Welcome to the ninth edition of Accrued: After Hours 🎙️! This weekly newsletter will provide you a short recap and the main takeaways of each episode from LoanPro’s Accrued podcast series on Fintech Confidential.
Hosted by Tedd Huff and LoanPro’s CMO, Colton Pond , Accrued explores fintech through the lens of lending with insightful conversations from experts and leaders across the industry.
Listen to the Accrued episodes on the following platforms:
Today’s newsletter will cover season 1, episode 9: Fintech is here to stay – A key part of the banking ecosystem w/ Joyce Mehlman.
In this episode, Tedd and Colton are joined by Joyce Mehlman, founder and CEO of iLEX Consulting Group, LLC. Tedd, Colton, and Joyce dive deep into the world of financial services, highlighting the evolution of fintech, Joyce’s advice for fintech startups to succeed, and the credit and lending trends that Joyce observes are reshaping the financial services industry.
Here’s what went down
Fintechs are here to stay
With 30+ years of experience in financial services, Joyce has a deep understanding of how banks and fintechs operate. At the beginning of the episode, she touches on how fintechs have transformed the industry by building personalized financial products using consumer data and analytics. As data has become more important in bringing these products to market, it has also become more sensitive. Data privacy is a concern for regulators and consumers as financial services like Open Banking and AI tools become more prominent in the industry, but Joyce believes that data continues to be at core of what fintechs and banks do. Keeping data privacy concerns top of mind is essential in ensuring compliance.
As more and more banks enter the fintech space and regulatory scrutiny increases, Joyce addresses big banks’ sustainability concerns over the fintech-bank partnership. She explains that fintechs are not a “trend” that will fade in the near future—they’re a key player in the banking ecosystem. It’s essential that banks and fintechs have a clear understanding of each other’s actions and goals so that their partnership stays on course, enabling them to bring innovative products to life that moves the banking industry forward.
For example, fintechs need to let their sponsor banks know the details of a new product so that the bank can fully assess the associated risks before launch. It’s the bank’s responsibility to have a clear line of sight into what their partner fintech is doing to stay on top of compliance, and that will be difficult—if not impossible—without clear lines of communication.
“You can’t let compliance sneak up on you. Compliance is the most important piece of everything you’re going to do.”
Buy first, build later
Throughout the episode, Joyce leaves a breadcrumb trail for fintech startups to follow in order to understand how to keep pace with the market.
One of these breadcrumbs is to choose the right partners up front to prevent costly mistakes that could harm their business. From her expertise consulting emerging fintechs, Joyce defines a good partner as one that will work side-by-side with fintech and create a collaborative environment.
For fintechs starting from scratch, Joyce advises them to buy first, then build. Companies like Chime and Dave are large enough to build out their core tools, but new fintechs need to understand that there are pieces that they’ll need to buy first, setting them up for success and giving them momentum for when they begin building.
Industry-shaping trends
Taking a deeper look into current industry happenings, Joyce names a few lending and credit trends that she believes are re-shaping the industry. One of these trends is the rising popularity of unique B2B lending models that fintechs are offering, such as lending against purchases. She observes that although B2B has traditionally been dominated by commercial banks, fintechs are quickly catching up to them by offering more adaptive and tech-driven B2B lending solutions, which align with the broader industry trend toward digital transformation and enhanced customer experience.
Another fintech trend that Joyce sees taking flight is niche credit offerings that cater to specific groups of people and life experiences. One example she shares is Totem, a fintech company dedicated to creating financial inclusion for Native Americans. Totem was born from the personal experiences of living in the underbanked Native community, and Joyce believes that programs like Totem will continue to grow as the need for personalized financial services increases.
“Programs that come out of personal experience…are the programs that make the most sense. Not everybody could just be another debit card out there…you have to have a reason to exist and credit has to have a reason [to exist]. People are willing to take the risk if the reason is there.”
Key takeaways
Communication is key. As fintech-bank partnerships continue to grow and the regulatory scrutiny increases, both entities must ensure that they’re facilitating good communication to bring products to market in an efficient and compliant way.
Buy first, then build. For fintechs that are starting up from scratch, it might be in their best interest to buy the pieces they need before they begin to build out their product. That way, they can concentrate on building a sustainable product that will meet their customer’s needs.
Driving towards personalization. Personalized financial services are becoming more of a necessity for consumers. Bringing in personal experiences into product ideation can help fintechs address this growing need while also increasing accessibility in financial services.
