What are the major trends driving the growth of fintechs and BaaS, and is the trend of challenger banks still relevant today?

There are so many verticals, where there's an existing something, that adding banking to it is really easy. One of the great companies we're working with is called Players Health. 

Ty, the founder, was focused on how he could bring kids into sport in a safe and productive way. It turns out one of the big challenges for parents of kids playing sport is economic. 

Imagine you've got an amazing kid that gets in the football team. Just equipment alone and all of that stuff for the team costs a lot, then you have membership fees, and so on. Many parents don't have the cash up front to pay for it, so what we're working with him on is this idea of spreading out those costs—like BNPL but for kids’ sports.

There's a second order of business problem, which is actually non-obvious, but when you think about it, it's really in your face. 

On opening day, many parents walk in with $500 in cash and say they want to pay their kid’s fees. If you're the team manager, you end up with $10 grand sitting in your pocket.

If you put it in your bank account, the IRS says, "Hey! You just got income." 

Overall, it’s not like he's creating a neobank for sports players—what he's doing is adding banking services to an existing vertical or a slice of the universe. We’re helping solve some of these interesting adjacent problems. 

The other trend is quite interesting and I hadn't actually envisioned this as B2B2B and B2B2C, where we've got people that are coming in and saying, "Hey, listen. I'm an expert in this area. I'm already doing, for example, dealer finance, but now I want to do all my dealer's banking. I want to offer them a checking account. I want to offer them payroll service." And the reason that—if I'm in the dealer finance business and I'm really good at that—is, I want the rest of that relationship largely for insight, information, to understand, and be able to predict risk better than I could before. 

I didn't really realize that all these little businesses exist, where I just do dealer finance for recreational vehicles—and I'm really good at it. I help them buy the units at auction, put them on the floor space. Now I want to offer deposit accounts, payroll. I want to do cards and manage the expenses.

It's interesting to see how these businesses are looking to grow by adding financial services to it. It’s a similar sort of scenario for the cannabis industry and dispensary management. 

It isn’t just about enabling payments in that industry but about offering a financial services experience for a dispensary owner, that probably hasn't had one before because they've all been kind of scrambling to patch things together. That's been really interesting. 

There's been other programs around real estate investment, where we've got people that are coming together and saying, "Hey! Let's buy that building," pulling the funds together, doing the syndication, but then also, "Let's service the rental in the building and disperse the rents back to the original investors," and things like that. The theme, I would say then, is fintech started in a very retail way.

It was retail banking and retail experience that is graduating into much more what we would consider, in the industry, more commercial style patterns—more business banking, commercial banking, even beyond SMB. Everybody's familiar with the SMB use cases, but it's going upstream. 

On the embedded side, the big brands want to know more about their customers. They see these customers as assets, and they're done with these blind, white label deals, where they just sign over a card and get a $50 referral fee and walk away. 

They don't care about the referral fee anymore but want the insights and to understand, "What are consumers doing outside of their operation and why? Where should they build their next location? How should they evolve their business?" It's much more about having that kind of proximity to the customer and really knowing them than just extending the brand.