What Banks and Fintechs Get Wrong About Each Other w/ Ethan from FS Vector

1 - > Ethan Singleton: I think relatively fairish on most 2 - > stablecoin use cases, international remittances, 3 - > clearly the best to the use case. 4 - > Eli Wachs: Everybody, welcome to the Risk and Reason podcast. 5 - > I've still not been fired as the host, so I'm back for 6 - > another week. 7 - > I'm joined with a phenomenal guest this week, Ethan 8 - > Singleton, managing partner at FS Vector.

9 - > Ethan, welcome to the show. 10 - > Thanks for coming on. 11 - > Thank you so much. 12 - > Ethan Singleton: It's my pleasure.

13 - > We'll take out the managing in case my CEO is watching. 14 - > Just partner. 15 - > Just partner for now. 16 - > Just partner.

17 - > Eli Wachs: Yeah. 18 - > Okay. 19 - > Partner at FS Vector. 20 - > We're thrilled to have you.

21 - > You this is called risk and reason. 22 - > And we often have on fintechs and they complain about banks, 23 - > and we have on banks and they complain about fintechs. 24 - > You probably every day get both those people complaining to 25 - > you. 26 - > How did you end up in that role?

27 - > There is legal background, but why did you want to have people 28 - > in all sorts of sizes in fintech complain to you all day? 29 - > Ethan Singleton: Yeah, I well, I don't use the term complain. 30 - > Seek advice. 31 - > Seek advice.

32 - > I started my career, so I'm a lawyer by training, worked early 33 - > in my career at HSBC, obviously one of the largest banking 34 - > institutions in the world. 35 - > Really enjoyed working at a large institution. 36 - > I'd learned a lot, had a lot of surface area interaction with a 37 - > lot of different people internally and externally. 38 - > And when I shifted over to the consulting world about seven or 39 - > eight years ago now, I started interacting with fintechs as 40 - > well.

41 - > And fintechs who were building things for the first time and 42 - > didn't really know what risk or reason or compliance was. 43 - > And they were like, we're going to leverage your expertise to 44 - > like build and operationalize risk and compliance programs. 45 - > And I really enjoyed both sides because it was large 46 - > institution, large banks. 47 - > Oftentimes you're kind of like maintaining the status quo.

48 - > Operations have been built out. 49 - > You're just looking to mature those operations. 50 - > And there's some interest in that, certainly. 51 - > But on the fintech side, it's about building and designing and 52 - > strategy of how risk and compliance actually impacts your 53 - > business.

54 - > And that building side, once I started working on that, was 55 - > just so addicting. 56 - > And so I about four years ago joined my current firm, FS 57 - > Vector, who the you know pitch to me was the only thing we do 58 - > at FS Vector at the time is build and launch products. 59 - > And most of that's on the fintech side. 60 - > And so I heard that that pitch and I was like, look, I can do 61 - > that all day.

62 - > Super appealing. 63 - > So I pivoted pretty heavily to just focus on fintech and 64 - > fintech product builds. 65 - > And that was across kind of all different products you could 66 - > think of: accounts, payments, cards, a little bit of crypto, 67 - > pretty much everything except for insurance. 68 - > And then pretty early in my tenure at FS Factor, uh, we had 69 - > gotten all of this experience from launching fintech products, 70 - > often in the context of bank partnerships, um, that we 71 - > realized that we had this core competency of like what makes a 72 - > good bank partner.

73 - > Um, so we kind of took that expertise and started pitching 74 - > what we called bass builds to community banks. 75 - > And that was bank partners uh when they're first entering the 76 - > space, thinking about the strategy, thinking about the 77 - > execution, obviously getting kind of senior management and 78 - > board approval and regulator approval. 79 - > Um, but helping them with that plan and then helping them 80 - > execute on that plan. 81 - > Um as you know, it's oftentimes involves uh plugging in new reg 82 - > tech to supplement existing bank technology.

83 - > Um so all that said, you know, it started, and I thought I was 84 - > gonna pivot very heavily and just focus on fintech. 85 - > Yeah. 86 - > Uh and then it became this kind of like full circle moment at 87 - > FS Factor over the years that we just, by nature of banking as a 88 - > service and bank fintech partnerships, and fintech's 89 - > relying on banks that I get to go back to the bank side as 90 - > well. 91 - > Eli Wachs: And Evans V, it it's a pretty amazing.

92 - > I I had the pleasure of meeting the founder, who's a legend in 93 - > the space. 94 - > Really cool history in DC, now also as a venture fund. 95 - > So like you see kind of these different areas coming together. 96 - > Couldn't we talk about why there's such a need for these 97 - > services?

