Kinetic Deposits, the Fraud Stack, and the Inheritance That Won't Arrive

Hey everybody, welcome back to another episode of What’s Going On in Banking.

I’m Ron Shevlin, chief research officer at Cornerstone Advisors, here again with my co-host, Stacy Bryant.

Bryant, how you doing?

You know what? I am living the dream, Ron.

I know you are.

And so let’s get right into this.

You’ve been on the road at a really important conference, and I know you go to it every year.

So tell everybody where you were at, and then I want to hear some of the highlights.

Yeah.

Fresh off the plane from Atlanta, Georgia, Ron, celebrating and attending the annual conference for the AACUC.

That stands for the African-American Credit Union Coalition, and it is very, very important, near and dear to my heart.

I’ll tell you this before I even dive into the highlights.

Listen, I’ve been in banking and the financial services world, Ron, for nearly 20 years.

And for a bulk of my time, a bulk of my career, I never saw people that looked like me.

And so back in 2020, right before the pandemic, I was at the annual GAC conference in D.C.

It was during that time that I found out about the African-American Credit Union Coalition.

And I saw people that looked like me that were CEOs, CIOs, part of the executive team, board members.

I mean, again, I felt like the Little Mermaid.

It was a whole new world.

And so it’s so important, when we think about the communities that we’re trying to serve, that we have representation.

That’s why it’s near and dear.

But we kicked off with some golf, Ron.

And shout out to my foursome.

We were golfing at the Golf Club of Georgia.

I told them right off the rip, I said, listen, I am here for the vibes.

I am here for the energy because my balls will go straight to the bush.

And you know what?

They held me down.

We made it.

And it was just such an amazing time to be on the fairway, on the greens, with some real-life legends.

That’s number one.

Legendary Olympic sprinter Gail Devers, she also keynoted the conference, and there was a quote that really resonated with me.

She mentioned, “In my race, there’s 10 hurdles, but in life there’s always a hurdle. Sometimes we fall, sometimes we stumble, but we cannot stay down.”

And of course, I related that to where we are in banking now and so many things changing and so many uncertainties.

So yeah, that was a great motivational way to kick it off.

A $29 billion Boeing Employees Credit Union’s very own president and CEO, Beverly Anderson, she also took the stage.

A bit radical here.

She got real with the crowd and she challenged everyone in the crowd, specifically in the credit union movement, not to conform to the way things have always been done.

I always speak about diversity of thought and how crucial that is when we think about how we’re serving today, when we think about the neobanks, the challenger banks that are really dominating and taking a lot of the market share.

And yeah, she said, “No matter your role, we all have a responsibility to bridge gaps within our own communities.”

And there are stories that have to be said.

Another shout out to some trailblazers who were recognized and received the Peak Career Lifetime Achievement Award.

You had Marcia Major over at U.S. Eagle Federal Credit Union, Mary McDuffie at Navy Federal Credit Union, Gary Perez at USC Credit Union.

These folks have imprinted so many lives and really lived throughout all the cooperative principles of the credit union movement.

Another major theme, I want to say perhaps maybe 40% of the attendees of this conference were young professionals, were zillennials.

And zillennials, for our listeners, termed by Ron Shevlin himself, right?

What is it?

The abyss of millennial and Gen Z?

And a lot of these sessions were on how to attract, when we think about growth, how to attract specifically the newer generation, how to attract millennials.

And you heard a lot of the stories as far as our SEG schools.

So we go to high schools and we provide them classes on what it means to even invest.

Some other credit union folks, some young professionals and middle management, mentioned how integral they are as part of their credit union’s board.

So it was a breath of fresh air to understand that a lot of grassroots roles are having conversations up at the tippy top.

And I like to hear those dynamics.

I really believe that it’s a part of the formula of success when attracting growth.

And yeah, it was just such a great time to be there.

Shout out to the president and CEO of the African-American Credit Union Coalition, Renée Sattiewhite, and the entire team for just orchestrating such a soulful event.

And I am recharged and I am ready here to serve.

How you doing?

I’m at home, man.

It’s baking in the heat here in the Northeast.

But listen, I’m glad to hear this.

It’s great.

You know, this is what conferences should be all about, recharging and reconnecting.

And it’s the importance of face-to-face interaction and communication today.

That goes beyond having just to go into an office every day and being forced to see people you work with.

It’s great to hear that, and I’m glad you had a good time and got reenergized.

I also want to ask you, though, to share.

You had a conversation recently with Rick Jelovsek, I hope, Rick, tell me if I’m mispronouncing your name, from Bank of North Dakota about stablecoins and tokenization.

