

Another one I saw at Finovate was the continued focus on customer experience, shadowing platforms, AI bots and that kind of thing.

I don’t know if there’s another area that’s really popped out at you as an up-and-comer.

Go ahead.

Kelli, I’ve not been out on the road as much lately, and Pete has.

I know we were exchanging some notes yesterday.

Pete, why don’t you take this one?

An area where I’m seeing more and more interest, and I think it was a little more prominent at Money20/20, is identity.

KYC, AML, self-sovereign identity, identity on-chain.

Al, that gets back to the NTT conversation you and I had.

Open banking has made some great strides in getting controls back into the hands of the consumer, giving consumers control to know where their data is going, what data is being shared and how.

Interoperability between financial-services technology companies and organizations.

I think we’re going to see the same thing from an identity perspective, consumers having more control over their identity and what information is being shared.

Sam, that kind of brings you back to loan origination a little bit.

The amount of waste in onboarding a user every time they get a new product or need to update something.

I think we could ask consumers, “What’s one thing you don’t like doing when it comes to financial services?”

Having to fill out all the same stuff over and over again when it’s like, “Don’t they already have this information?”

Same in medical and healthcare.

That’s a good point.

Identity management isn’t unique to financial services.

This is an issue for consumers day to day, whether it’s healthcare, government or e-commerce.

In financial services, there’s a lot of room for improvement.

I think the challenge will be interoperability between identity-management solutions.

It’s going to be hard to have one thing for everything.

That’s where some of the application for on-chain comes in.

If you have this ability to take it with you or make it compatible with other solutions, you have a platform now that service providers, whether it’s loan origination, account opening, credit card or business solutions, can build to.

If there is a standard for those services to build to, you’ll see great improvements in efficiencies, lower cost and better customer experience.

It’s an area that I think is ripe for some monumental change.

AI, customer-service chat, analytics, that’s kind of evergreen.

That’s always going to be improving.

I don’t know that it’s this wave, whereas what we saw with crypto and blockchain tech, what we saw with the internet, what we saw with mobile, I think identity is going to be another big area for growth and improvement, and hopefully just better experiences all around for customers and users.

Kelli, anything to add to that?

I just want to add to Pete’s.

I’ve heard from different investors about their interest in the fintech space moving away from buy now, pay later and the AI whiz-bang capabilities, more toward cyber insurance and fraud.

They find that far more interesting for the reasons Pete just said.

A company like Sardine identifies synthetic fraud.

It started up around movement between crypto, I think, and now something like two-thirds of its clients are banks.

Those are the places where, as things move from analog to digital, investors are going to be paying more attention.

If investors are paying attention, they’re going to have a business outcome or case that’s worth taking a peek at.

It goes back to authentication and identification being hugely valuable.

It’s a place where banks and tech companies can really naturally work together.

It doesn’t have to be competitive.

I think that’s where investors see real upside for funding those types of business models.

I would describe it this way.

To me, when we talk AI and machine learning, those are a means to an end.

They’re technologies that allow us to do things differently and create an experience.

From my perspective, I don’t focus so much on, “Is it AI? Is it ML?”

I focus on, “Is the experience one that would be further improved by these technologies? Are they the right technologies to produce the optimal experience?”

Sometimes they are.

Sometimes they’re not.

Sometimes they are in the background to drive intelligence internally so we understand our users better.

Buzzwords are a funny thing.

Some of them are an actual thing, and some are a programming method or technology.

I think it’s important as an industry that we separate those things.

What is it we’re trying to do?

We don’t AI just for the sake of AI.

We need a service and an outcome.

We’ve just got a few minutes left.

I know all of your time is valuable.

I suspect you guys might be booked up right at the end of the hour, and we want to be mindful of our guests online as well.

In closing, I’d just like to ask quickly, it’s November 8th.

We’re heading into Thanksgiving season and on into 2023.

What are you all thankful for?

I’ll kick off by saying I heard all of you mention your children.

Charlotte, my wife, and I have three boys.

One of them actually is a developer in fintech now.

He’s 23 years old and out there writing code.

I’m very thankful for our family, but I’m also really thankful that I get to work every day with fun, smart, kick-ass people like you two, like you three.

Al, you get to be included in that too because you’re the ambassador of quan.

I’d love to know what our guests are thankful for going into this season.

Kelli, let’s start with you.

Faith, family and friends.

Top of the list, always for me.

But at the end of the day, I consider family my work family as well.

I have to tell you, this whole industry is family to me.

I’m grateful for all the friendships along the way.

Pete, I can remember the first time I think we actually met in person was in the old iPay building here in E-town, when he was at Geezeo.

All those things make work less like work, more like just having a great time, doing great things and helping great people.

What about you, Pete?

Kelli gave us some great advice back in those days that helped us get on the right path for working with financial institutions, that’s for sure.

I still wasn’t sure if they were part of Apple at that point.

I mean, think about how far ahead they were in terms of payments on mobile devices.

Hands down, I’ve got to be thankful for health and family.

Those are probably top of the list, for sure.

That’s such a big deal.

It creates the opportunities to enjoy all this other stuff we get to do, whether it’s work, hobbies, life or adventure.

Having the health and the people to share that with is most important.

My fast thing is I love being around curious folks, people who want to continue to learn and share with one another.

I just think it’s awesome, Sam, what you’ve been able to build here.

Love what Cornerstone does.

Love how companies like Kelli’s and Pete’s continue to push a massively important industry forward.

They can do it in competitive ways, but it’s also all around collaboration and getting creative with one another.

I think that’s the best part of showing up every day for work.

All right.

With that, can I ask one more question?

Really grateful for all you guys.

We’ll see you again out there on the road and on the next Hustle.

Tip of my hat to you.