98 - > Ethan Singleton: Yeah, and I'll I'll kind of go back to I guess 99 - > it would have been eight years. 100 - > Yeah, and what he saw when he started. 101 - > Yeah. 102 - > Um so our founders, John Betya, uh, who was first general 103 - > counsel, chief compliance officer of Circle way back in 104 - > the day.

105 - > Uh, and Raj Date, who came from kind of the DC regulatory 106 - > background, first deputy director of the CFPB, uh, kind 107 - > of ventured into the investing early stage VC space. 108 - > Uh, and and I think the story, and I might be misquoting, but 109 - > I'll try to remember the story, is that John and Raj were in 110 - > Boston at a bar like seven, maybe I guess about eight years 111 - > ago. 112 - > Um, and Raj was talking to John about how a lot of the early 113 - > stage fintechs that he's investing in are kind of having 114 - > trouble with that initial finding of a bank partner, 115 - > building of a compliance program, thinking about product 116 - > and how like risk and compliance interacts with the product side 117 - > of launching a business.

118 - > Uh and I think they actually like mapped out on a napkin like 119 - > what could a consulting firm look like that could service 120 - > those innovative, you know, emerging technology companies 121 - > and finance and service and help them build and launch products. 122 - > Uh and that was the initial impetus of the idea. 123 - > And it started uh as that kind of build-focused advisory firm. 124 - > And now we do so much more.

125 - > We still have the kind of the core advisory practice, the team 126 - > that I sit on and help lead. 127 - > Uh, but we also have now a licensing practice, very, very 128 - > busy in the fintech space, doing a lot of MTL acquisition, 129 - > lending license acquisition, yeah, uh charter work that's 130 - > really, really hot right now. 131 - > Um, and then if you think further past the maturity of the 132 - > kind of startup work that I do and even some of the licensing 133 - > work, we have a lobbying team.

134 - > And that government relations team is extremely plugged in. 135 - > So it's Rogers Roots and DC. 136 - > Yeah. 137 - > That's right.

138 - > Um, and so we have um Peter Freeman and Andy Barber and 139 - > Ashwin Bassan, partners that lead that team. 140 - > Uh, and as you can imagine, the kind of the current regulatory 141 - > environment, particularly when we think about digital assets 142 - > and the passage of the Genius Act and now the market structure 143 - > bill, there's just so much going on on that space. 144 - > Uh so it's really important for clients, whether you're a bank 145 - > now, which is crazy to think that the the intersection of 146 - > bank and crypto is like so potent right now.

147 - > Yeah. 148 - > But whether you're a bank or a blockchain native company, like 149 - > having someone plugged in on the hill, like our lobbying team is 150 - > really important. 151 - > Eli Wachs: And what does that look like? 152 - > You know, if I if I'm working with you and I I say, you know, 153 - > it'd be really helpful if uh regulators were more friendly 154 - > towards X, Y, or Z.

155 - > What would your advice be? 156 - > Yeah, I mean it a totally it's not just one size fits all. 157 - > Ethan Singleton: Yeah, certainly not one size fits all. 158 - > Depends on really two things.

159 - > One, your product. 160 - > You know, if you're if you're asking that question as a 161 - > community bank, it's gonna be a very different answer than if 162 - > you're a international crypto company who's trying to break 163 - > into the US market. 164 - > Yep. 165 - > Um and then the second piece being you know the maturity of 166 - > your company.

167 - > If you're kind of early stage um and you maybe are are 168 - > dabbling in novel or even like gray areas, uh, you probably 169 - > don't want to like jump at the bit to like interact with 170 - > regulators and be like, here's what I'm doing. 171 - > It's this crazy thing, maybe it's in the bounds of legality 172 - > or not. 173 - > Um but if you're very established and you have 174 - > certainly the capital and the resources to be able to actually 175 - > get in front of regulators uh and then like pose that 176 - > innovative idea as something that they should be aware of.

177 - > Having an FS vector lobbyist uh or having just someone who 178 - > knows the stakeholders in DC and knows the regulators and kind 179 - > of get you in front of those regulators is a really nice 180 - > tool. 181 - > Eli Wachs: Um before we get back to this, I want to ask you 182 - > about culture, in that, you know, Raj this super personal 183 - > guy. 184 - > You, I've known you for many years now, and you've always 185 - > been not just a knowledge, but very friendly.

186 - > And I think that there, you know, the this maybe sounds 187 - > strange, but like I wrote recently a post about you know 188 - > culture and and what it means. 189 - > And I think it's just a reflection of people in your 190 - > org, but it is really important when you think about, you know, 191 - > you're in an area, I'm in an area that we're we're not in the 192 - > sexiest area, but we're in such an important area where when 193 - > things go wrong, it when it goes really wrong, you end up with 194 - > the need for the Patriot Act, right?

