"We're Pretty Bullish" with Ryan Falvey

Hi, welcome to Money Isn’t Everything. I’m Mary Wisniewski, Cornerstone Advisors editor-at-large and host of the show.

Today on Money Isn’t Everything, I am chatting with Ryan Falvey, who is the co-founder and managing partner at Restive Ventures, a firm that invests in early-stage fintech companies.

He’s also someone I know from my early days of reporting, so it’s super fun to talk fintech with him.

We get into the regulatory wishes and predictions for the industry, shoot the breeze about banking as a service in a post-Synapse crisis environment, and also chat about productivity hacks.

Here’s our conversation.

Well, hello, Ryan. Thank you so much for being on Money Isn’t Everything. It’s really good to see your face.

Yeah, nice to see you too. It’s been a bit.

Yeah, it’s been a bit, and there’s a lot going on.

Gosh, I mean, fintech 2024 was, well, there are a lot of ways to slice and dice it.

I was going to say horrible, but that’s because I’m thinking of Synapse.

But there were a lot of promising things too.

Ups and downs.

Ups and downs.

I guess that’s just the way of life.

I wanted to get into a lot of things with you, but I think to start with, we’re in a new political environment.

I know you are someone who’s paid attention a lot to what needs to happen with regulations in terms of what would help someone’s financial health, by way of fintech being able to do better things because of this regulation, et cetera.

General question to open this, but what’s your prognosis for fintech in 2025, especially in this newer political environment?

Yeah.

Well, maybe not a surprise since we’re early-stage investors into fintech companies, we’re pretty bullish on the category.

We’re excited.

I think there are a couple of things coming together.

Maybe I’ll drill in on the regulatory side in a second, but just as a broader context, we do have some pretty significant technological transformations underway.

Obviously, people talk about AI a lot in various use cases, but we’re clearly seeing the impact of those technologies on startup creation and the speed with which new companies are coming to market.

Also, just entirely new approaches toward solving some of the problems of the financial services industry that make it generally an exciting time to be investing into early-stage fintech, to be an early-stage founder, and to be thinking around where some of the new opportunities are.

Tell me a little about that.

What’s one of the striking, what’s the first thing that pops into your mind when you’re thinking about this?

Like, hey, this is an example of, oh, this wasn’t done this way before and I’m excited about it.

All of it.

The biggest thing, when people talk about layers like these foundation models, ChatGPT and Claude and Anthropic, and then there are companies that are building applications on top of it.

There’s this debate a little bit in technology whether it’s going to be the application layer or the foundation models that capture all the value.

I kind of think that’s honestly irrelevant if you’re creating anything in our society.

If you’re doing something, these tools dramatically increase your productivity.

Whether you’re running a podcast and you can now prep much more quickly for interviews, or if you’re starting a startup where you have to do a lot of stuff that’s really not core to your business but you’re just creating things.

You’ve got to write a lot of code.

If you’re operating in financial services, you’ll need to come up with a lot of explanations around what you’re doing.

You need to create marketing.

So for people and entities that are really early in their creation cycle, these tools dramatically accelerate how much they can publish.

And the benefits really inure to people who know what they’re doing.

You would be a good example.

You’ve been a journalist for a long time.

You’ve had podcasts.

You’re really good at creating content that resonates with people.

You know what works.

If you and I both started a new publication tomorrow, we could use a lot of these tools to create a lot of the foundational things really quickly.

A business plan, maybe some marketing for what the website looks like, maybe some early articles.

The difference is you would know the quality of the stuff that these tools are producing.

You’d be like, okay, this is good, and you’d be able to edit it and tweak it and produce really high-quality stuff.

Thank you for giving me access.

My articles, no one would look at them, so it wouldn’t really matter.

I wouldn’t get the same benefit that you get from it.

The other thing is, when you think of startups, for the best founders we’ve seen just a real acceleration of their growth over the last, I’d say, 18 to 24 months.

Companies are generating more revenue where they are in their lifecycle than companies three years ago with twice as much time.

So I think from the startup perspective, it’s been a really kind of dark time for investors over the last couple of years, and there’s a negative narrative out there around fintech.

But I think from the actual companies we’ve seen produced, they’re actually doing really, really well.

I think over the next year, whether or not we had a change in the regulatory environment, you would have been hearing from a lot more startups in the market as they grow and really develop new businesses because we’ve just seen a lot of new innovation with new ideas.

Really quite broad.

Well, Ryan, I do want to ask you more about this because it’s something interesting.

