How are nonbanks supervised within this regulatory perimeter?; Analyzing JP Morgan’s growth strategy; The unique challenges faced by fintech data teams;

Sam Boboev
15 min readMar 15, 2023

In this edition:

1️⃣ Y Combinator cuts nearly 20% of staff, scales back growth stage investments

2️⃣ How the Digital Revolution in Banking is Transforming the Customer Experience

3️⃣ Silicon Valley Bank’s shares are tanking as a mess unfolds

4️⃣ Analyzing JP Morgan’s growth strategy

5️⃣ Can any foreign adventurer make it in US retail banking?

6️⃣ The unique challenges faced by fintech data teams

7️⃣ How are nonbanks supervised within this regulatory perimeter?

And many more….


How the Digital Revolution in Banking is Transforming the Customer Experience

Digital channels are now much more than avenues to reach and serve customers. Rather, they are transforming the way people interact with money and financial services. Banks no longer have the sole right to banking relationships with customers. Increasingly fintechs and telcos are entering profitable segments in the banking value chain offering new, attractive digital banking services. In the future, the widespread use of digital banking services by customers may necessitate collaboration between banks and fintech players. Without collaboration, banks may face disintermediation and loss of access to customer data.

To understand how customer needs might evolve it is instructive to look to China. There are indicators that African markets are more likely to follow the Chinese model than paths followed by Europe and the USA. African customers experience friction with the financial system and financial inclusion remains limited, similar to the starting point for China’s market. Additionally, with a young and digitally savvy customer base, digital adoption is rapidly increasing across the continent. China is further on the journey than Africa, but we are likely to see similar collaboration between banks and fintechs.

In China, for example, WeChat, Jimbox and Rong306 have been at the forefront of this disruption, leveraging high mobile phone and internet adoption to address deep-rooted limitations in customers’ banking experiences. In South Africa, increasing mobile phone and internet penetration together with continued challenges inhibiting financial inclusion, create the ideal opportunity for fintechs, telcos and tech players to exploit. Unlike China, South Africa has no domestic social media and internet players, but telcos and fintechs are a risk to incumbent retail banks’ hegemony. If incumbents fail to change the way they serve their customers’ needs, digital financial services may threaten the very existence of banks in their current form.

Despite the threat posed by these new players, there is a space for both incumbents and challengers. Incumbents are advantaged by their large, relatively stable customer bases and high degree of trust. This enables them to leverage customer data to better understand and address customer needs. However, challengers have their own advantages by focusing on selected (profitable) market segments and developing tailored digital propositions for specific customer journeys.

Challengers also do not have to worry about historic client churn, digitization of legacy processes, and change management to transform their operating models. Nonetheless, challengers do still need to innovate continuously and offer new and improved customer offerings to keep pace with changing customer expectations. Incumbent retail banks have begun to respond to the threat.

Source BCG


Silicon Valley Bank’s shares are tanking as a mess unfolds

Shares of Silicon Valley Bank are down sharply Thursday in the wake of the company’s announcement that it is raising additional capital by selling stock, taking a charge to roll over an asset portfolio to higher-yielding assets and extending its term-borrowing capacity.

Given recent banking-related carnage in the tech and tech-adjacent worlds, there’s concern in the market that not all is well at SVB. Company CEO Greg Becker said in a call with venture clients that their assets are safe and that the stock sale was announced as an attempt to increase financial flexibility, strength and profitability at the bank.

Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” The executive asked VC clients to “stay calm. That’s my ask. We’ve been there for 40 years, supporting you, supporting the portfolio companies, supporting venture capitalists.”

The bank’s share price has fallen more than 60% at time of publication compared to last year.

In its investor presentation relating to its various financial moves shared last night, the company noted that venture capital firms were investing less, and that startup clients were still burning — consuming — cash at a historically elevated level. The mismatch led to what the company described as pressure to its “balance of fund flows.”

TechCrunch is hearing from some founders and investors that startups are being encouraged to consider pulling funds from SVB due to concern about its health. If many do, their actions could exacerbate the mismatch in deposits and withdrawals, perhaps extending the pressure that SVB is under.

Per SVB’s midquarter update, the company made an argument in chart form that it has a low ratio of loans to deposits, at 43%. How much protection that can provide in the wake of a share-price selloff and concern among its core customer base will become clear in the coming days.

Source Techcrunch


Analyzing JP Morgan’s growth strategy

From blockchain to payments, we take a look at where JP Morgan is acquiring, investing, and partnering to expand into new markets.

