Hey all, Jason here.

My whirlwind tour of the US continued this week, with a brief side trip to NYC for a couple of work meetings and to catch up with old friends. Unfortunately I missed the fintech happy hour event (sounds like it was a smashing success!), but recommend you check out the next one if you are NYC-based.

Also excited to announce I’ll be joining Fintech Pulse on Clubhouse next Wednesday, May 26th, with hosts Ambika Sharma and Monisha Chakrapani and guest Jared Kaplan, CEO of OppFi, to discuss the opportunities and challenges for fintech to meet the unique needs of underbanked consumers. Event info here.

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Goldman Hires Uber Exec to Guide Platform Strategy, Plans UK Roboadvisor

In an industry often critiqued for its lack of senior execs with technical knowledge, Goldman Sachs’ hire of former Uber VP of Technology Peeyush Nahar to run its consumer business is notable.

The Wall Street bank’s consumer business has seen a number of high-profile departures in recent months, including Omer Ismail, who left the role Nahar will be filling to launch a yet-to-be-defined fintech project for Walmart. Business Insider also recently reported on unrest and high turn over of rank-and-file tech staff due to the high pressure and stretched resources from attempting to complete multiple high-profile product launches simultaneously.

Prior to Uber, Nahar spent 14 years at Amazon, leading technology teams working on products including Alexa’s machine learning platform, Amazon Lending, and its business-to-business marketplace.

Choosing someone with a technology pedigree rather than a banking background aligns with Goldman’s broader technology and platform focused strategy, of which Marcus-branded products are just one part, and signals the firm’s commitment to this approach for growing its consumer business.

Silicon Valley-types joining more traditional financial services firms has become increasingly common, as ‘legacy’ players understand and respond to the threats posed to their business models by upstart fintechs.

But the transition from the aggressive and historically rule-flouting business culture of Uber to the highly regulated banking space and consensus-driven decision making typical at Goldman could be a difficult one to navigate.

I reached out to Goldman to ask how this key hire fit in with its wider consumer strategy, and Stephanie Cohen, Global Co-Head of Consumer and Wealth Management had this to say:

“We are thrilled for Peeyush to join Goldman Sachs as the head of our consumer business. He brings deep technical expertise along with a strong track record of building large scale businesses that start with the customer and work backwards.

Our goal is to be the leading consumer banking platform. Peeyush is the perfect leader for this next stage of growth where our success will depend on our ability to build beautiful and innovative customer-centric products that serve end-consumers directly, the needs of our large partners and their end customers and a broader developer community.”

UK Robo Rollout Planned for Early 2022

If you’re an avid reader of this newsletter, you might remember back in March, I flagged job openings that suggested Goldman was extending its roboadvisor to the UK as well as working on a US invoice factoring product.

Reuters is now confirming the firm will expand its roboadvice offering, Marcus Invest, to the UK early next year. Goldman launched its roboadvisor in the US back in February with a barebones set of features and priced more expensively than competitors like SoFI and Wealthfront.

While Goldman’s consumer business in the US includes consumer and SMB lending, savings, credit cards (Apple, GM), a PFM tool, and roboadvisor, at present, Marcus’ UK offering is limited to savings products. According to Reuters:

“The U.S. bank has attracted just over $30 billion in UK deposits since launching a savings account in 2018, accounting for 30% of Marcus's deposits globally, Des McDaid, the head of Marcus UK, told Reuters.

“We are pivoting more into an investment and wealth provider rather than a full service digital bank,” he said.”

Introducing Fintech Nerds Collective

One of my favorite things about the evolving fintech space is the number of amazingly smart, experienced, and talented people who contribute to the community by taking the time to write, organize events, and answer each others’ questions.

So when Nik Milanović (This Week in Fintech) and Simon Taylor (Fintech Brain Food) invited me to participate in this project, my answer was immediately ‘yes.’

Each month, a group of some of the brightest and most curious in fintech will give their POV on a fintech-related question. You can read the full first monthly edition here.

My first draft was a bit too long for the format, so I’m including it here in its original format.

If you could build your own neobank, what would be your first product and why?

I'm going to play a bit of conceptual devil's advocate here. Much of the focus of technology at large, including fintech and “neobanking,” has been around “removing friction.”

