a16z Podcast | Fintech from the World's Financial Capital -- London

Key Takeaways

hi everyone welcome to the a 6nz podcast I'm sonal and today Michael and I are taping another special episode of the a 6 & Z podcast on the road from London and so we are bringing this to you live from London and today's topic is FinTech or financial services and tech meets technology and joining us on the podcast today are Alex man pal who is our newest GP General Partner who among many other things will be focusing on fin tech and we also have Eileen burbage who is a partner at passion capital and early stage seed fund that's one of the most prominent early stage seed funds in London and she's also the chair of tech city and very interestingly the government special envoy for fin tech welcome Eileen and Alex thank you thank you let's just start talking about why FinTech why now let's just jump right in and in fact it's been tech like a new thing is that like a real phrase that's been around I mean is that like a new phrase or was been around for a while like what's going on with that we were just joking about this that it seems like a contrived term because if you were to ask any of the existing incumbent companies what they deal with there they would not say fin tech they would say we loan money we're a bank or we do finance we do microfinance but they they have very very well defined terms but anybody who's trying to compete with them that's fin tech company uh-huh it's almost like a dis right it's like the new newer companies are thinking oh we're gonna introduce technology into your sector right thereby implying that they never used technology to do it so it's almost a bit of it I think like Walmart Amazon's an e-commerce exactly exactly in Walmart's retail right yeah exactly yeah it's one of those terms that no doubt will disappear assuming that the FinTech people do what they say they're gonna do right because you wouldn't say I have an account with a fin tech company it's like where do you keep your money can you write me a check oh hold on let me login to my face I gotta call my fing tech company yeah so it is it true though that why can't the incumbents um compete with tech I mean they probably can I can't be easily acquire like you know some competencies and and make it happen like just hire really smart developers and bring technology to their business yeah I mean I don't think that's any different in the financial services sector than any other sector it's just a question of incumbents how big they are agile or not agile that might be and how quickly they can respond to what's happening right so I think that's like everything else whether it's publishing media you're mentioning e-commerce or retail you know a lot of large corporates are being sort of affected by but also looking at innovation aqua hires and bringing in-house sort of resources and knowledge coming from younger companies London is you know has a reputation obviously it is a financial center in the world but does that necessarily mean that it's a natural center for you know technology applied to finance yeah no I think that's a good question and one that you brought up earlier in terms of like why now I don't think just because it's like the financial capital world which it just read got again from New York this year it goes back and forth that's right often but we gots not a word but it's just recap do they really recapture that there's a raking oh yeah I would take it that seriously but got it back for this year but I do think to your point just because it's the financial capital of the world even for a year at a time doesn't make it necessarily the natural sort of leader or Center for FinTech I think what's happened there is you know this happens for instance 20 years ago or it has it has it has done it's only because we've got sort of a digital or a tech ecosystem or a startup ecosystem that I think has really kind of flourished over the last really three to five years and so I think it's the combination of those two things and you're asking earlier sort of why now I really think the 2007-2008 crisis had a lot to do with it I think on the one hand you saw with the financial crisis that maybe there's too much money being captured by too few institutions at least that's what you know people here in the UK recognized too few banks we're having too much control and so there was a need to try and spur innovation and try and get some diversification from other areas of the sector in addition I think what's more crucial is that talent was sort of at least here in London culturally you know a lot of people maybe we're sort of very happy or comfortable working at large companies at banks at consultancies doing you know really well getting nice paychecks and then when the crisis happened and you started seeing layoffs or redundancies people started thinking oh I don't have a fifteen anymore and I've always been thinking about doing something like this and this and this maybe now's a good time so when that safety net fell away that sty will go out and be founders or you know this just started with a few or a handful of people they just started tapping up former co-workers and started setting up startups this is why like in the Bay Area you had a lot of technology companies but how many technology companies in the Bay Area are going after the oil drilling sector or a lot of things it actually might be massive sectors of the economy but just because there's no that's not it's not located or based in the Bay Area so I totally agree you need you need a vibrant tech ecosystem you need people that are very entrepreneurial but lastly and almost most importantly it's the the Santa quinone of you need people that understand the particular industry that they want to go disruptor go after and it's interesting I've met with a number of people that were senior executives at various uk-based firms where they understand every bit of minutiae in terms of how a bank works and they want to build a new bank now they know they need is the the Venn diagram has you need to have knowledge of the financial system you need to have a very very strong technology background and you need to be an entrepreneur and those things don't overlap that often but when they do that that's the magic combination that you need I'd actually add to the Venn diagram I think there's a fourth element to I think another thing that makes London so special so you got the tech you know obviously not at the depth or the sort of heritage of Silicon Valley but I think in the last three five years we've really made some massive strides but then you've got the financial services like a Wall Street so it's almost as if we've got Silicon Valley and Wall Street in one place in one geographical City but on top of that and then like you said the entrepreneurial spirit which is a third part of your Venn diagram I'd put in the fourth one which is policy makers or regulars right because it's almost like well it's not almost we do we genuinely have the equivalent of like Capitol Hill and lawmakers here also in London so part of the reason we're chatting so early is I'm going over to number 10 Downing Street later this morning and you can't really do that I mean you can get on a plane from Silicon Valley but we talk to policy makers who are really interested you know and part of my role is whatever envoy for the government for FinTech is to try to help the government appreciate what can actually do to make a difference to help stimulate even more innovation or more entrepreneurs and FinTech so I think actually it's a really crucial part of the Venn diagram so not only is the encouragement important but then they actually set policy that helps so whether it's crowdfunding peer-to-peer lending you know