JP Morgan (JPM) is one of the leading financial institutions globally with over $3T in assets. While the company is largely known for its wealth management services, it has made key acquisitions and investments in the last 2 years that expand its offerings.

JPM’s investment activity reveals a deliberate strategy to develop its technological and geographical footprint. For example, so far in 2022, the company has taken a corporate minority stake in payment platform Viva Wallet, which targets European SMEs (small- and medium-sized enterprises), and has invested in digital asset compliance platform TRM Labs.

Source CBinsights


Can any foreign adventurer make it in US retail banking?

For most overseas lenders, US retail banking has been a graveyard of failed dreams. Drawn by America’s size, wealth and economic growth, UK-listed HSBC and RBS (now NatWest) and Spain’s BBVA all gave it a go before throwing in the towel. French lender BNP Paribas formally joined their ranks in calling it quits last month.

Yet some foreign banks remain convinced that they can make money from mass market American consumers. Bank of Montreal nearly doubled its US retail banking franchise to 4mn customers last month by taking Bank of the West off BNP’s hands for $16.5bn. And Spain’s Santander made strengthening its US bank, which has 4.5mn customers, an important part of its pitch at last week’s investor day.

The foreign adventurers have often had global scale, but that helps less on the retail side than it does with investment and institutional banking and even wealth management.

Why do Santander and BMO think it is worth trying to beat the odds? Partly a lack of options and partly a belief that technology has changed the equation. Each bank needs to find new sources of growth and each thinks that digital banking can help muster the scale to make a go of the US. But regulatory hurdles and economic challenges await.

BMO, the fourth largest Canadian lender, has been making US acquisitions for four decades but is only now aiming for national scope. Though the return on equity in US banking is generally lower than at home, BMO argues that the market is a logical target. The Bank of the West purchase now allows BMO to push forward with a conventional growth plan. The deal doubles its network to more than 1,000 branches and gives it a foothold in the huge California market and 31 other states. In a further effort to boost name recognition, BMO has agreed to pay $100mn to name Los Angeles’ soccer stadium.

Santander is opting for a narrower strategy built around online banking and auto loans. It plans to strip down its retail product offerings from 314 to less than 20 and use the digital app developed for Europe to cut costs. It has stopped new mortgage lending and bought out the minority investors in its US consumer unit. These moves allow it to channel deposits into car loans and compete profitably not just for borrowers with poor credit but also those who are much less likely to default but also command lower interest rates.

But it might not be the best time to bulk up. The US Federal Reserve, concerned that large regional banks could threaten financial stability, is considering rules that would raise costs for those that grow too big. BMO now has more than $250bn in US assets, putting it squarely in the Fed’s sights. Canadian rival TD has already felt the pressure: its $13.4bn acquisition of Memphis-based First Horizon ran into regulatory hurdles, delaying the deal’s closing date indefinitely.

Source Financial Times


How the downturn in crypto markets in 2022 impacted NFT adoption among top corporates

NFTs, in line with the surging cryptocurrency prices, witnessed a significant upthrust in 2021. However, with the onset of the crypto downturn because of rising inflation, a global economic slowdown, and several crypto firms going bankrupt, prices of NFTs fluctuated dramatically, and trading volumes fell drastically in 2022. From January 2022 to September 2022, NFT trading value declined by 97%, from $17B to just $466M.

Despite this, believing in the long-term potential, corporate exposure towards NFTs gained further traction in 2022. The number of trademark applications for NFTs and related products and services increased from 2,142 in 2021 to 6,855 in 2022 (as of October), according to figures compiled by licensed trademark attorney Mike Kondoudis. However, most of these applications were filed in H1 2022. Some top corporates, such as Intuit, Johnson and Johnson, Mastercard, UPS, Chevron, L’Oréal, and American Express, filed their NFT-related trademark applications during the period.

Corporates continued to venture into the NFT space with product launches. For instance, Salesforce launched its Salesforce NFT Cloud solution in the pilot phase in June 2022. In May 2022, Samsung launched the Samsung NFT Platform, allowing users to buy and sell NFTs directly from their Samsung TVs.

On a similar note, Mastercard enabled NFT purchases using Mastercard cards on marketplaces, including Immutable X, Moonpay, Candy Digital, The Sandbox, Nifty Gateway, Mintable, and Spring, in June 2022. Visa launched the Visa Creator Program in March 2022 to help artists, musicians, and creators to integrate NFTs with their businesses.

Let’s look at some of the recent developments of the top corporate firms concerning NFTs in H2 2022.

Recent developments — H2'22

Interest slowed down in H2 2022 following the FTX and Terra collapse in November 2022 and June 2022, respectively. The following is a list of the initiatives by these corporates in the second half of 2022.

