Jim Baer [00:00:47] I'm excited to have Ryan Falvey here today, who is the co-founder and managing partner of Financial Venture Studio, and what's exciting about this episode is that while we've highlighted other industries, we have not highlighted fintech and looked at where the puck is going with respect to fintech. So, Ryan, welcome. And why don't you take a minute and tell us a little bit about your background and we'll go from there.  

 

Ryan Falvey [00:01:12] Yeah. Thanks for having me here, Jim. Pleasure to be on the show. Yes, and I actually got my start in with what's now fintech, probably about 15 years ago. I started out working in background and startups and technology and started out working in emerging markets and spent the first five, six years of my career developing mobile banking and mobile payment platforms kind of all over the world. And I took a job in the US in mid 2012, 2013 and was working for a bank that was trying to a bunch of stuff in financial services. And I had assumed naively that the United States was pretty advanced as far as you know, payments infrastructure and how consumer financial services was  

developing. And I was shocked just to see how far behind the eight ball the US is and really how much opportunity there was here to really rethink financial services by whole  

cloth. And so started at investing, I ran an investment fund, was backed by JPMorgan Chase, called the Financial Solutions Lab, which was a partnership with the nonprofit, and did that from 2015 till 2018. And then I launched this business in early 2018 with my partner, Tyler Griffin, who was a founder of another fintech payments company that had been acquired. What we're really trying to do here is really create a home for the founders for building the future of financial services in this country. I think there's really a once in a multi-generational opportunity to rethink almost every element of the financial services industry. And so, we want to help founders who work in the forefront of that really accelerate their growth and take their business to the next level.  

 

Jim Baer [00:02:33] We have spent some time on the Puck talking about things like cryptocurrency, for instance. And I know that you've looked at that space as well. Do you see fintech and cryptocurrencies kind of coming together as a big new part of where you see the puck going? Or is crypto not part of the future,  

 

Ryan Falvey [00:02:51] I think it’s part of the future. They tend to kind of orbit around themselves, each other a little bit. I think historically and so I say till today, you see the biggest connection on the two where you often have strong technical teams will come around to work on something in the crypto space and then may often pivot away to work at something even more traditional fintech. I think with a lot of the innovations we're now seeing and more of that third generation of crypto, you're seeing more obvious connectivity points with the traditional financial services ecosystem. And I think that that will lead to more crossover between them. If you look at what Square has done, so PayPal's done Robin Hood incorporating crypto into their core offerings, it’s a great way to drive engagement and activity. So far, we haven't seen a lot of utility outside of that, mostly speculation or investment, but I think that that will evolve. 

 

Jim Baer [00:03:38] So in terms of the companies that you're seeing and the changes that technology is bringing to FinTech, can you help us understand where you see FinTech evolving in the next few years?  

 

Ryan Falvey [00:03:52] Yeah, I don't want to speak with too much hyperbole, but I think we're really in the midst of what I would describe as a once in a multigenerational transformation of financial services. Mostly the last two hundred years, the way banking and insurance has worked is, you were extremely well connected, you went out and bought or rented the most expensive piece of land in your town or city. You dragged some granite there and you put on a suit and tie and, as long as you followed the rules, you were able to get a license to be an oligopoly over a financial service in that area. And what's happened, really over the last decade, is you now have the ability, you know, that kind of nexus of competition has moved to the Internet. So, someone with a great design and new sense of thinking about product, which has been happening you know, since the advent of the mobile web, those people are coming up with kind of completely new ideas for financial services and are no longer constrained by physical barriers. And increasingly, consumers are looking for digital options. And so, what that's meant is you've seen a mass migration to the tune of tens of millions of consumers. First it was every year. Now, with probably a quarterly basis moving from physical financial services to digital financial services. It's leaving behind most of the banking infrastructure. Most of the, yeah, I think most insurance companies are going to be pretty heavily disrupted and creating new  

multi-billion-dollar platforms kind of left and right. And many of these businesses are competing on a completely different set of rules than the traditional companies have. And I think it's a really exciting time for anyone who's using financial services, but certainly anyone is investing in this industry or building new businesses.  

