Frank Keller, Executive Vice President, Large Enterprise and Merchant Platform, PayPal Steve Quirk, Chief Brokerage Officer, Robinhood Markets Tamara Romanek, Global Head of Partnerships, Plaid Moderator: Luisa Beltran, Fortune
Category
🤖
TechTranscript
00:00 - Welcome everybody, this is the last panel before cocktails.
00:04 So we're gonna be very prompt here.
00:06 - No pressure.
00:07 - So, my panelists, first question is,
00:10 AI is on top of everyone's minds these days.
00:13 Tomorrow, what do you think will be the next
00:15 or the biggest near-term impact for FinTech?
00:18 - Oh gosh, well, like every good Disney movie,
00:21 there's a lot of good and a lot of bad
00:23 that can come with AI, right?
00:25 Especially in financial services.
00:26 I think there's a lot of opportunity
00:28 as it relates to customer service.
00:30 We talk about that a lot,
00:31 but I think that personal financial management,
00:33 connecting your bank accounts and things like that
00:36 to give access to consumers
00:37 so that they have better line of sight
00:39 to a full picture of their financials,
00:41 that can be pretty exciting.
00:43 But I do think as an industry,
00:44 we have a huge responsibility to think ahead
00:46 of the fraudsters 'cause they have access
00:48 to the technology too and are innovating
00:50 and thinking every day about how they can challenge us all.
00:54 And so I think there's an opportunity
00:56 for us to really get ahead.
00:56 I think about that a lot at Plaid every day,
00:58 especially with onboarding experiences and KYC
01:01 and those types of responsibilities.
01:04 - Frank?
01:05 - Yeah, I'm actually looking into
01:07 how that changes shopping behavior
01:10 and the purchase behavior.
01:12 What's interesting is 70% of people want personalization.
01:15 But when you drill in and you look at the research,
01:18 people are super scared about what does AI do with my data,
01:21 what data is used and so on.
01:23 So when you drill one level deeper,
01:26 when people trust them with their business brands,
01:31 I think that's a McKinsey study,
01:33 87% of people wanna make sure
01:37 that data privacy is handled well.
01:39 More than 70% of people want that AI policies are done well.
01:44 And I think that's something
01:45 we're just getting started with.
01:47 And it's super interesting.
01:48 So I'm looking into how we can personalize those experiences
01:52 while keeping customers safe.
01:54 That's what PayPal has done over many years
01:56 and with financial data, we're doing this now holistically,
02:00 also in the world of AI with commerce data.
02:03 - And how is AI impacting the move to open banking?
02:06 - You wanna take that, Shalide?
02:10 - Yeah, I mean, I think I touched on it a little bit
02:12 in the spirit of when you think about open banking,
02:14 and we'll have 1033 regulation coming out here in the fall
02:17 in a more formal way.
02:18 And everyone is starting to engage.
02:21 Early wage access, people are providing a lot of data
02:24 as it relates to how do I get from where I am today
02:27 to get to a proper financial aspect
02:30 of how credit can make a difference in my life.
02:33 But getting people to a proper path to credit
02:35 is gonna be pretty critical.
02:37 - Yeah, I think as I explained,
02:39 open banking allows draw enough data
02:43 and to be used for personalized AI decisioning.
02:48 I think people want to understand how is my data used.
02:51 And that will be critical.
02:53 But it allows us to do much faster credit decisioning,
02:56 onboarding, KYC, and all these kind of things.
02:59 - So is it different here than in Europe?
03:02 Is there more progress in Europe?
03:03 - I think so, I'm German.
03:05 So I think the Europeans are a little bit more cautious.
03:08 I think in general, the sentiment is,
03:10 that is very surprising.
03:12 People want to use it.
03:14 They are just not that sure.
03:16 And I think the Europeans are a little bit more cautious
03:18 about it, but I think the themes are the same.
03:21 And when I see regulation across the world,
03:24 evolving in the same way, we're all rallying around,
03:27 especially now, around the same themes.
03:30 And I think the regulators are struggling
03:32 to follow really the pace of the industry.