195 - > Where it's like really bad things are happening with our 196 - > financial rails. 197 - > To say when it goes wrong, it's people's data is getting 198 - > leaked. 199 - > It's there is there is over three trillion dollars of money 200 - > illicitly moved on rails last year, is a is a number you 201 - > commonly see. 202 - > Half a billion, uh half a trillion uh of fraudulent 203 - > activity.

204 - > So there's so clear. 205 - > And how have you thought about just building out the business? 206 - > Because it it's I feel now whenever you speak with a 207 - > partner bank or a fintech, and it's who are you working with 208 - > for consulting, it's FSV. 209 - > Ethan Singleton: Yeah, it's it's uh really, really important for 210 - > us as we think about our growth and as we've been hiring more 211 - > advisors.

212 - > Uh naturally, as a professional services firm, you know, a lot 213 - > of what we do is uh interacting with people, and you have to be 214 - > personable and you have to be able to communicate well. 215 - > Um I think that the really unique thing about FS Vector is 216 - > that we look for people that have those qualities, but we 217 - > kind of look for people that go a bit above and beyond that, and 218 - > they're really trusted advisors, and that there is no 219 - > question or problem that we can't help you think about.

220 - > Uh, and in the context of the fintechs that we're helping 221 - > build and launch for the first time, that's really, really 222 - > important. 223 - > And something I personally take pride in is that this is the 224 - > biggest, oftentimes biggest move of their life. 225 - > They're starting a company, they're dropping everything, you 226 - > know, they they have investors that they have to kind of answer 227 - > to and and spend a lot of time keeping happy. 228 - > There's just so much pressure in launching a fintech or any 229 - > company, really.

230 - > Um and so our FS Factor team, like we recognize that. 231 - > Like we and any any consulting firm could put together a risk 232 - > and compliance framework and set of policies, hand it to a 233 - > founder and say good luck. 234 - > Like FS Factor, what we do is so much more than that. 235 - > It's this framework of risk and compliance that then we 236 - > communicate to the client and help educate the client on, and 237 - > of course help operationalize in many different ways, but 238 - > oftentimes in the plugging in technology like footprint for 239 - > identity and verification and fraud prevention.

240 - > But it's really that like personal component. 241 - > And and a lot of the fintechs I've advice, even if we're not 242 - > working together, it goes on the bank side as well. 243 - > I'm very friendly with the people I've worked with. 244 - > I've built amazing relationships with the people, 245 - > um, which really makes it really fun.

246 - > Like compliance is not that fun. 247 - > I'll like I'll be the first one to admit it as a career 248 - > compliance professional and you know, attorney by training. 249 - > But um, the people that you work with, whether it's the the 250 - > internal people at FS Vector or the clients, like really make it 251 - > fun and you get coming back for more for sure. 252 - > Eli Wachs: Can we talk about AI?

253 - > Never heard of it. 254 - > So, you know, uh um at right uh if you're a developer and 255 - > Claude or cursor comes out, great. 256 - > Let's start using this tomorrow. 257 - > If you're a bank, if you're a fintech, uh, you know, we very 258 - > much have been spending a lot of time, we've worked with you, in 259 - > getting your advice of how do we build out uh AI tools and 260 - > agents for financial crime that can can hold up to regulatory 261 - > scrutiny.

262 - > It's also very much a a new frontier. 263 - > How much has uh that changed uh the advice you've given, or how 264 - > how much uh I guess how many people are coming to you saying, 265 - > how do we use this technology responsibly? 266 - > Ethan Singleton: Yeah. 267 - > It's uh almost every day it comes up with a different 268 - > client.

269 - > Um and you know, maybe a year and a half, two years ago, when 270 - > you know we were kind of first seeing these LLM models come in 271 - > and the even in some of the early kind of a agentic AI 272 - > solutions or machine learning solutions for compliance in 273 - > particular. 274 - > Um my advice has always been like it's a tool to put in your 275 - > toolbox that makes you better at being a compliance 276 - > professional. 277 - > We'll kind of stick with the compliance example.

278 - > You 100% should be exploring it. 279 - > Eli Wachs: Yep. 280 - > Ethan Singleton: Um whether that means you know exploring it 281 - > using a third-party tool and kind of purchasing the AI 282 - > capabilities or building it a house, which like there are 283 - > banks that have the developer capabilities and the expertise 284 - > to build kind of in-house AI agents, which is super exciting. 285 - > Because if you can, you know, remove the abstraction layer and 286 - > get directly to the model, and and uh there's so much more you 287 - > can do, particularly in terms of like just protecting your 288 - > sensitive data as an institution.

