Alloy Labs

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.

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.

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

Driving home from summer camp yesterday I passed a woman dangling over a non-pedestrian bridge. She vanished by the time I circled back. The State Troopers were not optimistic given the length of the span and the short time it took me to return. I took advantage of the Juneteenth holiday to run along the river past the spot. My mind wandered to the meaning of Juneteenth. It's hard to wrap my head around just how horrible the human race can be. The barbaric practice of slavery couldn't have lasted for 250 years if people and companies weren't complicit in supporting it, even if they didn't own slaves. I don't think companies should participate in politics. I think it is up to the company whether they take stances on social issues. But... every company needs a moral compass, especially in financial services. It is non-negotiable in our business. The current Synapse debacle isn't just a legal issue, it is a moral one. Synapse and it's CEO stranded thousands of customers' money when it self-destructed. Read Jason Mikula's reporting to hear the personal impact. The self sabotage at the end feels like an attempt to further obfuscate the ability to unwind the damage done. It isn't just Synapse at fault. Yotta, the largest impacted program, throws up its arms and says "there's nothing we could do." They should have had a plan in place. It wasn't like this happened overnight; this played out like Austin Powers on a steam roller. Evolve and Lineage had a regulatory and moral obligation to ensure the safety of the funds entrusted to them. The investors and board members backing the programs, the startups, and the banks all had a duty of care. From usurious rates to untrue claims, financial services, and by extension fintech, requires a moral compass. It doesn't matter that a claim or a rate passes regulatory muster. These are people's lives and livelihoods. It may not trigger a UDAAP, but is the claim morally right? Would you be happy if your parents or children signed up? Are you misleading what the rate, deposit or repayment, is with legalese? Back to the woman on the bridge... I can't help but think "what if just one person had intervened" before I was speeding by at 65mph. I think about people like William Wilberforce that led the abolition movement in England (Amazing Grace is a must see movie). In our industry, we need to intervene when we see things being done wrong instead of waiting for regulators reaction (over reaction). This isn't being woke or anti-capitalism. This is about taking care of people. From the way we treat the barista to the products we offer, there is a moral imperative that we've gotten lax on in the name of capitalism and social media. Financial Services needs to step up and police its own. This isn't the regulators job unless we leave it undone. Also, be kind. You don't know what that other person is carrying. You might be the gift that turns around someone's day or keeps someone from climbing onto a bridge.

This one is for my fellow strategy, ops, and math nerds. Whether you're a startup seeking your repeatable business model or a bank trying to find sustainable growth, you must know your Business Model Formula. It's more critical than your business plan and more powerful than your strategic plan. Most executives and founders don't actually know it though, even if they know their business better than anyone. Not knowing it leads us to make poor strategic, partnership, and personnel decisions. We take suboptimal actions because we leverage incomplete information. Business Model Formulas don't just apply to "simple" businesses like young SaaS companies. The complexity of a bank means it harder to create but even more necessary to establish and adhere a Business Model Formula. Everyone - founders, executives, and employees alike - will benefit from taking the time to nerd out on their Business Model Formula. #businessmodel #formula

Difficult tasks can induce anxiety and stress. This anxiety can cause procrastination. The overwhelming nature of facing a harsh reality combined with the complexity of the challenge make it even easier to push it off in favor of trying to grow out of the problem or hope an alternative presents itself. You need an exit plan from BaaSIsland and that plan will get more and more difficult to write the closer you are to needing to execute it. Soft landings are difficult, if not impossible, for companies without: 🔧 Product market fit 💸 Working unit economics 📈 Substantial traction Acquirers aren't interested in your code or your team without these three things. Jason Zaler of Oliver Wyman and I discussed Bank <> Fintech M&A for an upcoming Breaking Banks Fintech Podcast featuring their latest report. If you don't know how to get off the island, here is a template for your plan.

If your bank fails, is acquired, or just plain under-performs, no one will care that you 'stuck to the basics' of gathering deposits and making loans. If you're not delivering value to customers in a way that differentiates you from the sea of commoditized competitors, you're doomed to fail. What is the biggest risk that banking leaders are underestimating right now? Alloy Labs Breaking Banks Fintech Podcast Brett King 💯 Jim Marous Ron Shevlin Theodora Lau Bradley Leimer Sam Maule Jason Mikula Kiah Lau Haslett Alex Johnson Provoke.fm Media Provoke Management