03:36 - So European regulators are not ahead of us.
03:39 They're pretty much on pace with us.
03:41 - I think they're ahead of us.
03:43 I think they're ahead of us,
03:44 they're in open banking pieces.
03:45 - On open banking, yes.
03:46 I mean, with PSD2 way back, we had open banking regulation,
03:50 which forced the financial institutions to open up
03:53 and then there's licensing around this.
03:56 And this is just now happening in the US.
03:58 So it's less from an AI perspective,
04:00 more from an open banking perspective, yes.
04:03 - Okay, Steve.
04:04 - Yes.
04:05 - Don't fall sick there. - I was enjoying
04:05 the conversation, you can keep going.
04:07 - Sorry. - No, I'm learning a lot.
04:09 - So let's talk about after hours trading at Robinhood.
04:13 How has the industry responded to the entrance
04:16 of a new generation of investors
04:18 who are active in the markets
04:20 and wanna invest on their own terms?
04:22 And who are these investors?
04:23 Are they Gen Zers?
04:24 Are they millennials?
04:26 - So the Robinhood, we have 24 million clients
04:31 and they came at a speed
04:34 which the industry has never seen before.
04:37 So I came from the world of Schwab, TD Ameritrade
04:40 and it took six decades to get to 15 to 20 million customers
04:45 that took about four years for Robinhood.
04:47 But they're very different investors.
04:49 Average age is early 30s.
04:52 Half of them are first time brokerage clients
04:54 and they're challenging the norms of the way
04:58 that a sometimes stodgy business operates.
05:03 So the idea that some person who looks like me
05:06 has to go ding, ding two times a day
05:09 for them to make an investment is quite foreign to them.
05:13 You know, Amazon doesn't close
05:14 and clearly we don't need the human beings
05:16 on a trading floor.
05:17 We survived COVID without a person on a trading floor.
05:20 So, you know, the idea that they can't make their invent,
05:25 a lot of them do their education
05:27 and they find their investment opportunities
05:30 in the after hours, they work during the day.
05:32 So it's always been a source of frustration
05:35 that they can't invest whenever they wanna invest.
05:38 If I wanna buy a stock at $10,
05:39 I don't really care if I get executed at 3 a.m.
05:42 or, you know, when all these people
05:44 are standing on a trading floor.
05:46 So we approached that problem and said, let's fix it.
05:51 Let's find a way to accommodate their schedules
05:54 and let people invest whenever they'd like.
05:58 And so we've stood this up.
06:00 We started very slowly with a small number
06:02 of very liquid names, but we're up to about 900 symbols.
06:05 And we've seen, well, this week,
06:09 you can guess it was quite busy
06:12 'cause we're the only, we're the only game in town.
06:14 And so, you know, we've seen huge volumes
06:19 as a result of that.
06:20 - Is there any time that's busier than others?
06:23 - Around earnings or when there's news
06:25 that happens overseas, we'll see huge spikes in volume.
06:29 And, you know, there's an opportunity there for people,
06:34 either they want to capitalize on that
06:37 or maybe they wanna protect an investment that they have.
06:41 I do believe in five years, we'll laugh at the idea
06:44 that this wasn't the norm
06:46 'cause it really doesn't make a lot of sense.
06:48 I mean, we have other asset classes
06:50 that trade around the clock seamlessly.
06:52 This one just needs to get on board.
06:56 - Okay, let's talk regulatory.
06:59 Tamara, you mentioned that there was some big regulatory
07:04 issue that got announced today.
07:06 - Well, it was the Supreme Court, you know,
07:08 kind of came out and said that the CFPB
07:09 will continue to receive funding, right?
07:11 And they're the ones that are driving the 1033 initiative,
07:14 which is really good for consumer data rights,
07:16 setting standards for data sharing properly.
07:19 It's gonna drive a ton of innovation in the ecosystem.
07:21 I run partnerships at Plaid and just seeing
07:24 the various types of FinTechs
07:26 and financial services companies,
07:27 big banks were the original FinTechs,
07:29 so let's be clear about this.