So you’re saying I would recognize, like if I’m using ChatGPT to do an article or something, I’ll be able to edit it and make it better because I have that expertise.

One thing I am a little concerned about would be people who think they can do things, but if they put it in front of someone who’s done that, they might not realize, oh, it’s actually not so good.

You know what I’m saying?

Yeah.

I think you still get the benefit of quality.

This is a good example.

We’re talking about issues that require knowledge among the listener, the viewer, the reader.

They kind of need to already care about financial services and fintech.

If someone were to just produce generic ChatGPT-written stories about fintech, they just wouldn’t be interesting to the readers and viewers who would otherwise tune in to something like this.

I think the benefit, to kind of extend this analogy, is maybe instead of hiring reporters to work for you or maybe hiring editors, you could offload some of that work.

You become more productive.

Maybe you offload parts of the work where you really don’t have a competitive advantage.

Maybe the editing of what you’re looking at, or maybe the marketing of the product.

And you’re in Slides.

I’m like, “How do you put that text box in again?”

But in startups, it’s a little bit different because the main thing these companies are doing, like the people who are there for the first year, they’re typing code on their computer.

That is a big difference.

So if you’re already a really talented technical founder and you kind of know what you’re trying to do, you’re just much, much more productive.

Unlike when we’re creating content, it’s really hard to tell.

It’s qualitative.

It might be good.

There’s a lot of judgment associated with it.

Code generally works or it doesn’t work.

If you’re using some of these things to generate some code alongside you and the code doesn’t work, it’s pretty obvious it didn’t work.

You can go fix it.

But generally it’s working, and the person who’s creating it is offloading a task onto it that might be laborious and saving them time.

It’s making them more efficient.

That is where I think you’re really getting the advantage.

They’re just building the product much more quickly.

Yeah.

I kind of like using ChatGPT for ideas of things that I might not have thought about.

I’m still finessing the way I do a prompt because I understand that it’s a total art, and I don’t quite know the right words sometimes.

But I want to use this in a way that helps me vision board for things I hadn’t considered, things outside of my brain.

So there’s that.

But I want to bring up another very nerdy subject.

I know it’s sort of like, who knows, because of the CFPB getting attacked, or one might say they’re attacking it, just depends where you fall in your political belief here.

But open banking seemed to have made some traction.

Now I would imagine a little bit of mystery about what’s next.

I’m curious about what you think is next for open banking, or what the fintech firms you’ve invested in are thinking about, or maybe they’re not thinking about that.

I’m curious about your take there.

Yeah.

I think we’re entering into basically a period of banking deregulation.

The first times we really could have seen that, we’re going back really to the late ’90s.

At a really high level, the vast majority of the regulation that exists is for banks and insurance companies.

It is for regulated entities.

There are a lot of rules and a lot of guidelines around that.

For most, when we think about how that regulation’s been extended to fintech, it’s extending existing regulation.

It’s bringing these nonbanks underneath the regulatory framework.

A lot of what the CFPB does extends that kind of more broadly.

That’s been driven in large part because the regulated financial services industry would be pointing at the nonbanks, the fintechs, and be like, “Well, how come they’re not covered by the rules too?”

Yeah.

“How come they don’t have to play by the same set of rules?”

So open banking, a lot with how it’s been constructed, is a way of trying to, the nonbank saying, “Well, we should be able to get access to it.”

There’s this kind of tension between, on one hand, having to come underneath some of the rules.

If you were to distill down the open banking rules, they’re an attempt to compromise in a tension of how much of the rule should I, the nonbank, have to be bound by versus how much access should I get to this data, and trying to compromise there.

I think what we’re going toward for the next couple of years, probably, is a very different market where I don’t think the banks and the regulated financial services are super focused on regulating fintech as much as reducing their own regulation.

Businesses generally don’t think through the lens of, “I want to be less regulated, but I want them to be more regulated.”

That’s a losing message.

A better message is, “I would like to have fewer controls over executive compensation. I would like to have lower capital requirements for banks. I would like to not have to follow these rules as tightly. There should be more sensitivity on it.”

That generally is going to reduce the regulatory burden for banks.

And I think in doing so, even further reduce it for nonbanks, the fintechs.

Okay, slight segue, but you’ve got me thinking about this now.

What do you think the state of fintech partnering with the bank is now?

I’m thinking, of course, of the terrible Synapse thing where people couldn’t get their money.

What does that say about banking as a service today or the future?

I’m kind of curious how you’re viewing that.

I’m hearing banks say, “Hey, we’re still working with fintech, but we’re being extra thoughtful about which ones we work with.”

That’s vague.

