Alloy Labs

Now live: Banking-as-Service Partner Shutdown Scenarios Over the past few months, our BaaS Center of Excellence has been working on a set of scenarios financial institutions should be prepared for if a fintech program needs to be unwound. With this publication, we are striving for a more uniform approach in wind downs that protect both the bank and its customers. This first set of wind down scenarios are for a hard shutdown, either because the startup is out of money, or the bank has chosen to terminate the program. Our next release this fall will be geared towards a voluntary transition either due to acquisition or changing of banks partners. See the comments for the interactive and downloadable versions of the publication ⬇ *These materials are for informational purposes only and are not representative of the views of all members of Alloy Labs. Each institution is responsible for their own preparations, but this is a useful starting point.

tl;dr: Our BaaS Center of Excellence just dropped scenarios banks need to consider when winding down a partnership. See the comments for the link. What goes up must come down... Newton didn’t have a law specifically related to fintech, but his first law has applicability: rising rates caused a return to economic reality in the venture ecosystem.   Frank Rotman, co-founder of QED Investors, wrote an exceptional piece about Darwin’s return to venture capital (link in comments) and the number of unsustainable business models that will lead to startups shutting down because they can’t raise more money.     Responsibility for an orderly wind down should lie with the startup that made promises to customers in the first place. From a regulatory perspective, the bank is ultimately on the hook. Any bank that is partnering with these startups to provide banking services needs to not only verify the startup has a plan, but they must also make sure those plans are robust and being followed.  Our Banking-as-a-Service Center of Excellence prepared a set of scenarios financial institutions should be prepared for if a program needs to be unwound. This first set of wind down scenarios are for a hard shutdown, either because the startup is out of money, or the bank has chosen to terminate the program. Our next release will be geared towards a voluntary transition either due to acquisition or changing banks partners.  Interactive and downloadable versions are in the comments. Feedback is welcome! These materials are for informational purposes only and are not representative of the views of all members of Alloy Labs.  Each institution is responsible for their own preparations, but this is a useful starting point.   Must founders don’t start a company thinking it will fail. In financial services, we have a moral obligation to protect customers that depend on us, and that unfortunately means being prepared for all outcomes. cc Kirsten Muetzel Clayton Mitchell

What happens when 16 banks meet in Chicago to dive into the world of product, partnerships, leadership, and teamwork? Product management magic. We gathered a group of banks alongside product and partnership experts to dig into the ins and outs of product management in this next era of banking. We're leaving feeling inspired and excited to see how the thoughts and tactics discussed over the past two days work their way into larger strategies, decisions, and partnerships! Colleen Wilson Eric Schurr Peter Tapling, APRP Clayton Mitchell Crowe Jason Henrichs Madeline Fredin Kelsey Landau Samer Saab

Deposits are the aqua vitae of banking, the water of life. How do we attract new customers to the bank without expensive teaser rates or free toasters? Net Interest Margin (NIM) is a key success driver, but we're not pulling all the levers we could to stem the long trend of NIM compression. . Every 1 basis point (0.01%) of margin movement up or down equates to $100,000 per $1 billion. Here's what some of the best banks in the business are doing differently.

RiskScout continues to redefine the banking operating model around BSA/AML. We're proud of the work that the team continues to put in to unlock new value and push the industry standard forward! #bankingunbound Learn why we invested here: https://lnkd.in/dJ_ZuT-S Justin Fischer Kristin Parker Ethan Kratt

In his latest Fintech Takes, Alex Johnson called Evolve Bank and Trust's lax standards "a feature not a bug." Immediately some chimed in with convincing arguments such as "no it wasn't" (without evidence) while others, responding to the hack with "it could happen to anyone." To be fair, it is unlikely many institutions can withstand a sustained assault from a quasi-nation state actor. HOWEVER, this is why best practices such as Encryption at Rest and intrusion detection are critical for anyone storing PII and providing access to the nation's banking infrastructure. A cybersecurity expert told me the the stance should be WHEN, not IF, and that Evolves response time is a clear indicator they were not prepared. Now let's address the elephant in the room. It was not a closely held secret in the industry that Evolve was running fast and loose. You don't need to be an industry insider to or expert to question how a bank of that size can add so many channel partners at that pace without hiccups. As I've said before, it is a quadratic scale of complexity. Our Alloy Labs members that play in BaaS started a Center of Excellence three years ago in anticipation that the industry would need to be better at self policing and standard setting. Some of it, like our nomenclature guide and Roles & Responsibilities which we developed with Unit, Treasury Prime, Lithic, Currencycloud, we've made public (see links below). Others are availble only to members or happen behind closed doors with our next session in Chicago the end of the month. If you are a BaaS bank interested in doing it right, consider joining us. https://lnkd.in/gHpqcX9h

Defense keeps you in the game, but you can't win without playing offense. For leaders, that means making a clear assessment of what are always limited resources- not just financial resources, but human resources, and managerial time and attention, and how they're being deployed. For most institutions I've worked with, most if not all have been allocated towards products, projects, and processes that just keep them in the race, so they don't have enough gas to get across the finish line first. Think about all of the meetings, conference calls, emails, progress reports, and financial models devoted to things that really won't move the needle. Are all of them necessary? If so, can you scale back any of the resources dedicated to them to free up some to invest in something to help you win?

My 7 year old likes to call things disastrophies - worse than either a disaster or a catastrophe. The Synapse / Evolve saga is a disastrophy of such proportions it may have effectively killed "fintech" as we know it. And that's a good thing. We may look back and say June 26th is the day the music died. (that's for you Walt Cox) Alloy Labs operates a BaaS Center of Excellence with the leading banks in the space focused on maturing the industry. Our partnership with American Fintech Council & Phil Goldfeder strengthens the effort.

In this Next Era of Banking, it is critical for financial institutions to effectively reduce risk and accelerate time to value on new products, whether those are built in-house or through partnerships. We are making this available to non-members, but this is a hands-on workshop so space is extremely limited. Register now to reserve your space.

Why Your Strategic Plan Sucks...and what to do about it. Part 3 of 6. Data > Opinions Strong opinions loosely held. Gathering your best and brightest around a big brown conference table or off to a nice resort somewhere to ruminate about the future isn’t the answer. If we don’t have data to help us understand what’s going on, our default decision making mode is going to be the HIPPO – the highest paid person’s opinion. When Jim Barksdale was CEO of Netscape he used to say, “if we’re going to go with data, let’s go with data; if we’re just going to go with opinions, then let’s just go with mine”. Making decisions without data is like going all-in at the poker table before you’ve even seen any cards. Data is almost always incomplete, often conflicting, and sometimes inaccurate, but we make better decisions when replace our opinions, with facts. Read all 6 here: https://lnkd.in/g9HNKADg