January 10

Despite recent turmoil in the crypto markets, Visa is “doubling down” on its efforts to prepare for blockchains to become mainstream payments infrastructure. 

Visa expects blockchain technology to transform consumer payments within the next ten years and it’s dedicated to being on the forefront of that transition, according to head of crypto Cuy Sheffield. The firm’s strategy revolves on the “DeFi mullet” assumption that the blockchain will eventually become a standard, backend technology that users don’t need to understand in order to use. In other words, fintech in the front, DeFi in the back.  

In the meantime, Visa aims to “crank out research in demos and proof of concepts to show what’s possible,” like its recent proposal about automating recurring payments on the Ethereum blockchain, Sheffield told Tearsheet.  

Following FTX’s implosion, the firm has seen a shift away from crypto exchanges towards fiat-backed stablecoins that allow consumers outside the States to access the dollar. “Many of the products we’re working on with our partners tend to be consumers holding dollars in stablecoins on a crypto platform,” Cuy said. “How can they spend that form of a dollar at any place that accepts Visa?”  

Read the rest of Sheffield’s interview with Tearsheet here.   

Traditional banks are at risk of losing Gen Z customers to new players unless they can find ways to appeal to younger audiences.

The kids are alright, but incumbent financial firms and traditional banks may not be unless they can find ways to win over Gen Z: 

A recent JD Power survey found that large national banks are seeing declining satisfaction among younger customers while a BAI report from late last year found that more than half of Gen Zers and millennials would switch financial service organizations for a higher commitment to ESG and DEI. 

In that vein, neobank Greenlight just released a new financial literacy game, while sustainability-focused fintech Twig acquired French neobank for young people, Vybe, as it aims to become the “go-to platform for the Gen Z market.” Education is a cornerstone of both offerings.  

Citing research that found that 93% of teens believe they need better financial knowledge and skills to achieve their goals, Greenlight has created “an engaging, gamified curriculum that teaches financial literacy in a fun and relatable way.” Interactive education can both rope in young people and prepare them to be stable customers in the future.  

Along with the focus on learning, neobanks are attracting young people by targeting specific niches like catering to LGBTQ+ issues, battling climate change, or serving immigrants.  

To be fair, some incumbent FinServs are also finding ways to up their appeal to young people: For example, Amex created a giving-as-a-service feature to simplify charitable giving andTruist acquired interactive mobile savings app Long Game, while Chase and Capital One offer dedicated youth debit cards for building good habits.   

Recent news highlights why financial institutions need to revamp their compliance culture to be real-time and continuous – or face the consequences.  

Fraud protection is already hijacking headlines in 2023: 

Both PNC and JPMorgan are facing lawsuits that blame them for their customers’ fraud losses through insider threats or phished credentials, while Coinbase agreed to a $100 million settlement related to its anti-money laundering (AML) and know-your-customer (KYC) controls. 

While each story contains its own unique details (and PNC and JPMorgan’s cases are still ongoing), at their core they involve accusations that the financial institution should have caught red flags before it was too late.  

That’s where sophisticated fraud-fighting tech comes in. As one exec recently put it to us: Technology is “transforming the culture of compliance to be real-time, continuous, and complete.” 

While FinServs have historically viewed KYC protection as a customer onboarding issue that requires manual processes, paperwork, and legacy systems, technology is now allowing them to shift to a customer lifecycle management mindset, according to a recent Moody’s Analytics report.   

Perpetual KYC uses AI-powered data crunching to transform from “an activity that occurs irregularly every few years after onboarding to an automated trigger-based activity that works in real time,” the report says. 

As a real-world example, Standard Chartered is using tools from Chekk for real-time risk assessment and anti-money laundering. 

Efficient development is often highlighted as the key differentiator between big banks and fast-moving fintechs, and by reorganizing itself behind the scenes, Wells Fargo is trying to buck the trend.

To create a more cohesive digital experience – and ward off fines and fintech competitors – Wells Fargo revamped its digital strategy to create teams that bridge disciplines and products.  

Wells Fargo historically had a very fragmented corporate structure that segmented workers based on region and product, but it realized that it needed to simplify, expand, and blend its teams. The bank now divides itself into multi-disciplinary “garages” within its departments; each includes people in product, tech, business, marketing, risk, compliance, and legal. 

For example, it has a “money movement” garage that combines a swath of people with different specialties working across ACH, real-time payments, and credit cards.  

The idea is to break the silos between tech and business-focused staff to create better products, more quickly.  

“You have to teach business people about tech development and tech development people about how the business works,” the head of Wells Fargo’s strategy, digital, and innovation team, Ather Williams III, told Insider. 

The bank credits this new structure with allowing it to develop its robust new business portal, Vantage, in only 11 months. It’s also part of its plan to better fend off future regulatory action, like the $3.7 billion fine it recently received in part because of technological errors. 

Meanwhile, dedicated Distilled readers may remember reading how other banks have disrupted their own tech strategies: JPMorgan now deems its product leaders “mini-CEOs” and relies on a mindset of “controlled autonomy,” and Truist built a dedicated innovation team called Foundry. 

Artificial intelligence-enhanced virtual assistants that can quickly and easily answer questions via text or voice chat are becoming table-stakes for consumers; partnerships can help big FinServs launch them more efficiently. 

Nordic bank DNB has partnered with artificial intelligence firm Boost to help it better handle customer requests through its website.  

Building its virtual agent took about two months and the bot now handles more than 50% of DNB’s chat traffic, while increasing customer satisfaction scores. The bot, which has already interacted with over 1 million customers, allows DNB to provide customer service around the clock, while freeing up employees to focus on more impactful work.  

Those employees benefit from the Boost partnership in other ways too: DNB also built an internal tool to help its nearly 12,000 workers replace employee handbooks with a bot that can surface information and answer questions. That tool has over 5,000 daily users and accuracy rates of 80%.  

“This is just the start of our journey too,” DNB head of emerging technologies Jan Thomas Lerstein said in a press release. The firm is interested in integrating voice APIs and additional personalization, he added: “In improving efficiency, the sky’s the limit.”

There’s a slew of tech firms that financial institutions can partner with: Truist uses Amazon Lex, Wells Fargo leans on Google Cloud, WestPac, JPMorgan Chase, Standard Chartered, and TD have tapped Kasisto, US Bank, Ally, and Santander rely on Personetics, and BNP Paribas and Deutsche Bank use Glia (an Insight Partners’ portfolio company).