And this is a topic we keep bringing up almost every other week and every episode.

So tell us a little bit about what your conversation with Rick was like.

Yeah.

Poor guy.

I think he wanted just to catch up and see what’s new in my hood, and it was all questions.

You know how I am.

My middle name, mad question asking.

And so that’s what I did because, Ron, you mentioned it yourself.

We’re having these conversations regarding stablecoin, regarding tokenization.

It always takes us back to the root question of even AI.

What are we solving?

What are the use cases?

And so that’s really what I extracted with Rick.

He’s a CIO at Bank of North Dakota, a state-owned bank, who I believe it was early this year, if not late last year, partnered up with Fiserv and established a Roughrider Coin.

And so they serve as a correspondent bank of sorts, but their target market is about 85% of the U.S. banks and credit unions that are under $5 billion.

I’m seeing more and more, even going back to the conference and themes about attracting growth, there seems to be a very sweet spot that I’m noticing for community financial institutions between $1 billion to $5 billion.

And so again, Rick called that.

I really wanted to ask, what are you seeing, Rick?

We talk about the plumbing.

This is basically changing everything.

And I wanted to just dive right into three of the examples that he gave me that they’re seeing a lot of leverage and they’re really kind of customizing, so to speak, what these rails can do.

Bank-to-bank loan payoffs.

I put this on LinkedIn as well in a post, but that’s basically today’s, if there’s a cashier’s check moving by courier, and you give it to me Friday afternoon and I drop it off to my bank, I’m not going to see that until Monday.

And especially if I’m using that specific check to pay off a loan, which means that I, the borrower, now get the financial crime of sorts to pay three more days of interest and someone has to explain why.

So what does that mean if we can make that much faster for accessibility?

Another use case that he mentioned were line-of-credit advances.

So from Bank of North Dakota to a lot of these member financial institutions, again, with these line-of-credit advances, if I’m wanting $5,000, $10,000, whatever it is, I can get that in a matter of an hour.

And how important that is because, even from a lending perspective, he mentioned an example, one of his banks, in a conversation as far as even Rocket Loans.

With Rocket Loans, you can complete an application within seconds.

Integrated, they use Plaid, how they validate your financials through that integration.

And then in a matter of minutes, they can go ahead and approve you.

And then I think it takes maybe a couple of hours for funding.

And so when you think about what Rocket Loans is doing, how do we go ahead and maybe extract that same capability via stablecoin initiatives to go ahead and provide that same accessibility for that specific community financial institution?

He also mentioned participation loan payments and how heavily executed through smart contracts, and what that reconciliation time now looks like.

It’s less than 36 hours.

And so I do want to perhaps maybe take you up on your word on publishing a GonzoBanker article, which is what we do here at Cornerstone.

Again, we are in the strategic planning season phase.

And I believe, and we always say this, if you are doing your thing and you’re really kind of doubling down to decipher the noise and the distractions and what this really means to your specific shop, we’re hearing more and more use cases that are real.

And I wanted to hear your reaction.

I know I sent you some notes based off of that conversation.

But what do you feel about those use cases?

Tell me about your reactions.

I gave you a good taste of our discussion.

Yeah.

So I think my initial take, Stacy, and I think it might represent a lot of bankers outside of Rick’s bank, which is, hey, yeah, those are all great use cases.

And couldn’t I just use FedNow for all of that?

For faster payment, faster reconciliation, faster movement of the money and so forth?

I think, to me, the missing part of the story, you mentioned it briefly but kind of glossed over, is the programmability aspect.

You briefly referred to the smart contracts, but to me that’s the key differentiator between stablecoin and tokenization in general and what FedNow is offering, or The Clearing House through their faster payment efforts.

So I would have loved to hear from Rick, how do they build the programmability capabilities?

Who’s got these kinds of skills?

I’ve got to believe that practically every banker in a bank below $100 billion in assets, let alone the trillions, are looking at this and going, I don’t know anybody who’s got capabilities of building that kind of stuff.

Where did Rick get it?

Yeah.

You know, I asked him the question too.

I asked him about, could tokenization increase deposit stickiness rather than threaten deposits?

And I really wanted to hear his take.

And he said nope.

He said basically their model is intentionally designed to avoid that.

A few notes here.

Instead of moving deposits into a centralized reserve account, he mentioned deposits stay at the originating bank.

Tokens are minted only when needed.

Also, tokens are burned after settlement.

A lot of institutions are continuing settling net balances in traditional fiat.