Anything to be excited about?

The crypto winter undoubtedly impacted the growth of the NFT market in 2022. However, the future looks promising, given that NFTs are set to play a crucial role in the emerging digital economy with their growing adoption among Web3 gaming, art, media and entertainment, and digital collectible industries. Starbucks is one of the recent to adopt NFTs into its loyalty program to provide a unique experience for its loyal customers. In December 2022, the company launched Web3-powered Starbucks Odyssey experience in beta, allowing selected customers to engage in a series of entertaining, interactive activities to earn collectible NFTs called ‘Journey Stamps’.

Source Blockdata


Why You Should Buy Everything With Credit Cards

Having multiple credit cards and playing the rewards game can save you hundreds of dollars each year. It can land you some substantial sign-up bonuses like the Capital One Venture Rewards credit card’s 75,000 miles or Chase Ink Business Unlimited’s $900 cash back. Americans own four cards on average but not being able to pay off the balance in full every month can be damaging to your credit score and wallet.

American credit card balances reached $986 billion in the last quarter of 2022, according to the Federal Reserve Bank of New York. Those contributing to that debt should not be using credit cards because the interest rates they’re paying outweigh the card rewards. However those who use credit cards responsibly and don’t have balances, typically save $300 to $400 each year. How much money you save using credit cards depends on your lifestyle and how you play the game.

Source CNBC


The unique challenges faced by fintech data teams

Regulatory reporting

Almost all fintech companies are overseen by a regulator. In the UK it’s the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Regulators put a lot of scrutiny on fintechs which translates into challenging work for data teams. If companies get it wrong there are consequences and there’s a long list of companies being fined for lack of controls or providing wrong data.

Often, a fine is just the tip of the iceberg. The company afterwards has to invest in improving controls and in the worst case regulators can take actions such as preventing the company from onboarding new users.

Dealing with regulators is no easy task for data teams

- Definitions–deadlines are short and there’s little room for questions or interpretations around regulatory requests which means you need robust definitions of metrics and a log of previous requests

- Accuracy–there’s a high demand for data accuracy. While you may get away with having made a mistake in a data pull for a market sizing analysis, there’s less tolerance for errors when it comes to regulators. This puts pressure on the level of testing and monitoring required

- Reproducibility–data needs to be reproducible. If you’re asked to resubmit data from six months ago, you need to be able to get that to match up Often, regulatory requests come with short deadlines and the data team may have to drop everything else to jump on it. The combination of the high accuracy needed and time pressure can make these a strain on the data team.

Fraud and anti money laundering (AML)

Fintech companies almost always have some requirements when it comes to detecting money laundering on their platform and preventing customers from being the target of fraud. The data team is often involved as many of these problems have proven to be suitable applications for machine learning.

However, managing a machine learning system that decides if a customer should be allowed to sign up on the platform or is a potential fraudster and should be reported to the authorities comes with a big responsibility.

If your transaction monitoring system has dependencies on a data model that wasn’t updated for two days, you may end up approving transactions for customers that are outside your risk appetite. This may mean you have to notify regulators. As the number of machine learning systems and dependencies on data models grow, so does the number of critical dependencies and things that can go wrong.

Source synq


Here’s a look at many of the companies that have disclosed exposure to Silicon Valley Bank


In its filing with the SEC, Roku disclosed that about 26% of its cash and cash equivalents balance as of March 10 — roughly $487 million — is held at SVB. Roku said it isn’t sure how much of those deposits it will be able to recover. The filing also notes that it has approximately $1.4 billion of additional cash and cash equivalents “distributed across multiple large financial institutions.”


The company said Friday it its filing roughly 5% of its $3 billion of cash and securities balance as of Feb. 28 is held at SVB. “Regardless of the ultimate outcome and the timing, this situation will have no impact on the day to day operations of the Company.” Shares of the video-game maker fell about 0.9% in post-market trading Friday.

Juniper Networks

The networking equipment maker said that while it “maintains operating accounts” at Silicon Valley Bank, they represent less than 1% of its total cash, cash equivalents and investments. As a result the company say its exposure to loss from SVB is “immaterial.” Shares of the company were unchanged after the close of trading Friday.

Rocket Lab

Shares of the space startup slumped 2.6% in post-market trading Friday after it said in a filing that it had deposits of roughly $38 million in accounts with SVB, about 7.9% of its total cash and cash equivalents and marketable securities as of the end of December.