07:31 But I think what's fascinating is to see
07:33 the type of innovation that everyone is being able to create
07:37 to help users access their favorite financial apps
07:40 and engage.
07:41 These two gentlemen right here are customers of Plaid.
07:43 And so it's great for us to see the long time,
07:46 you know, having the relationship that we've had
07:48 with you all for all the years
07:49 and being able to take advantage of that in early stage,
07:52 early movers here on the stage with us.
07:54 - Interesting.
07:55 So let's, sorry.
07:58 - I'm sorry.
07:59 - I think our first connection was with Venmo, right?
08:02 - Yes, Venmo was the very first one.
08:03 So people linking their bank account
08:05 to fund their Venmo accounting experience
08:07 and pulling money out the same way.
08:09 It's like an on-ramp experience.
08:11 - So let's talk about fraud.
08:13 So AI and fraud.
08:15 So we've been talking about AI a lot at this conference.
08:19 Can we talk about how it's helping criminals
08:21 conjure up sophisticated means of fraud?
08:23 And I know Plaid has been doing a lot of stuff.
08:26 - I mean, it's very interesting.
08:29 I just recently gave a speech on this topic
08:32 that like now school kids are basically can access tools
08:36 that were not available just a short while ago
08:39 and go online and actually get to read a tutorial
08:42 on how to do fraud and using some of these AI tools.
08:44 So it's moving, it's democratizing fraud.
08:50 And fraud is now I think,
08:52 if you take the fraud economy globally,
08:54 it's like the fifth largest economy in the world, I think.
08:57 In 10 years, it will be the third largest economy
09:01 in the world.
09:02 It's crazy.
09:03 - Wow.
09:04 Steve, any thoughts on fraud?
09:05 - Well, he just scared me.
09:07 (laughing)
09:08 I didn't realize it was gonna be the third largest.
09:11 - Wow, maybe we should get into that.
09:12 (laughing)
09:14 - Well, there are other guys that don't like that.
09:16 (laughing)
09:18 - So Tamara, can you talk about deep fakes?
09:21 Are they sometimes too good for like the human eye to detect?
09:25 - So when you think about,
09:26 so we have a product called Plaid Identity and Verification
09:29 and it's all about the onboarding experience,
09:31 whether you're linking a bank account to any experience
09:34 and just deep fakes are probably one of the scariest things
09:37 we can think about.
09:38 I remember a couple of years ago,
09:39 my bank account calling into the VRU system,
09:43 would you like to record your voice?
09:45 It's making different forms of authentication
09:48 like irrelevant, right?
09:49 And so we really have to keep thinking about,
09:51 it's not just about your one time picture.
09:53 Maybe it's the way you move your head
09:55 and making sure that the liveliness is there
09:57 when you're onboarding a user.
09:59 But it's not even just that.
10:00 It's like, I think that our head of identity
10:02 and verification is predicting that three years from now,
10:06 pure document verification will be obsolete.
10:09 So we have to find other ways to get insights
10:12 and network information to inform,
10:14 is Frank really who he says he is?
10:17 - I miss the days when you just asked
10:19 what my favorite ice cream was.
10:20 - Yeah, right?
10:21 We might have to get a little more personal than that.
10:23 - Yeah.
10:25 - I think the notion of a digital identity
10:27 and how we can all work together to make that fraud proof
10:30 and future proof and how it's constituent
10:34 is something that will need to evolve very rapidly.
10:37 And again, something I think that the traditional way
10:41 of how legislation and so on has caught up
10:44 will be very difficult.
10:45 If you go to Brazil,
10:47 I think driver's license is digital by now.
10:49 You go to some of the Eastern European countries,
10:53 a lot of the, all the identities are digital
10:57 and some of the traditional Western European
11:00 and US is just moving slow in comparison.
11:04 - So what are small businesses doing?
11:06 I mean, it's gonna be a big burden on them
11:08 to deal with fraud.
11:09 I mean, how are you guys helping them?
11:11 - I mean, I'd love partnering, of course, right?
11:15 I think that leaning into partners to help leverage tools.