289 - > Um, but the exploration uh of the AI capabilities that are out 290 - > there have to be paired with really safe and sound risk 291 - > management practices. 292 - > Yeah. 293 - > Um, whether you're a fintech who's working with a bank 294 - > partner or a bank partner who's directly regulated, when you're 295 - > ingesting potentially very sensitive data into these tools, 296 - > um, when you're relying on these tools to make decisions on 297 - > your behalf that historically maybe were a human-made 298 - > decision, you really have to have sound model risk management 299 - > practices.

300 - > You have to build out kind of existing model risk management 301 - > practices and augment them with AI-specific uh evaluations. 302 - > Um, and you have to rely on vendors who like actually 303 - > understand what that means. 304 - > Yep. 305 - > Um, so if you're a reg tech company, for example, and you're 306 - > selling into these financial institutions, you know, 307 - > auditability, explainability, you know, data privacy, 308 - > security, all of these things should be kind of core to your 309 - > business as you're going and interacting with these banks.

310 - > Um, but it's fundamentally changing how my bank and fintech 311 - > clients operate the compliance policies and procedures that I 312 - > help build out. 313 - > Um, and even like FS Vector, you know, we're thinking about 314 - > how we can better use AI tools to help our advisors be faster 315 - > and smarter and better at their job. 316 - > Uh and I I'd be naive if I didn't admit that like 317 - > professional service firms and consultants and and lawyers, you 318 - > know, we're all thinking about how AI could replace us someday.

319 - > Um, but we're also thinking about how do we, you know, make 320 - > it so we're a better advisor to our clients. 321 - > Eli Wachs: You bring up something really interesting 322 - > there about there's some banks that maybe are going to try to 323 - > build agents on their own. 324 - > Some will buy this. 325 - > You work with both banks and fintechs.

326 - > Uh how do you when do you when are you advising a bank to buy 327 - > versus build? 328 - > And on the same side, how are you what advice are you giving 329 - > to a fintech on what bar they need to clear for a bank that 330 - > historically builds, but maybe they would buy if it was good 331 - > enough? 332 - > Ethan Singleton: Yeah. 333 - > I depending on kind of what we're talking about, I mean it 334 - > it varies so greatly depending on the bank, um, size, 335 - > competency, capital to invest in, like building uh say an AAI 336 - > agent.

337 - > Um in in the the bank partner ecosystem that I mostly operate, 338 - > um, there's so many buy uh versus build questions that get 339 - > asked as you're spinning that program up for the first time, 340 - > both in terms of the technology that you utilize to interact uh 341 - > with the fintech and their customers in terms of kind of 342 - > middleware or ledgering technology. 343 - > Um I've almost always kind of recommended the buy approach for 344 - > that. 345 - > Um the reason being kind of just like speed to market.

346 - > Uh, we've seen some banks like Colum and uh Cross Rover who've 347 - > like built those technologies out themselves. 348 - > Uh takes a lot of time to do that. 349 - > But obviously there's some kind of economic advantage of doing 350 - > that. 351 - > Um thinking about kind of like the risk and compliance, it's 352 - > it's so hard to build uh onboarding platform or 353 - > transaction monitoring platform or you know, sanctioned 354 - > screening.

355 - > All of these things are extremely difficult to build uh 356 - > if you're a bank, and that's why I think most don't do it. 357 - > Yeah. 358 - > If you're JP Morgan, you probably are because you have a 359 - > thousand developers to do it. 360 - > But yeah, that's not the reality for you know the 2,000 361 - > or so other community banks that are you know under 10 billion.

362 - > Um so if you're on the other side, if you're on the reg tech 363 - > side, you're on the fintech side, uh, more specifically, 364 - > thinking about um uh a bank partner evaluating the AI that I 365 - > have been potentially implementing, um it's gonna be 366 - > easier if it's a AI that they're familiar with. 367 - > Um, but the fourth party risk considerations of your fintech 368 - > working with an AI company. 369 - > If it's an AI company that you've heard of and maybe even 370 - > have diligence as a bank yourself, you could probably get 371 - > more comfortable with that risk quicker than if it's, hey, I'm 372 - > a fintech, I built out all of these agenc AI models.

373 - > They feed into every single thing we do from onboarding to 374 - > customer service to complaints to disputes. 375 - > It's all ours, it's all built. 376 - > Um that's they're starting from scratch when they diligence 377 - > that. 378 - > So there's there's a speed component there in terms of like 379 - > onboarding with that bank that if you're a fintech, you could 380 - > think of.

381 - > But obviously, there's proprietary advantages and 382 - > economic advantages as a fintech to build it all yourself. 383 - > Um, and as we like think about the Capital One Brex acquisition 384 - > that was recently in the news, the BRECS built out so much of 385 - > their own technology across the entire customer journey. 386 - > A lot of that, which is now kind of enabled by AI, there's a 387 - > lot of economic value in building it yourself in the long 388 - > term.