I don’t know how real that is or how not real that is.

What do you see?

We’re seeing a maturation of the industry.

I think that’s the easiest way to think about it.

The banking-as-a-service middleware always had a challenging component to it, that it was a middleman.

It’s between a bank that has a license and a fintech that was the agent, which was going to, in the eyes of regulators, extend that license.

What a lot of these banking-as-a-service providers did was make it easier, air quotes.

Yeah, always air quotes.

I think this is an industry that needs air quotes.

Yeah.

Made it “easier” to extend financial services.

Easier generally means kind of faster and maybe a little bit looser.

So you have some players who probably weren’t quite as buttoned up and were relying on this middleware provider for the buttoning.

There’s a risk there because oftentimes these banks weren’t particularly sophisticated either.

What’s happened is you’ve ended up with a couple players on the nonbank side, fintechs, which are quite sophisticated.

I don’t know.

Chime, arguably, I don’t have any special insight into Chime, but my guess is from a regulatory compliance standpoint, they’re probably more sophisticated than 90% of the banks in the country.

They’re effectively operating like a bank at this point.

They probably have some market power for when they go talk to banks about who they’ll partner with.

I’m sure a lot of banks are willing to work with them because they’ve got a large installed customer base and a business that’s pretty predictable and, from all media reports, profitable.

So that, I think, is just a natural maturation of the industry.

Then you have a lot of players, small companies, companies we invest in, that maybe haven’t broken through.

Maybe they don’t have scale, really aren’t driving significant revenue, and at the end of the day might represent more of a liability, some risk, to some of these institutions.

You’re going to see the market kind of pull back from them.

I don’t know if that’s necessarily, I think you’ll continue to see bank-fintech partnerships.

I think you’ll probably see an acceleration of those over the coming years again.

But I think the heyday of being able to go partner with a BaaS provider and get live in a couple of weeks is probably not coming back.

That’s kind of wild to think about, that that could happen that quickly.

Ryan, before I take you on another rabbit hole, there’s one segment of the show and it’s called “That’s What You Said.”

But this is “That’s What You Wrote.”

You wrote in BankThink, and it’s sort of related to what we’re talking about, but maybe it’s a little bit different because you published it in October, so again, before the election.

You were offering guidance of what would be some ways to reset the regulatory agenda to foster, I hate, I love this word creativity, but I know it can be viewed as a negative too, but I mean it in a positive way.

You wrote, “There is a massive tradeoff to too big to fail. It discourages risk-taking and innovation.”

I think that’s really interesting.

I know we’re sort of in a different time moment now, but can we unpack that a little bit?

Yeah.

I was trying to write that so it would apply no matter what the election outcome was.

But I do think over the last several years, and I’d say over the last administration, it became, I think, from certain policymakers, increasingly obvious that there was a view that these larger institutions were desired.

You think about the banking crisis we had with SVB and First Republic.

If we went back five years and said the solution to a banking crisis is to have JPMorgan buy another bank, it would have been very shocking, I think, for policymakers.

That was what we were trying to avoid happening.

A lot of Dodd-Frank and a lot of the response to the financial crisis, the idea was to make the big banks smaller, easier to control, less profitable.

Maybe market forces would kind of break them up.

Maybe you’d have more innovation at the regional and smaller banks.

I think that shifted to, “Hey, these big banks are maybe not the best, but they’re run pretty well, they’re easy to control, and it’s better off having a few big ones that are kind of politically sensitive and predictable rather than having 15,000 financial institutions or tens of thousands of fintechs running around creating chaos.”

I think that’s a terrible policy.

I think that policy encourages large financial institutions just to get bigger and bigger.

The way you get bigger in the United States is to swap out poor people for richer people, swap out middle-class people for upper-middle-class people, swap out middle-class people for mass affluent, mass affluent for the wealthy.

If you could have a bank that only banked the top 100 families in the country, that’d be great.

You’d have a huge deposit base.

You’d have really safe loans.

You’d have some customer service.

It’d be an amazing business and you’d be making money hand over fist.

But it wouldn’t serve the U.S. economy.

I think the crackdown on some of these partnerships, in particular focused on smaller institutions, was discouraging innovation in a destructive way.

That’s kind of what we were going for there.

I think the point I was trying to make, and it’s when I think about some of the policy ideas we had, they bring technology into the regulatory world.

A lot of the regulation, these banks are so complicated that it’s really a process checklist that they’re going through.

They’re making sure that the process is appropriate rather than if the business makes sense.

They’re kind of loath to question business judgment.

That tends to penalize institutions that can’t really keep up with the process.

