Year-end wrap up for holiday season
2022, as we approach year-end, has been bittersweet in our industry and world.
Cryptocurrency exchange FTX bankruptcy has broadly impacted companies, sovereign wealth funds, and other traditional financial institutions. It highlighted the importance of balancing regulation with wild innovation. And it also raised the question to a bigger audience about how to maintain balance among entrepreneurs, investors, and regulators.
In an interview with CNBC, FTX’s new CEO John Ray III, appointed to oversee FTX bankruptcy proceedings, said he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” Ray previously oversaw the bankruptcy of energy giant Enron.
Some analysts attribute this tragedy to youthful entrepreneurs and their lack of risk governance and principles; others, such as short-seller Carson Block, argue the FTX collapse is “an example of greed and FOMO.”
Short-term, the FTX collapse impacts public confidence undoubtedly but in the long-term, it provides an opportunity for all parties to think through and complete governance and operational models to prevent a similar downturn in the future.
The Big Bank Theory conference was held online from December 8 to 9 by Tearsheet, attracting industry leaders from top banks and financial institutions, who shared their observations and wisdom on trending topics.
Below are conference highlights.
What is embedded finance and how does it differ from traditional banking products and processes?
According to Shruti Patel, Director of Partnerships, Shopify, Embedded finance is the future of the financial services industry. It allows non-financial institutions and platforms like Shopify to integrate and embed FinTech tools and services within the user journey in the context of user need. So, at Shopify, really, the way we define the user journey is twofold: First, we think about our merchant journeys, and then we think about the end consumer journeys, which is the merchant’s customer and try to drive optimization and efficiency across both journeys.
What’s going to be the most interesting trends in the future of embedded finance?
We think there is going to be increased scrutiny and regulation coming down on a lot of the FinTech platforms and in general across the industry. Secondly, more and more traditional financial institutions are going to partner with FinTech, Shruti Patel, Director of Partnership, Shopify said.
How fintechs and incumbents can win together
When being asked about what Synchrony is interested in investing in, Trish Mosconi, Chief Strategy Officer, Synchrony, shared three horizons, one perspective is the company would like to give complementary access capabilities to help Synchrony to expand and accelerate innovation. Second is to give opportunities to test and learn in markets Synchrony is interested in but not ready to fully enter. Third is tracking potential disruption.
Buy now pay later, BNPL
What do you think caused the surge and what were the biggest contributing factors?
According to Vishal Kapoor, VP of product, Affirm, demand is real and we have seen BNPL grow by almost 20 to 30 percent. There are three trends to drive it; first is the younger generations, like millennials and GenZ, are increasingly looking for flexible and innovative payments methods to pay in lieu of the traditional credit card. Those who grow up during the financial crisis essentially lost trust and faith in the banking system. The second is since the pandemic, everyone is moving to online and digital, which accelerates digital transformation of every aspect of commerce. Third is the challenges merchants face, especially the escalating costs of acquiring customers and merchant services solutions.
MPC Strategist, FinTech Consultant Partner at LYSTAR GROUP www.lystargroup.com Tracy Lai provides strategic and business development solutions to executives, and entrepreneur. Her professional experience includes work at Fortune 500 companies including Intel and RBS, and startups. Her expertise covers business development, risk management, project management and investor relations, in Financial Services, FinTech, Innovation, Technology and Education. As management consultant and FinTech advisor, she holds multiple senior roles with focus on cross border and cross industry collaboration, including projects in US, Asia and Europe.