 

Jim Baer [00:05:26] So for someone like myself who has seen the evolution where we started with obviously going into banks, and then we add cash machines, and then we're seeing PayPal and we're seeing the Robinhood now, and then you've got online banking and Venmo and these different abilities to make payments and otherwise.  You mentioned things like insurance, for instance, and other disruptive technologies coming in. Can you walk us through some of those, as you said, once in a century, disruptive technologies that some of us may not have been using? Like what about technologies that are just coming up that the younger people are starting to use, for instance, like in the area of insurance and health care? But that may not be as mainstream yet, but that you see peeking their heads, so to speak, that you see coming out in the next couple of years.  

 

Ryan Falvey [00:06:13] Yeah, I think insurance would be a great example. We have in the last several months, we've had two companies go public in parts of the insurance market that most people probably never heard of. So, the title insurance industry, the company called DOMA to speak in those days title, which is really trying to rethink title insurance and has created a multibillion-dollar business here and in about five years in a market that I would venture a guess isn't home to many multibillion-dollar businesses. And then Hippo, which probably has a fraction of the homeowners insurance policies in this country, but probably commands a premium of the equity valuations in that industry. And these are two, I think, relatively sleepy industries where incumbents were taking advantage of your regulatory capture and pretty standardized product that was it was mostly sold through commissions and kickbacks and created a product that's actually better and actually does the same thing, which is cheaper than what the existing companies provide. And consumers are rewarding it by purchasing it and investors are rewarding it by giving it a premium valuation. I think on the consumer side, there's really no shortage of new products. I mean, the most well known as probably Chime, which I think at this point probably has about the fifth most customers of any financial service company in the country right now. And most of them are low to middle income consumers who were not only underserved by incumbents, but were actively discouraged from banking with them. And you now have a company that's come in there and really just found a way of creating a transparent product for them that they love and are using and telling their friends about. And again, investors are rewarding that. And when you have these companies that are able to raise billions of dollars at a time, I do think the incumbent should be aware of that. There are very few banks in this country that are capable of raising that kind of money. And so, when you have a series of startups kind of across the board coming at various angles, it's probably time to start paying attention.  

 

Jim Baer [00:07:56] I hadn't followed the Chime story, for instance. Is that an online banking company? I mean what's Chime doing?  

 

Ryan Falvey [00:08:02] Yes. Chime is essentially it's a debit card. It's just like a checking account. And you sign up online, they send you a debit card, just like you might get from Wells Fargo or JP Morgan. It has very few fees, really doesn't have any. It has really low risk of being an overdraft, which is a big deal for many consumers. It's just a simple, simple checking account, really. You know, there's a lot more of the product, I think, at the core. It's just really easy to understand a simple product gives you what you're looking for without really having to worry about some sort of hidden fee or something else in the background that might come in to get you, bite you.  

 

Jim Baer [00:08:34] So using that as an example, like I mean, I don't know if you're familiar with the company Green Dot, which was also when people were buying debit cards, but they were buying them at convenience stores or gas stations or otherwise, and then they could reload them in an economy where a lot of people don't have access to traditional banking arrangements and, for instance, are unable to get a credit card, Green Dot with solving that particular challenge.  Does Chime, in this online banking, is this the next evolution of the Green Dots of the world essentially?  

 

Ryan Falvey [00:09:02] I think so. You know, Green Dot has increasingly shifted to become a payments platform that powers a lot of other players. So, Green Dot could be powering Chime. And I think this is kind of how I think about how these fields evolve is oftentimes will have something so Green Dot, that you point out, it's been around for, I think about 15 years now. And one of the first to really think about how to create a processor for prepaid cards before that. These were not particularly common and they were not particularly efficient. And so, the first iterations of Green Dot’s products, was, you know, powering a bunch of different prepaid cards that could have hung on local Wal-Mart or Target shelf. As you've seen the shift away from buying those products at your local Wal-Mart or Target to seeing it on the Internet and downloading on your phone. Green Dot has also shifted its business to enable that infrastructure to happen. This isn't what Chime is doing, it's to a degree derivative of the Green Dot business model. And the Green Dot has a bank now. And so they think about banking, I think, very differently than a conventional bank. They really think about banking many of fintech companies.  

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