Maybe the process isn’t quite as tight, but the business is actually pretty safe.

So to that scenario where technology can kind of come in and say, “Hey, this is actually a pretty low-risk thing they’re doing, so let’s see what happens.”

This makes me want to get into financial health things because that’s something we’ve talked about a lot over the years for different stories I’ve done.

You have such an interesting perspective here.

I think, I don’t remember quoting you saying this, but at one point you were saying it would be hard for a checking account to get worse.

I think we were talking about overdraft fees, and maybe at the time the apps were a little bit clunkier.

I know the bigger banks are a bit better.

But what’s interesting these days in the financial health scene?

What would be the Digit of today?

It doesn’t have to be an automated savings category, but what?

Yeah, the Digit of today would just be a lot better.

If you asked Ethan, the founder of Digit, he could do Digit better.

The technology is so much better now.

You could be a much better coach, not just sweeping a little bit of money into a side pocket, but actually giving you advice on what to do.

I think the problem of the Digit of today is that that business would have so much regulatory risk associated with it that no one would fund it.

You’d have a business that still has to sweep money into an account, which turned out to be hard for Digit to keep up without running afoul of some regulations.

I thought that was a terrible enforcement action for the CFPB to bring.

I remember that.

Yeah.

That was incredibly chilling.

The business had done nothing but try to be on the right side of it.

The idea that we’re going to make a big rigmarole out of small-time stuff, I thought, was just terrible.

I think really bad policy.

Sure that there was accurate...

But I just don’t think that’s how you want to encourage the market to evolve.

It certainly slowed innovation in consumer products.

But you’d still have that to deal with.

You’d have to deal with the fact that this AI agent would be telling somebody advice that sounds like financial advice.

So are they, well, what are their, how are they keeping logs?

What are they advising on?

Are they a fiduciary?

You could just imagine it could be too complicated.

That’s why I think you do need to kind of take a step back.

I’d like to go back to an environment where there was some space for people to innovate.

When Digit was created, CFPB had Project Catalyst.

I remember talking to people about how to solve these problems.

There were actual government employees meeting with startups and giving them advice on how they could comply with the law, what they could do.

They were talking about fintech sandboxes.

They were creating no-action letters.

You could try these things out.

Oh, that’s right.

But what a terrible, I mean, I hate these names though.

No, but you’re bringing me back.

It’s like that game Hot Lava.

You know, the little kids, sandbox, don’t touch the sand, it’s lava.

Men in suits mostly.

It just seems strange.

Well, I saw in the news in mid-January that Barclays was sunsetting its Rise fintech program.

So I don’t have any insight into that, but that’s another example of something changing.

Ryan, what are you seeking when you’re seeking early stage?

Are there core qualities or flavors that you’re especially looking for?

I am especially interested in anything cooking on the gig side, because I know year after year everyone’s like, we need fintech or bank accounts that are better for gig workers, but it seems harder to find something that’s working.

Yeah.

We try to be the first investors in the companies, really.

That is the hardest job.

Yeah.

The key is we’re just looking for people.

There are three of us.

We all talk to every founder.

We’re all kind of asking slightly different questions.

We generally want to see a business where they’re actually able to code, build the product themselves.

That saves a lot of money and resources.

Generally, we’re really relying on the founders oftentimes to bring the best ideas to us.

We’re not really out there with a thesis of, “Hey, there’s an opportunity here.”

It is really kind of an open book.

We try to encounter founders and hear where they’re taking the market.

They tend to have a better insight on where the opportunities are.

Then the other big thing we’re looking for is just the speed of execution.

Going to your original point on AI tools, they just speed up these companies.

That’s the real thing.

The faster that they move, the more things they can try, the more mistakes they can make, the more progress they can make in a shorter period of time.

That’s really the advantage of startups.

Those are kind of really the three things that we’re looking for.

As far as what we’re seeing, you continue to see a lot of leverage within financial services.

Financial services are really two things.

There’s a license and there’s a bunch of services.

Way to make it sound so interesting.

Wow.

Should write the tagline.

The services piece, some of those are really susceptible to having LLMs and some of these new technologies dramatically reduce costs.

So you see a lot of that where someone’s going to use AI to replace some paper-based process or some reporting function that creates reports with an audience of one or an audience of zero.

There are a lot of those in banks.

That’s a constant theme we’re seeing right now.

We’re seeing a lot still on compliance.

Going to the theme of some of the earlier questions around where you see regulation going, the regulatory environment has increased to such a degree that you now see a lot of companies that are saying, “Well, hey, we can solve this particular compliance machine. We can help the bank navigate this particular part of the partnership. We can provide some additional oversight over this function.”