And so think of the token as a temporary digital representation of a bank deposit, not a replacement for it.

And so for a lot of our listeners, mostly the community financial institution ones, this is much easier when you think about it from a regulatory and liquidity conversation.

So, Stacy, I think your travels this week took you out, and I think you might have missed the company meeting in which I presented at.

So a quick comment on this.

I was asked to present on the three big, bold themes for the next year or two in banking.

And for me, tokenization is a trend, not a theme.

And what I put the stake in the ground to our colleagues, Stacy, was that one of the major themes for banking in the next couple of years is what I called deposit fidgetation, meaning fidgety deposits.

And I used the “-ization” in all three of them, balkanization, deposit fidgetation and defenderization.

Was it because of the interns?

I think you were trying to get hip with the interns.

No, the interns have all left.

And listen, I am long past the point where I am trying to impress anybody of any age with my coolness.

But I did make the point that all three of my themes had rizz.

Yeah, I got rizz, baby.

But look, here’s the point to tie back to this.

My point is there is no more concept of core stable deposits.

It’s a physics thing.

It’s all about kinetic deposits.

Deposits in motion want to stay in motion.

And I think this is a big strategic issue.

And it’s not just about tokenization.

Tokenization drives this to new levels, but even faster payments drives this, and easy money movement has been driving this for 10 years.

We did the research last year to show that $3 trillion had moved away from the banks since the pandemic.

But it isn’t even about the money away from the bank.

It’s the movement of money.

And I think what tokenization is driving is these kinetic deposits.

And that, to me, is the key point.

Looking to try to focus on sticky deposits, the regulators will catch up on this, but my stake in the ground is there is no such thing as core deposits anymore.

It reminds me of, what was that song, that children’s song, “The Loco-Motion”?

Do the locomotion.

Grand Funk Railroad from the ’70s.

Come on.

Actually, that goes back even further than that.

Grand Funk Railroad was a cover.

Yeah, there was a Motown...

Don’t sleep on me, Ron.

Don’t sleep.

I’m not sleeping on that.

Don’t sleep on me.

But it makes me, when you said money in motion, it’s like stablecoins and tokenized deposits.

To your point, they’re not really about creating new money.

I guess what you’re really saying is that they’re about putting money in motion more efficiently.

So I don’t know.

That just came to mind for me.

All right, cool.

All right, let’s get to some news stuff.

There was a fairly noteworthy acquisition that was announced this week.

Visa acquired fraud provider BioCatch.

And I know you wanted to put this on the agenda, so start us off.

What was your take on this?

Yeah.

Well, let’s kind of prep it up for everyone listening.

Again, just early August, Visa announced the acquisition, a $2.4 billion buy, acquiring BioCatch.

And BioCatch provides behavioral biometrics and fraud intelligence.

The deal is expected to close next year, 2027.

But again, they’re a leading provider for behavioral-first, multi-signal fraud intelligence.

And it analyzes thousands of application, behavioral, device, networking signals, including keystrokes, touch gestures and device handling, to detect fraud and distinguish legitimate users from fraudsters in real time.

This immediately took me to, you know, we always speak about the tech stack, Ron, and this made me think now of the fraud stack.

And John, our very own John Meyer here at Cornerstone, our whiz when it comes to all things fraud, he said it a couple of years ago when we first started speaking more and more about AI and how the bad guys will also leverage AI.

So what does that really look like?

I think about the strategic rationale regarding this announcement.

And there was a quote from Andrew Torre, Visa’s president of value-added services.

And he pretty much framed the entire deal around the AI fraud surge.

He said account takeovers and scams cost the global economy over $1 trillion annually, and AI is enabling these attacks at an unprecedented scale.

So again, if Visa just paid $2.4 billion and BioCatch had about $185 million in recurring revenue at the end of 2025, what does that really tell us about how much money is being made off of fraud tools that we’re buying?

It immediately took me to the build over buy.

It immediately took me to this concentration of vendors being backed by Visa.

It took me to, what does this look like from a risk standpoint?

Breaches happening, and now if we’re using Visa and now we’re getting BioCatch through that, how secure are we?

And again, I speak in “we” of the community financial institutions that we serve.

So that’s where my mind took me a few places.

My mind took me again back to, how much are we really investing?

How much are we really shining the light on staying compliant and staying ahead of the fraud curve?

How about you?

For me, this is an important acquisition for, let’s see, two or three reasons.

We’ll see how many I actually can elaborate on here.

First reason I think this is super important is that it moves Visa upstream in the transaction flow.

So much of fraud analysis, fraud management, fraud detection is post-transaction.