11:18 I mean, a lot of the tools that we,
11:20 we do service a small business community as well.
11:23 So making sure the developers are there
11:24 to help integrate the right solutions
11:26 to get them at the right point in time
11:27 when they need to engage in onboarding
11:29 on whether it's onboarding a merchant experience PayPal
11:32 or if it's onboarding to a user experience
11:35 at SoFi or Robinhood.
11:36 I think that being able to have access to those tools
11:39 that in a lot of merchants, I think,
11:41 have purchased bespoke solutions
11:43 to solve for certain things.
11:45 But I think it's really critical
11:47 for all of these things to operate
11:48 and be leaning on one another
11:51 to kind of have a full picture
11:54 around what you can do to help drive your decisions.
11:57 - Yeah, I mean, we've been operating
11:58 in the payment space for quite a while.
12:00 And the biggest thing is how do you compete with fraud?
12:04 How do you understand this is somebody just traveling
12:07 or this is really fraud happening.
12:08 And we are democratizing that with our risk services
12:12 also for small businesses,
12:13 making that accessible for them, giving them,
12:15 like you take a very large company,
12:18 they have large teams that can deal with that.
12:20 If you're a small business,
12:21 you're the only person running your shop.
12:23 You want everything out of one hand.
12:25 You're not a risk expert.
12:27 So that's where we're thinking about
12:29 how we can help them for sure.
12:31 - Great.
12:32 So Steve, back to you.
12:34 - Okay.
12:35 - So last week, Robinhood produced
12:37 its second consecutive earnings surprise.
12:41 You guys reported, you guys beat earning expectations.
12:46 You also received the Wells Notice
12:48 over your crypto tokens traded on your platform.
12:52 Were you surprised?
12:54 - Yeah, we were surprised.
12:55 And I have to be careful about what I say,
12:57 but I can share everything that we've shared publicly.
13:02 So we're one of the few firms
13:06 that has both a brokerage business and a crypto business.
13:09 So we are very accustomed to being highly regulated
13:14 and we actually welcome regulatory clarity
13:17 'cause it helps us understand.
13:19 We have a model that we can replicate
13:21 and it's easy to do so.
13:24 It's not easy, but it's not,
13:27 if it's understood, we can accommodate that
13:29 and work compliantly.
13:32 So we thought we were on a very good path.
13:36 We did not list 300 coins.
13:39 We did not have staking, lending.
13:40 We were very careful.
13:42 Though we were kind of surprised.
13:45 We also, and I know Vlad shared this on CNBC,
13:48 we were asked to come in and register.
13:52 We did that 16 times.
13:54 - Wow.
13:55 - Didn't happen, was not reciprocated.
13:57 So we were a little surprised
14:00 that we were the recipient of the well-known notice.
14:03 - And you mentioned that you're searching
14:07 for regulatory clarity.
14:09 Are you finding it anywhere?
14:11 - Not in the US.
14:12 We're finding it in Europe.
14:13 So we're now in Europe from a crypto standpoint
14:17 because I think they're at least providing a framework
14:20 to start, and it, by the way,
14:23 we're on the Hill a lot talking to our elected officials
14:26 and we're like, look, this is not an area
14:27 where we wanna fall behind
14:29 because of uncertainty about how we're gonna regulate this.
14:34 And I think there's a lot of consensus around that.
14:39 I just think they need to gather up
14:41 and make sure that they're all unified
14:44 and then let's get going on a path.
14:46 - Do you think the SEC understands crypto?
14:49 - I do think they understand it.
14:51 I just think that there's not consensus
14:54 about what exactly they wanna deem.
14:56 I mean, look, the two regulatory agencies
15:00 that we both are part of, CFTC and the SEC,
15:03 don't even agree on what a security is.
15:06 Like one thinks Ethereum's not a security
15:08 and one thinks it is.
15:09 So if that's like mom and dad not telling you,
15:13 I'm a kid, how the hell am I gonna know what to do?
15:16 I mean, it's not exactly an environment
15:19 you wanna operate in.
15:20 - Great.
15:23 - You guys wanna weigh in?