389 - > Eli Wachs: Can I ask you some hot take questions and you 390 - > complete the fifth when you see fit? 391 - > Sure. 392 - > Uh you bring up call and cross river there. 393 - > Uh how do you respond to this statement?

394 - > Calm and cross river lead, those banks are ha have a 395 - > genuine advantage over historical banks that are 396 - > partnering with BAS providers to work with FinTechs. 397 - > Ethan Singleton: Happy to answer this one. 398 - > Uh and try not to step out anyway. 399 - > Eli Wachs: And I'm not saying that's what I believe.

400 - > I'm just saying that's what some people believe. 401 - > Ethan Singleton: Look, there is there is an objective advantage 402 - > when you do not have a third-party technology company 403 - > that's part of one, the fintech onboarding uh diligence term 404 - > sheet negotiation process, but two, part of the actual 405 - > technological technological implementation process. 406 - > Yeah. 407 - > Um, so if your column across river, it's all in-house.

408 - > You know, the capabilities are very, very clearly laid out. 409 - > And the division responsibility internally at the each of those 410 - > banks is very clearly laid out in terms of fintech uh diligence 411 - > and onboarding and implementation. 412 - > Just naturally, when there's less parties involved, things 413 - > are going to move faster. 414 - > Yep.

415 - > Um now that said, like it's it's very, very hard to build 416 - > out what Column and Cross River have done. 417 - > And as we mentioned before, it takes takes years and millions 418 - > of dollars in some cases of investment. 419 - > Helps to start a company, make a lot of money. 420 - > That's the dream.

421 - > We can all like exit and have uh an ungodly amount of money to 422 - > just buy a bank. 423 - > To go buy a bank and then build a pretty much build a fintech 424 - > on top of it. 425 - > That's not the reality for most of the banks that are getting 426 - > into the fintech uh bank space. 427 - > Trevor Burrus, Jr.

428 - > And how should those banks compete, though, with the 429 - > columns and crossovers? 430 - > Yeah, and and this is something we help banks think about a lot 431 - > because if you're using a Treasury Prime or an Increase or 432 - > SyncTara or Lithic, depending on the product, you know, you're 433 - > you're relying on their technology uh and the adequacy 434 - > of that technology uh in a lot of ways, in terms of how you 435 - > interact with the fintech, how satisfied the fintech is with 436 - > that technology.

437 - > Um so differentiating yourself can't really come from the 438 - > technology side. 439 - > It has to come from the leadership side, the economic 440 - > side, make you know, the market is kind of broadening in terms 441 - > of the supply of partner banks. 442 - > So how you price deals and how you win deals is extremely 443 - > important. 444 - > Obviously, kind of having a clear regulatory history helps.

445 - > Yep. 446 - > Um how you acquire fintechs is extremely difficult. 447 - > Um you can go to fintech meetup and try to get paired up 448 - > one-on-one and hope you meet a fintech there. 449 - > You can go to Money2020, uh go to other conferences, but it's 450 - > really hard to like organically get fintech leads if you're a 451 - > bank partner.

452 - > Um so there's you know digital brand campaigns you could do, 453 - > and you could really like beef up your website and have your 454 - > SEO optimization nailed down. 455 - > Um, but I I think the best thing you could do is have like 456 - > the face of your partner banking division, like early on, too. 457 - > And a couple of the banks that we've done, you know, someone 458 - > who we mentioned kind of like someone who could be personable 459 - > and like speak fintech and like really get out there and and be 460 - > a salesperson on behalf of that bank, um, that can really 461 - > surprisingly go like a really, really long way.

462 - > Eli Wachs: Now you you brought up Brex earlier. 463 - > Obviously, Brex and Ramp have been in the news recently. 464 - > Um uh may we all have five billion dollar outcomes? 465 - > Like uh and anybody who's dunking on Brex, I'm just 466 - > dumbfounded.

467 - > But regardless, uh you you brought up Lithic. 468 - > But Bo from Lithic, you know, tweeted congratulating Brex 469 - > saying I'm Lou welcome. 470 - > And then uh brought up, you know, he's like Brex spent a lot 471 - > of time rebuilding uh IP2, like their processor internally, and 472 - > that maybe that was technology they didn't they shouldn't spend 473 - > time building. 474 - > This is a constant uh Robin Hood rebuilt Apex, famously 475 - > internally.

476 - > Like they built their own version of a brokerage. 477 - > So there's a long and stored history of fintechs deciding 478 - > that they want to rebuild some of the tech. 479 - > However, like do you could a another type of bank point that 480 - > same argument at a leader or a column and say, yeah, like they 481 - > they built this tech and it's a bit sexier, but at the end of 482 - > the day, why do you need better APIs for opening a deposit 483 - > account? 484 - > Right.