Faster account opening. Tap to pay. Instant loan decisioning. Real-time payments. Early wage access. Buy now, pay later.

There has been an unceasing march towards increasing speed in the name of “user experience” (and revenue). And consumers have responded in droves — adopting new products, payment methods, and the behaviors encouraged by them.

But “friction” plays an important role in decision making, especially in financial decision making, where human cognition is vulnerable to many biases, such as overweighting outcomes in the present while discounting those in the future and time inconsistent preferences.

Ample research has shown how one is paying (mobile vs credit vs debit vs cash) changes the ‘pain’ of payment and even how much one is willing to pay for the same goods.

So let’s call my first neobank product FrictionMode™, which would be a collection of UX features designed to boost information salience and add friction to help counter these human biases.

Think of it as the digital equivalent of freezing your credit card in a block of ice — something to make you think twice before clicking “Buy.”

Examples of UX elements that could help nudge consumers to spend less include:

• Total month-to-date spend, pacing vs. budget as a push alert after every purchase

  • Additional info: expected return over 20 years if user had saved and invested instead of spent that amount

• “Are you sure?” spending authorization for attempted charges over a user-configurable amount

• Requirement that card must be enabled before each purchase

• User-configurable ban/budgets by product category, with transactions blocked in banned/exceeded categories:

  • Gambling

  • Transport (eg nudge users to use public transit vs. Uber)

  • Food delivery (eg nudge user to shop at grocery store vs. Deliveroo)

  • Alcohol

  • Retail

  • Online transactions

In behavioral psychology, these techniques are referred to as “commitment devices.” Aspects of these features certainly already exist, but typically as opt-in features, requiring a user to activate them.

“FrictionMode” could either default a user in (and offer an opt-out) or actively ask a user to configure the features and limits during on-boarding.

Yes, there will be times when a user's transaction is declined and she or he is annoyed (which they can always override) — that’s the whole point.

UK Regulator Warns Fintechs On Calling Themselves Banks

The Financial Conduct Authority is the latest banking regulator to warn fintechs on making clear to consumers that they are not licensed banks.

In March, the California banking regulator reached a settlement with Chime for its use of “banking” language, and just last month the French banking regulator issued a warning about non-qualifying institutions using the term “neobank.”

According to the Financial Times (emphasis added):

“The Financial Conduct Authority on Tuesday ordered more than 300 companies to write to their customers within six weeks to remind them of the risks of storing their cash in accounts that are not covered by the Financial Services Compensation Scheme.

It also warned that some companies were ‘misleading’ customers about the extent to which some of their products are regulated.”

The FCA sent the communication to companies operating under e-money licenses, which range from small start ups to companies with millions of customers like Revolut and Wise (formerly Transferwise).

An e-money license allows a company to provide basic banking services, including offering current (checking) accounts. Fintechs holding an e-money license cannot lend out customer funds, which instead must be held in a ‘safeguarded’ account at a licensed bank in an arrangement roughly analogous to how US fintech-bank partnerships operate.

While the FCA’s action is notable, its impact is likely to be minimal. To end users, if it looks and feels like a bank account, they are likely to assume the protections they associate with licensed banks, regardless of what the account is called.

California Regulator Hires a Fintech Expert

California’s banking regulator, the recently renamed Department of Financial Protection and Innovation, announced it has hired Christina Tetreault to lead its new Office of Financial Technology and Innovation, which aims to aid startups and entrepreneurs to foster responsible innovation in financial products and services in the state.

The regulator appears to be moving toward a more pro-active stance of engaging with the fintech community. According to the announcement from the DFPI (emphasis added):

“Tetreault will work to establish regular ‘office hours’ for fintech innovators and stakeholders and plans to host listening sessions to gather feedback on how the San Francisco-based office can provide support and guidance to emerging businesses that will spur job creation and safeguard consumers.”

Fintech Spring Meetup

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Other Good Reads This Week

Ken Norton: Interview with Michael Siliski on Stripe’s product management culture

Tanay Jaipuria: Marqeta S-1 teardown

Marc Rubinstein: Coasian Finance

Fintech Business Weekly Resources

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