That continues to be a pretty attractive scene.

Don’t see much in consumer though.

Unfortunately, that still is a pretty quiet area.

We love consumer.

I always like doing consumer deals.

I think that’s where all the money is, in consumer.

But you don’t see as much right now.

I think a lot of that has to do with just a general perception that it’s harder right now from an investment standpoint.

Yeah.

Well, Ryan, I have two questions left for you.

One is tied to this.

How are you finding all these founders?

Are they finding you?

If some bankers really want to connect more to fintech founders but seem to, they’ll go to trade shows, but I don’t know if that’s the most natural way to do it.

Maybe it is.

What works for you?

We do get a lot of people who are inbound to us and try to be very open.

So if someone makes an introduction or if we get cold inbound that kind of makes sense, we’re going to talk to those founders.

We try to be helpful on those calls.

That becomes a little bit of a flywheel after a while.

That’s a significant source of deal flow for us.

We also do a lot to get out there and get the word out about what we’re doing.

Try to identify where we see opportunities and get the word out about why we see opportunities in fintech.

We just published a piece earlier in January that was kind of the state of the market and where we see some of these technology trends driving things, and where we can see some opportunities in the market, particularly around leveraging AI.

We’re even starting to see some innovations in quantum and some of the new form factors that we expect are going to be released over the next couple of years.

Then we do events.

We actually did an event earlier this week we called Go Restive, where we invited founders who had an idea, who might have just been launching the product, to come and hear from founders who are further along in their journey.

To meet other partners, or partners, other investors like ourselves, maybe further downstream from us, and really kind of help them on their journey.

In doing so, obviously, we get to meet them too.

Yeah, no, that’s cool.

I’ll make sure to drop a link to the report in the show notes.

So anyone listening, check the description in the podcast episode because you’ll find the link to that.

Ryan, I have one last question for you, but I’ll open it up to you.

Kind of ties to this.

How should people reach out to you?

Any last thoughts for what to expect in 2025, when it’s already been, I’m just like, brutal?

Yeah.

Well, getting ahold of us is pretty straightforward.

My email is ryan@restive.com.

Twitter, Ryan...

They call it X.

Yeah, I know.

It feels weird though, right?

“I’m on X.”

It sounds like you’re on a drug.

But the usual.

Then, what to expect?

I certainly think we’re going to go into a very favorable period for fintech that will probably be marked by less enforcement, maybe more openness for partnerships, and probably more capital.

My only caution would be, many of these rules are laws and they have long statutes of limitations.

So if you’re building a business in financial services, despite the headlines and the near-term politics, I would definitely continue to focus on investing in compliance and a lot of those processes, and the legal side of things.

That is never not going to be important.

Underscore that.

Plus one.

A lot of the companies that we’ve seen get into trouble, frankly, were somewhat infamous for their lack of compliance and process and controls before they got in trouble.

So I do think that will always be really important.

Wherever the winds are blowing, that’s a competitive advantage because financial services is just marked by volatility, and it’s getting more and more volatile.

In the last four or five years, there have been like twice where we thought basically the financial services industry was going to just end, and fintech was over.

Then it came raging back.

There was going to be a new currency that would replace everything.

There’s a lot.

It kind of goes up and down.

It’s a true soap opera.

A bit of a soap opera, yeah.

If you stick with it and stay focused on what matters, it really does pay off.

I think you can really change the market in a really positive way.

Ryan, last question.

What is the photo on your phone’s lock screen?

My phone’s lock screen?

I have a picture of one of my children.

Oh my gosh, you just picked one.

I alternate them.

Currently, the lock screen is my daughter.

My son had the lock screen for a while, so I needed to kind of, I don’t want to create complexes.

Well, that’s important.

I know.

My mom does that.

My mom does that for her grandkids.

It’s a good way to go.

Well, Ryan, thanks so much for joining me on Money Isn’t Everything.

It’s a pleasure to see you again.

A lot of fun.

So, the one thing I learned is a prediction, but it’s a good one, so I’m going to share it.

That’s that the heyday of being able to go partner with a banking-as-a-service provider and get live within a couple of weeks for a fintech is probably not coming back soon.

That’s likely a good thing.

I hope you join me two weeks from now because we’re in for a treat.

I’m in conversation with the co-founders of a company I’ve really, really been wanting to interview for a while, and that’s the Cobalt Cowboys, where their tagline is, “It’s not our first rodeo.”

See you then.