485 - > What would you say to that? 486 - > Ethan Singleton: Yeah, I mean, I think it's an extremely fair 487 - > argument. 488 - > Um and if I'm a bank partner who's maybe like working with a 489 - > lithic or working with the Treasury Prime or one of the um 490 - > other providers, this might seem counterintuitive, but it's kind 491 - > of a selling point of like you're not being completely 492 - > intertwined with my bank's technology, like which you are 493 - > with a a column or crossover setup.

494 - > You know, once you have that first bank part, you're really 495 - > integrating. 496 - > Right. 497 - > Eli Wachs: Yeah, which is kind of but it's actually a really 498 - > it's a it's a really nice selling point. 499 - > Trevor Burrus, Jr.

500 - > We weirdly try to pitch that it's easier to move off 501 - > footprint than other companies. 502 - > That said, nobody we're proud to say nobody's ever left. 503 - > But we we do think that it uh I'm sorry, I can continue. 504 - > Ethan Singleton: No, it is, but it is like a real thing.

505 - > And and you know, depending on the fintech that you're selling 506 - > to, if if it's a d startup fintech, you're their first bank 507 - > partner, they're looking to just like prove the concept uh 508 - > and actually like get the product to market and see if it 509 - > has legs. 510 - > Uh, you can do that at a bank that isn't have this full 511 - > integration, probably at a bit cheaper rate and it maybe 512 - > potentially faster. 513 - > Um so that's something you can sell as a partner bank, you 514 - > know, who works with a middleware provider is that 515 - > like, look, if you need to move fast, we can do that.

516 - > We have this implementation team uh at you know Treasury 517 - > Prime, for example. 518 - > We um can get you what you need at a pretty decent price just 519 - > to prove the market fit. 520 - > But if you feel like we're not a good culture fit as a bank, 521 - > you know, come two, three years from now when our first 522 - > agreement is up, you don't have to completely decouple. 523 - > You can go work with another bank within that, you know, 524 - > Lithic or Treasury Prime or you know, middleware XYZ network.

525 - > Uh once again, it's kind of an interesting argument, but it it 526 - > I think it could be a selling point if you play it safely. 527 - > Eli Wachs: Um another uh hot uh let me throw you two other, 528 - > we've spoken a lot about AI, two other trends that I think you 529 - > hear a lot of talk about in Fantec Curious, which you're 530 - > very bullish on if you maybe have a healthy skepticism on 531 - > either, but we've seen a lot of stablecoin activity in the last 532 - > cult year, and a lot of people are talking about gentec 533 - > commerce.

534 - > I'm I'm curious, you know, how much how many questions are you 535 - > seeing on these topics? 536 - > And how much are you what do you think smoke versus what do 537 - > you think is real? 538 - > Ethan Singleton: Yeah, the say stable coin every single day we 539 - > we are having conversations about that. 540 - > And should we be having conversations about that?

541 - > 100%. 542 - > 100%. 543 - > Yeah. 544 - > Um the the conversations look different depending on who our 545 - > clients are.

546 - > We're working with some banks now who are in the early stages 547 - > of we think now is a good time, both from a market perspective 548 - > and from a regulatory perspective, to somehow get into 549 - > stable coins. 550 - > Uh what that looks like, they don't know. 551 - > We help them think through that strategy and help them execute 552 - > on that strategy. 553 - > So there's a lot of pontification about what are the 554 - > use cases for stablecoin?

555 - > What are the realistic use cases for stable coin? 556 - > Um, how do banks actually make money on a stablecoin issuance 557 - > or a partnership? 558 - > Um I'll I'll be relatively bearish on most stable coin use 559 - > cases, I think, in the coming years. 560 - > I think and this is a low-hanging fruit and everybody 561 - > saying it, but like international remittances, 562 - > clearly the best suited use case.

563 - > Uh faster, cheaper, I mean the legacy systems, but uh that that 564 - > have historically been in place for cross-border payments are 565 - > just really, really antiquated. 566 - > Yep for now, although we see Swift, you know, they're 567 - > adopting blockchain technology and they're trying to integrate 568 - > it so that they're they're not losing too much of the market 569 - > share. 570 - > Um domestic uh use cases. 571 - > I'm there's there's a lot more that I'm skeptical about on that 572 - > side, particularly in the short term.

573 - > Eli Wachs: I'm not asking you to name names, but any use cases 574 - > like specifically that you've seen. 575 - > Ethan Singleton: I I think I'm I'm pretty bearish and skeptical 576 - > on like point of sale, like merchant, like stablecoin-backed 577 - > cards. 578 - > Yeah. 579 - > Um for the US.