AcuityAds Holdings

The Canadian advertising-tech firm said in a statement Friday that nearly all of its cash is held at SVB. AcuityAds, which sells digital-advertising technology, says it had roughly $55 million in deposits at the now defunct bank and about $4.8 million at other banks, which it says it will use to “support continuing operations.”

No Exposure

Some firms on the other hand, disclosed that they had no exposure or relationship with SVB at all. More than a dozen stocks filed form 8-Ks with the SEC simply to tell investors that they were aware of the situation and that they had no deposits with the bank.

Others waited until Saturday to clear the air, with Plug Power Inc.’s Director of Investor Relations Roberto Friedlander telling investors and analysts in an emailed statement that it only banks with tier one US banks. Shares of the hydrogen and fuel-cell maker had slumped more than 5% during Friday’s session.

Source Bloomberg News


How are nonbanks supervised within this regulatory perimeter?

The supervision of nonbanks currently spans federal and state regulators depending on the products offered and the overall nonbank business model. Nonbanks are often subject to individual state licensing and supervisory regimes that require nonbanks to obtain a license in each state they operate within for the services they provide (for example, consumer lending, money transmission). Due to differences in state law, this often leads to multiple sets of rules being applied to the same organization in each state where

it does business.14 In contrast, the federal banking regulators

(for example, the FRB, OCC, FDIC, and CFPB) apply a common set

of consumer protection regulatory requirements across state

lines. The nature of nonbank supervision is largely dependent on business models, including product and service offerings, and the entity’s engagement with supervised banking organizations. When considering collaborating with a bank, nonbanks should understand which agencies will have supervisory authority and what supervisory oversight may entail.

Notably, banks have a responsibility to determine regulatory compliance of nonbank service providers under the umbrella of safety and soundness, and more specifically consistent with third- party risk management requirements. Regulators are in the process of updating third-party risk management guidance, as evidenced

by the July 13, 2021, joint press release requesting comment on proposed interagency guidance. Finalization of the guidance is expected to result in a more consistent supervisory approach across agencies, which will likely set forth a more prescriptive risk management framework for third-parties, especially those that support critical banking activities.

Nonbanks have direct responsibilities under the BSCA16, where sections 7(a) and © grant the federal banking regulators authority to inspect and regulate bank service providers to the same extent as their principal investors or the banks to which they provide services.17 Under Section 7(b) of the BSCA, bank service providers are also subject to section 8 of the Federal Deposit Insurance Act, which among other things allows the FDIC to initiate enforcement actions or recommend that other federal banking regulators initiate enforcement actions based on safety and soundness.

Source Delloit


Y Combinator cuts nearly 20% of staff, scales back growth stage investments

Y Combinator will be writing fewer checks for late-stage companies, a scale back that also cost 17 team members — or roughly 20% of the accelerator’s employees — their jobs, according to a statement released on Monday. The accelerator told TechCrunch that Silicon Valley Bank’s failure was not a factor and that they have been strategizing about the shift “well before” the collapse; over 30% of Y Combinator’s startups are exposed to SVB.

YC CEO Garry Tan wrote in the memo that the accelerator, which is largely focused on early-stage investing, found late-stage investing to be a “distraction from our core mission.”

“There shouldn’t be any noticeable effect on the companies we’ve funded or on the way we interact with alumni, but if any companies or alumni have questions, I’m here and the YC group partners are here — as always, to help you make something people want,” Tan wrote in the memo.

Tan has been active online over the past four days as SVB, which once banked over half of U.S. venture-backed startups, was taken over by regulators following a historical, seemingly Twitter-induced bank run. Early on, Tan told YC companies that “anytime you hear problems of solvency at a bank, and it can be deemed credible, you should take it seriously and prioritize the interests of your startup by not exposing yourself to more than $250,000 of exposure this year,” according to an internal screenshot seen by TechCrunch.

Twenty-four hours after he said that, Tan took to Twitter to say that “this is an extinction level event for startups and will set startups and innovation back by 10 years or more. BIG TECH will not care about this. They have cash elsewhere. All little startups, tomorrow’s Google and Facebooks, will be extinguished if we don’t find a fix.” He also penned a petition, now signed by over 5,000 tech CEOs and founders, asking congress to step in and support the entrepreneurial community.

While YC refused to admit that today’s layoffs and departure from growth stage is related to the banking crisis, it’s hard not to see the news amid the backdrop of a tech reckoning. We’ll know soon how a YC, refocused on early stage, is navigating the tough road ahead: The storied accelerator is having its biannual Demo Day in just a few short weeks.

Source Techcrunch



Sam Boboev

I am a fintech enthusiast and product leader passionate about crafting simple solutions for complex problems. Subscribe