Dynasties, Stripe + Genuine Delight

What’s up, everyone – Pranjal here.

Welcome to the first issue of Generative Finance – where we dive headfirst into the wild world of Generative AI and Finance.

A bit about me: I run Accend , an AI company that helps banks and fintechs speed up onboarding and underwriting. Before that, I was at Brex, fighting fraud and dealing with compliance, credit and all the fun stuff. And, way back in the day, I dabbled in AI research.

So yeah, I’m always neck-deep in AI and fintech. Every week, I’ll hit you with my favorite finds and throw in a little rant (or two) on something I’ve been obsessing over.

Let’s jump in!

My favorite finds of the week.

• How to build a successful modern AML solution (link )
• The fintech dynasties of today (link )
• Ongoing monitoring is non-negotiable in AML (link )
• Machine learning is better than ChatGPT in predicting corporate credit risk (link )
• Product development > risk management (link )

NEWS

Stripe’s big gripe with banking

Stripe is discovering that disrupting finance comes with its own set of challenges—particularly when it comes to keeping banking partners on board.

The backstory: In a significant blow, Stripe learned last year that Wells Fargo intended to end their partnership, citing increased risks and regulatory scrutiny. Seeking a replacement, Stripe approached Goldman Sachs, but was turned down due to similar concerns over business practices and the regulatory environment.

Now... Stripe has secured a new partnership with Deutsche Bank for payment processing, but this game of musical chairs is symptomatic of a larger trend. Banks, including Wells Fargo and Goldman, are increasingly wary of supporting FinTechs due to mounting regulatory pressures.

The crux of the issue? Stripe's involvement in the creator economy, where some businesses skirt the edges of prohibited content rules. Despite efforts to ensure compliance, Stripe has struggled to effectively monitor all activity, particularly on platforms facilitating adult services. This tension between growth ambitions and regulatory compliance underscores the complex landscape FinTechs navigate today.

In response, Stripe has significantly expanded its risk and compliance teams, tripling headcount to around 700 since 2022. However, banks are becoming increasingly selective, preferring lower-risk clients in an environment of heightened scrutiny.

THE TAKEAWAY

Stripe's banking woes highlight a crucial lesson in the FinTech world: innovation without robust compliance is a risky business model. As the embedded finance space evolves, it's clear that the most valuable 'disruption' might just be finding ways to grow rapidly while staying firmly within regulatory bounds. For Stripe and its peers, the challenge isn't just processing payments—it's processing the reality that in finance, rules aren't just guidelines, they're the difference between thriving and merely surviving.

MY TAKE

Banks have to build the path of least resistance.

Let's talk about building banking products people genuinely want to use.

Not just tolerate, but actually love.

It can sound like a radical idea in an industry that often sees compliance and customer experience as two separate, sometimes competing, priorities.

But it’s possible, and it’s necessary.

The best financial products come from a place of personal frustration. Think about the “Built for X, by X” category of fintech products: the entrepreneur creating the business bank account she always wanted, or the doctor developing the debt consolidation loan he knew should exist.

They create solutions from the lens of: "I understand what needs to be built here, and I'm going to solve this problem for others like me" - this thinking is something we need more of in financial services.

I used to lead Compliance at Brex, and I recently wrote a post about how one of Brex’s values was to “inspire customer love.” This meant largely putting ourselves in the shoes of our customers to understand what sparked genuine delight for them.

I’ve found that impulse is largely missing when it comes to onboarding.

On average, it takes 3-4 months to onboard a corporate banking customer . That’s a huge amount of time – and the frustration that results from it is very evident. Around 50% of commercial banks in the US report losing clients due to slow and inefficient onboarding processes.

Onboarding a business is your first point of contact with your customer. You get one shot at making a good first impression. If you don’t, you’re the only one that gets hurt. We live in an age of optionality where there are countless other banks and fintechs offering extremely similar, if not identical, services that customers will flock to instead.

Granted, Know Your Business (KYB) is never going to be an instant process. But it’s riddled with avoidable inefficiencies.

For example, verifying business entities and overarching ownership structures now necessitates Enhanced Due Diligence (EDD). This EDD helps establish that the business customer is real and identifies the stakeholders and UBOs. Thomson Reuters surveyed 430 AML compliance leaders of financial institutions (FI) and found that 58% cited the inability to access UBO (Ultimate Beneficial Owner) data as their greatest challenge.

Finding that information manually is hard, especially when there can be shell companies, subsidiaries, multiple jurisdictions at play. It gets even harder when you take into account that UBO checks should be continuous — ownerships can change, so it’s never a one-and-done task.

For many banks and fintechs, the answer is outsourcing their KYB work. They throw more (external) headcount and money towards the issue, which might help their internal teams offload some of their work – but has absolutely no effect on the customer experience. For a business trying to set up a bank account, the process is just as long and irritating.

A bank or fintech who puts customers' needs above - or at least on the same level - as their own internal pain points would think about ways to offload this work while speeding it up for the people on the other side of the table, like incorporating AI in some of their compliance workflows.

It’s easy to forget that most banking customers today don’t care that much about which financial products they use when the difference is marginal.

They default to whatever the path of least resistance is.

When you look at it like this, the future of banking isn't exclusively about managing risk - it's about elevating customer experience. It's about moving from "can we do this?" to "how well can we do this so our customers fall deeply in love with our product?"

Banks that figure this out will thrive. The ones that don't will be footnotes.

Until next time,

Pranjal

How I can help

We can help speed up your compliance and onboarding process.

We built Accend as your AI-powered platform to help risk and compliance teams get customers onboard quicker. Get started today with us today .