580 - > Because I think if if you and I went outside right now and and 581 - > asked people on the street, would you ever use a 582 - > stablecoin-backed debit card for to go buy your Starbucks 583 - > coffee? 584 - > I think they would ask, I have no idea what you just said. 585 - > Can you tell me what that means? 586 - > Yeah.

587 - > Um and then even if it should work as tech that you don't have 588 - > to think about. 589 - > Right, right. 590 - > Agreed, agreed. 591 - > If there's something behind the scenes, I think some of the 592 - > things that uh like Rain is doing with like Lithic, I think 593 - > there's some like plumbing opportunities for like 594 - > settlement.

595 - > Um, but I think if you're aiming for a consumer adoption 596 - > of stablecoin-backed cards, it's gonna be really tough to 597 - > replace the whatever top of wallet card they're using. 598 - > Like if they're say they are kind of a technologist and 599 - > they're using the Coinbase credit card, it's gonna be 600 - > really tough to say, put that down, don't get your three to 601 - > four percent in Bitcoin rewards and use this stablecoin-backed 602 - > debit card instead, which maybe won't even get any rewards.

603 - > Um but it and so there's there's so I think that, but 604 - > there's still we're still so early, which is like the really 605 - > cool thing. 606 - > We obviously the Genius Act passing was really helpful to 607 - > set the kind of legislative and legal requirements for offering 608 - > these products. 609 - > Um, I think the market structure bill, whether that 610 - > passes um in the next few months or even at all, I might add 611 - > some additional things that add clarity to kind of stable coin 612 - > use cases.

613 - > But overall, I'm like very, I think, bullish on the technology 614 - > over the next few years at least. 615 - > Eli Wachs: You um you say kind of next couple years, you think 616 - > about the domestic stable coin use cases that on the flip side, 617 - > five years from now, what do you think are some really 618 - > exciting innovations that we're going to see in this broader 619 - > space? 620 - > Ethan Singleton: Yeah, and you and you asked before, you know, 621 - > kind of like agentic commerce and like where that's gonna fit 622 - > in.

623 - > Um that's the one that I'm more bearish on. 624 - > Yeah, I I I wonder oftentimes how much people will be kind of 625 - > like willing to just give up control. 626 - > Eli Wachs: Yeah, I completely agree. 627 - > And I just don't see it to your point earlier about uh you walk 628 - > on the street and you ask people if they want a stablecoin 629 - > bag.

630 - > I I just don't know how how many people are actually having 631 - > an agent go and book a plane ticket for them. 632 - > And if they are, that's just how many flights are you booking 633 - > a year? 634 - > Yeah. 635 - > Uh it's like the volume is just not creating.

636 - > That's right. 637 - > Even that's a good example. 638 - > I I I do to use amount of travel. 639 - > I would be happy telling Claude, hey, could you go and 640 - > check Delta for me and find the flight that leaves between these 641 - > times?

642 - > It's just not still not even happening that much. 643 - > Ethan Singleton: Yeah, and it's there's a stopping point. 644 - > I think there will be a stopping point for a lot of 645 - > people in terms of how much control they give. 646 - > I think your example of using um the agent to go pull things 647 - > and give you a clear itinerary or like a clear option.

648 - > Yep. 649 - > I think most people will be fine and comfortable with that. 650 - > But in terms of like take my card. 651 - > Take my card, go use it as you see fit based on the prompt that 652 - > I've given you.

653 - > Like that, I think is gonna be a little bit tougher. 654 - > Eli Wachs: And there's a lot of like better prompt engineering 655 - > classes than high school. 656 - > Ethan Singleton: Yeah. 657 - > And like, look, at the end of the day, I'm a lawyer, and most 658 - > of that stuff I don't understand once we get under the hood.

659 - > But like that is gonna be extremely important. 660 - > Who is the liability there if the wrong flight's booked? 661 - > 100%. 662 - > And also, you think about like the chargeback liability and how 663 - > things will change.

664 - > That said, I I feel like I'm there's it's a higher likelihood 665 - > that I'm wrong about agentic commerce than I am about like 666 - > domestic stable coin usage. 667 - > But I'll be very interested to come back to that. 668 - > Eli Wachs: I tell the team often comes to me, they say, Eli, 669 - > like we think this is exciting. 670 - > And I go, I don't disagree, something probably will happen 671 - > here.

672 - > I just don't think it's happening in the next year. 673 - > And as a startup, that means we just can't be focused on it. 674 - > Ethan Singleton: 100%. 675 - > 100%.

676 - > What I will say is that at FS Factor, uh, and we work with 677 - > startups of of all varieties, we have not had one agentic 678 - > commerce type. 679 - > Which is pretty telling because you'd think they'd be coming to 680 - > you if they were trying to do that. 681 - > Yeah, we've had conversations, but um really what the the the 682 - > focus now is still feels like kind of a very good mix of kind 683 - > of traditional banking products wrapped in fintech layers. 684 - > Yeah.