And what BioCatch is bringing to the table is more session-level analysis.

So it is helping move Visa upstream.

And that’s absolutely critical to the fraud prevention, fraud detection aspects, but gives them a whole new wrinkle on it.

So I think that’s really important.

Number two, this is continuing a trend from a vendor landscape perspective, an industry structure perspective, that more and more of the fraud detection, management, analysis, all of the related capabilities within the fraud stack, is moving to the network instead of at the individual financial institution level.

So what’s happening is basically financial institutions will get their fraud capabilities bundled with their network provider instead of having to make individual decisions and deployments at the FI level.

So it certainly helps BioCatch reach thousands more financial institutions than it probably could reach by itself.

But it was really kind of changing the economics of the tech stack, or the fraud stack, as you relate to it from that perspective.

The next, and this will probably be the last point that I think is the important piece of this, and not as important as the first two, is that it will ultimately help Visa from an agentic commerce perspective, from an identity perspective.

And so, I mean, that’s a bit further down the line, but these are smart.

They’re making smart acquisitions for both today’s needs and capabilities and for the future.

So moving upstream, bundling it in the stack and the agentic impact.

Those are my three reasons why I think this is an important acquisition.

Yeah.

You know, you said, I think I was at a conference with you.

It was probably for New Jersey Bankers, one of them.

And so the question was asked, now that we’re seeing some more vendors come in the show when it comes to leveraging innovation, do we see, as bankers, us working with fewer vendors?

And I believe you, and I’m sorry, I’m just trying to paraphrase what the question was, and you said something along the lines, Ron, of no.

As we see more technology emerge and we see everything else, the vendors that we as banks and credit unions are going to be working with will probably triple.

And so it makes me now come back to what you mentioned about bundling.

And I’m not sure if bundling, though it sounds great, it sounds, okay, yes, now you’re also charged with fraud, but I think about, I don’t know why, tell me a little bit more.

Help dissect me on why this is calling a little bit more risky for me.

I’m kind of playing devil’s advocate here.

How bundling really converts something optional into something like you can’t opt out of.

Well, it’s a pricing aspect.

But I think the bigger, if I were to argue my own point, which I’m pretty good at doing, I can take both sides of the coin on these things, is that it’s eliminating choice from the financial institution perspective.

If there’s a company out there that competes with BioCatch and you say, I like what they do better, but boy, I got my network deal, Visa, Mastercard, whoever it is, and they’ve already selected the vendor.

There could be some limitations from a capability perspective.

That’s kind of the downside.

But you’re raising, I think, a different point around the vendor sprawl.

And yes, I did tell that conference that I think they’re delusional if they think they can eliminate the number of vendors they deal with.

And you’d look at this and go, hey, didn’t Visa just help do that?

Yes, Visa did help do that.

But when it comes to building your AI stack and having orchestration layers and agent providers, and when you start thinking about who’s going to help you build your digital asset stack, yeah, no, you’re talking about more and more vendors coming into the stack, not a lot less.

But it’s a wave.

And this is what happens in the industry every 10 to 15 years.

As new technologies come in, there’s a sprawl of vendors that provide these things.

And what happens inevitably?

The big guys gobble them up, and sometimes the small guys grow big enough to gobble up others.

And then it reduces the number of vendors.

But then new technologies come along, new players come in, and it’s a constant up and down.

And I think any financial institution who is putting a stake in the ground and saying, well, we’re going to reduce the number of vendors that we deal with, is just not a realistic strategy.

I think the last thing I’ll comment on here is just back to that feeling of the risks, the systemic risk standpoint.

And I don’t know, it feels like a...

Listen, I’m all here for strategic partnerships and acquisitions.

I’m all here for it.

Here at Cornerstone, we’ve done some amazing, just incredible acquisitions ourselves.

But I feel like this can be more of a chokehold.

And bundling looks sweet until the bill comes due.

So that’s my take.

Hey, I think we’ve got time for one more topic for this episode.

And I would like to selfishly throw out something that I recently published on my FinTech Snark Tank blog on Substack.

And here’s the genesis of this, Stacy.

For years now, I and we have been hearing about the gazillion trillion dollars of money that’s going to be passed on to Gen Zers and millennials from boomers and older consumers.

And I’ve never disputed the number.

I have no basis for saying whether $84 trillion, $124 trillion, I don’t care what the number is.

I’ll take whatever estimate it is.

I’ll take it.

But I’ve never believed that you’re actually going to see that money.

And I finally kind of put the stake in the ground and wrote about this.