15:25 Anybody wanna say anything?
15:25 - This is really his area, I think.
15:27 - But I couldn't agree more on the regulatory clarity.
15:30 I think that's super important.
15:32 And again, outside of the US moving much faster,
15:35 much more clarity on things.
15:37 - Why?
15:38 - Well, I don't know.
15:41 - It's actually a really good opportunity.
15:43 If I just put myself in the shoes of people
15:47 in these other jurisdictions, this is the future.
15:52 And if I have an opportunity to have a competitive advantage,
15:55 why wouldn't I take it?
15:56 Yeah, I'll provide you this regulatory clarity.
15:59 Bring all your business over here.
16:01 A lot of the firms are.
16:03 So how much momentum is that gonna gain
16:05 before we wake up?
16:08 - And I think if you're in the emerging markets,
16:10 what would you do, right?
16:11 If you lean into digital rails, digital identity, crypto,
16:16 these are the things that the biggest,
16:18 like we launched our stable coins.
16:21 So one of the huge opportunities is,
16:23 we heard it on the earlier panel, is cross border.
16:26 How do you bring down the cost?
16:28 If you send $200 cross border today, it's 6%, I think,
16:32 that you pay on average.
16:34 How can you bring that down, right?
16:35 I have a friend of mine, she's a filmmaker.
16:38 She sends money to her film crew in Malawi,
16:41 and it's really hard for her to get the money there.
16:43 So that's where those rails can be very helpful,
16:47 but we need the clarity.
16:48 - Yeah, and from an investment standpoint,
16:50 so if you think about it,
16:51 the 11 Bitcoin ETFs, ETPs that were launched recently,
16:58 they got more traction in a very short period of time
17:02 than virtually any ETF that's launched.
17:04 And that happened in the world of Robinhood as well.
17:07 It's people just taking a small portion of their portfolio
17:10 and saying, I want some exposure to this.
17:13 So it's, look, it's the general public believes in it.
17:18 I think some elected officials believe in it.
17:20 We just gotta get the middle to come to the same view.
17:25 - Okay, so one last question.
17:28 We have about a minute left.
17:30 How is the payments landscape evolving?
17:34 Is there one big trend you expect
17:35 to come into fruition this year?
17:37 Anybody, I'll start.
17:40 - So when I joined Plaid two years ago
17:43 and just realized the opportunity with open banking
17:45 and linking a bank account,
17:46 the natural transition to many people
17:48 when I was thinking about it was to pay with your bank
17:51 versus just account funding,
17:52 like what we've done with Venmo and with Robinhood.
17:55 But I just went to the Merchant Risk Council
17:58 not long ago in Las Vegas,
17:59 and top 50 global merchants are there.
18:01 And every one of them is thinking about
18:03 how they want to drive down some efficiencies
18:05 and costs out of the ecosystem.
18:07 And so they're looking at ways that they can allow
18:09 to the acceptance of paying with a bank account.
18:12 So that's certainly a trend that I think we'll see.
18:14 And perhaps by the end of the year,
18:16 you'll see a major retailer even launching.
18:18 - Wow.
18:19 - Yeah.
18:20 - Yeah, we're on our PSP business,
18:22 our payment service provider business.
18:25 I see a lot of merchants right now,
18:26 especially high interest rates.
18:27 Everybody's trying to save cost,
18:30 to find ways to lower costs also on the payment rails
18:33 and looking for options that are just cheaper
18:37 than the credit card rails and the debit rails.
18:41 And so account to account, again, outside of the US,
18:45 is happening more and more.
18:46 It requires consumer adoption,
18:48 but we're seeing slow optics on this.
18:51 - Steve, do you have any last words?
18:54 - Yeah, the payment space is not really my wheelhouse.
18:59 (laughing)
19:00 - Okay, on that note,
19:01 I'd like to thank everybody for coming.
19:03 The conference is over.
19:05 We're gonna have drinks now.
19:06 And thank you, my wonderful panelists.
19:08 - Thank you.
19:09 - Thank you for having us.
19:10 (audience applauding)
19:13 [BLANK_AUDIO]