685 - > Um and then of course the digital asset stablecoin work 686 - > that I mentioned before, a lot of that's picking up. 687 - > Eli Wachs: As we get close to wrapping up here, uh I'm curious 688 - > your advice. 689 - > What is one thing that uh you think more fintechs and our 690 - > banks are should be doing that they're kind of just neglecting? 691 - > This is purposely broad.

692 - > Ethan Singleton: Oh, that's a great question. 693 - > Um it's tough to think like years ahead, particularly when 694 - > you're a startup fintech, or even like months ahead. 695 - > Like, you know, you're kind of like, I want to launch a uh bank 696 - > account product, and that's gonna be my sole focus, and I'm 697 - > just gonna prove that use case and get it live. 698 - > Um on the bank sides, too, we're just gonna onboard our 699 - > first fintech, and then then we'll figure it out from there.

700 - > Um, I I think what what could be done better is um kind of 701 - > product road mapping plus strategy forecasting over months 702 - > and years. 703 - > Um and so if you're a fintech and you're launching that, let's 704 - > just say commercial checking account product for plumbers, 705 - > whatever it might be. 706 - > Eli Wachs: Sure. 707 - > Ethan Singleton: Um you should immediately what's that hot 708 - > market, a very hot market.

709 - > Yeah, that will not be replaced by AI. 710 - > Uh you should immediately be thinking about what's next? 711 - > Is it a debit card product? 712 - > Is it a credit card?

713 - > Are we gonna embed a wallet and allow them to get paid in 714 - > stablecoin? 715 - > But I think you really like that sometimes I I think the 716 - > like product roadmap and growth strategy can get lost on on the 717 - > fintech side. 718 - > But the ones that have done like really well are like if you 719 - > think about like Brex uh ramp constantly adding new products 720 - > to supplement their initial kind of charge card product. 721 - > Um, or even Chime, for example, you know, just kind of like 722 - > starting off with like kind of relatively basic, you know, 723 - > consumer.

724 - > Even if you go to like Stripe Airwallets, he's kind of oh 725 - > yeah, Stripe's a I mean a huge example of kind of just starting 726 - > with relatively you know, kind of simple merchant acquiring and 727 - > processing. 728 - > Uh and then so many $500 million businesses. 729 - > That's fine. 730 - > It's uh it's so impressive.

731 - > Yeah. 732 - > It's really impressive. 733 - > Um and then and then on the bank side, like I said before, 734 - > kind of similar thing, like getting that first fintech and 735 - > and serving that kind of first you know, use case that you're 736 - > comfortable with. 737 - > Maybe you only work with fintechs that are doing account 738 - > products.

739 - > Yeah. 740 - > But then once you get that competency and you get 741 - > comfortable with it, okay, maybe we'll add lending products 742 - > next. 743 - > Yeah. 744 - > Or maybe or maybe cards or a mortgage, whatever you think you 745 - > can continue to add, you know, diversified streams of revenue 746 - > across your fintech partnership group, I feel like you have to 747 - > be doing that.

748 - > Eli Wachs: Final question, inverse of that, what are too 749 - > many people doing? 750 - > Like what are you just seeing people spend time on that's just 751 - > a time sync or a money sync? 752 - > Ethan Singleton: Well, if they're working with us, they're 753 - > not. 754 - > They're not wasting any other time.

755 - > Everything is perfectly not. 756 - > Exactly. 757 - > Yeah. 758 - > Um I think probably like worrying about things that are 759 - > out of their control.

760 - > Um so like go with the fintech example of you are trying to 761 - > find your first bank partner, and you're going through and 762 - > you've talked to like 10 or 11 or 12 of them, um, and you're in 763 - > the diligence, and there's multiple banks that you want to 764 - > work with. 765 - > Um but you're focused too much on their process and like how 766 - > long it takes them to diligence, and and what is their 767 - > underwriting model internally for de-risking you and getting 768 - > comfortable with you as a partner, or even like putting 769 - > their pricing model together.

770 - > Um, all of that time spent thinking about that and worrying 771 - > about that and asking questions maybe to like your advisor at 772 - > FS Fector of like what's taking them those so long. 773 - > Um, obviously that distracts from very important things that 774 - > should be happening, like your product build or building out 775 - > your staff, or um, you know, actually having your engineers 776 - > go in and build out the front end of the product. 777 - > Um so it's tough because in the bank fintech ecosystem, there 778 - > are so many reliances on third parties across the board.

779 - > But you just kind of to like relatively stay in your lane, 780 - > control what you can control, and just push forward on that. 781 - > Eli Wachs: Thanks so much for coming on. 782 - > Thanks for having me. 783 - > It's been great.

784 - > Appreciate it.