Basically, my case and my rationale for this was a couple-fold.

Number one, whatever the number is, the reality is that half of the money that is sitting out there, these $84 trillion, $124 trillion, comes from the wealthiest 2% of households.

Half of it.

And I wrote a piece that was called “The Great Wealth Transfer Delusion.”

And the delusion isn’t the amount of money.

The delusion is the bankers who think that they could direct any of that to them, or much of it to them.

And it’s creating this delusion that, hey, we can put some strategies and marketing programs into place to capture the young people today who are going to inherit all this, and start working with the older people today who are going to pass that money down.

And that’s just not the way it works.

And here was my logic flow.

Number one, half of the transfer comes from the wealthiest 2% of the households.

Number two, and I don’t know what percent of it, but a lot of it goes sideways before it goes down.

A big chunk of it moves to a surviving spouse, and that’s very predominantly going to be women who inherit it.

It goes sideways before it goes down.

And before it even goes down, you know where that money goes, Stacy?

To private equity-owned healthcare facilities who provide assisted living, senior living, memory care.

That’s where all the money is going to get eaten up.

The other reality of this is that by the time the money moves, it’s getting moved to millennials who will already be in their 50s and even 60 years old.

My point was millennials that are planning to inherit these trillion dollars will probably be AARP members by the time it shows up.

And at that point, the opportunity for the bank is long gone because somebody who’s 55 years old has 30 to 35 years of experience working with financial providers and those relationships.

So my point with all of this is, this is a big delusion, and that the focus really needs to be on helping the older consumers manage their healthcare lives because that’s where the money is going to get eaten up.

So tell me where I’m wrong on all this.

No, you’re not wrong.

I think the only thing I’ll shout out is it’s my birthday next week, Ron.

And as a millennial, bit of a milestone for me, and I could tell you that just this morning, I’m checking my personal emails, and the nerve for AARP to wish me a happy birthday.

The nerve.

But I digress there.

I’ll touch it back to what I mentioned when I was at the AACUC conference earlier this week.

Again, the focus was, as we see everywhere, the focus on attracting growth and really focusing on the segment, the millennials.

And I think this is a great piece that really showcases relationships.

And how you touched on the biggest retention risk isn’t about the wealth transfer itself, it’s about the relationships.

And that took me to a little rabbit hole that I enjoy so much.

Where my mind took me was, well, what can folks do now?

We see the need.

We see that, based on these numbers that you brought up within the Substack article, again, if we’re not doubling down on being proactive, of knowing the beneficiaries before an estate settles, you touched on that.

Banks and credit unions can introduce advisors to adult children years before inheritance.

Making the estate settlement easier.

There’s a fintech that touches on this, and they’re doing fantastic.

They’ve been in the game for a couple of years now.

I believe their name is Ribbon.

So shout out to them.

But again, just even, what does this look like as far as deposit stickiness or relationship stickiness?

And how do we even provide estate planning?

How do we provide estate planning to our core membership or consumers?

And again, this was a great article that I’m going to personally pass down to several folks that I’ll be facilitating their strategic planning sessions.

So spot on.

I think this really touches on a lot of the product priorities.

Again, we think about estate planning.

We think about maybe family financial dashboards, maybe a way that these financial institutions can go ahead and touch and maybe kind of start immersing themselves and becoming familiar.

I don’t know, just managing, investing.

I’m looking at a list that I wrote right before this recording.

But, you know, fraud protection.

We speak about fraud as well.

And what does that look like?

So how do we educate and how do we protect, not only the heir themselves, but for the folks that are actually holding this money?

And no, this is a great piece.

I wish I could argue with you.

Yeah, I had tried to, you know how I’m always trying to coin terms and do something in the industry.

PFM typically relates to personal financial management.

I wanted to rename it parental financial management because that’s really the bigger issue.

As the baby boomers, the oldest ones are, gosh, 80 years old already.

If you were born in ’45 or ’46, you’re 80 years old already.

And you’ve got 17, 18 more years of baby boomers hitting that age limit.

So yeah, to me, that’s where the big opportunity is.

It’s not in the transfer of the money, but in the management of the money right now.

So listen, I think this kills it for this episode.

Listen, I know you’ve got some big travel coming up for your birthday.

Hannah, our producer, and I do want to see pictures of the travel, but please do not send pictures of the birthday celebration.

That you can do on your own.

But listen, have a great trip.

Have a great time.

And everybody, thanks a lot for tuning in.

Looking forward to seeing you again at the next episode of What’s Going On in Banking.

Thank y’all.

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