they held early reviews of you know the blockchain Bank of England did a really big study on it these kinds of things actually make a difference and I think can kind of grease the skids in terms of about the first three elements of that Venn diagram especially for financial services because on a panel that we did yesterday I was talking about if you want to launch uber or Airbnb or do something of that sort in the sharing economy sure you might get your your risk might get tapped with a ruler for being a bad boy if you do this without getting permission but it's not that big of a deal whereas if you say that kyc and AML laws are antiquated then you're not gonna follow them you'll go to prison KIC know your customer kyc is know your customer AML is anti money laundering you've got a hundred more in the u.s. that you have to follow so there's something called a No Fax screen which means it's an office of foreign asset control to make sure that you're not giving money to a terrorist there's a no and watch list of people that you can't give money to but you can't just say it's an excel file and you go check it there's a whole process for this so you know it's very very complicated when you're touching money I mean it's probably only beaten by touching healthcare in terms of the impact that you can have on people's lives as opposed to you okay there's a new on-demand food delivery company and they're not operating within the confines of food delivery law that was established in London in the year 1400 like okay that's that's not good but it's not a big deal whereas you lose somebody's money you lose their life savings I'm gonna find a terrorist yeah we're you funded terrorist like these are bad things and you do have to fall regulation a lot more click or a lot more closely so I get the reasons then for the regulation clearly this is another case where it's really important but I lean when you describe the environment in London and we think about the fact that their communal London in New York or competing head-to-head for the one in two spots so to speak whether it's objective or not is it that the government needs to do a better job of setting policy or getting out of the way in relaxing policy and there seems like there's a quantitative and qualitative difference between those yeah I think it's the balance of the two and I think actually the UK government has done job of balancing the two you know a lot of people so then some people started to talk about it not necessarily as light touch or have you touched but as kind of quote right touch regulation and I think that's right I think the government you know it's important to think it's not just at the government so like hugely altruistic and they're just doing whatever entrepreneurs want you know there is an economic driver for the government to sort of be supportive or at least watch this ecosystem really carefully the financial services sector contributes about 150 to 160 billion pounds a year to the UK economy in GDP it's not something the government wants to see go away that's the massive driver for the economy but at the same time it recognizes that the banks are in trouble what happened in 2007-2008 shouldn't happen again we had bank bailouts here in this country and so it's got a vested interests to make sure that the banks kind of stay current or at least get ahead of the game and it's sort of done things like committed to saying you know we're gonna approve or grant new licenses for up to 15 challenger banks that's what you know Alex was mentioning and so doing that really sends a really strong signal it's not necessarily legislative but it actually says listen we want to see 50 new banks come up in the next year that's a really big message to both the banks but also to startups you know and it's got the government here sees 300 of the world's banks with their headquarters here in London we have more American Bank headquarters here in London than in New York so it's there's just this really thriving yeah really really thriving ecosystem it's like a petri dish and it makes sense for the government to be really watchful it's not also just keeping an eye but it might be looking at things that are outdated so a lot of laws here in this country have been around for hundreds of years like there was some kind of 1,400 you know established in the year 1400 not really joking but it dates dates really far back so there was something that sort of suggested to pay in a check or to deposit a check you'd have to show a physical representation of a check or you know an IOU or a promissory note or whatever and only about you know a couple of years ago to Berkeley sort of say this is stopping us from being able to use mobile apps or digital versions of checks and that went back to some kind of measure and introduced in some 1,400 or 1,500 measure when the government was you know when that was brought to its attention obviously you know it holds a quick review but it changes it and there are lots of things that were just developed in a antiquated analog world that need to be updated even on the AML side by the way so I think it's doing all the right things by examining all this is there we've heard over and over and it's somewhat bragging I'll be honest that that Europe and UK in particular are way ahead of the United States in terms of like the consumer side and in payments and like you haven't seen a paper check in decades or something but what is the customer poll and I want to know from both sides or maybe talk about how the government wants to do this and how clearly as investors you're very interested in doing it is there a different kind of customer poll here because of you know what people are used to and how they're used to handling money and versus the United States where maybe the poll isn't as strong and I don't know if you have any in sense of them it's a really good question and actually I haven't thought about it too much but now that you mention it I do think there's a big cultural difference as you were saying the question I was wondering if so this is just my hypothesis I'm not even sure if the fact that Europe as a continent or you know European Union because there was multi currency for a while maybe that made some consumer pull sort of slightly stronger to sort of say make this easier for me I'm not a hundred percent sure that that would that would sort of support things in remittances and foreign exchange but maybe there was something about you know moving faster to chip-and-pin cashless payments you know we've had the Oyster Card network in London for I don't know well ever since I've moved here I've been here 11 years it's got to be in there 20 years old it's the Oyster Card now the Oyster card is what you were able to use on the tube London Underground or on buses so basically all public transport and it was just a contactless card you know that you were able to just tag in and tag out for all of your journeys and all your fare you top it up every so often now you can actually use your bank card to do that so I can use my Barclays debit card and just tap in and tap out to get in and off the tube and that is the largest contactless payment bank sort of backbone as opposed to a private network contactless payment in the world we've had that for close to 20 years we also had Chip and PIN which I was just in the States to two weeks ago and I know is now starting to get rolled out it's not sure no parent yeah which is really weird cuz I was like at Walgreens and I was like don't show me my pin where's the two-factor authentication here laughter is I mean it's it's insane that we don't have to fast yeah and part of the problem is that in the US versus Europe in Europe if you go pay at a restaurant they bring the terminal to you yeah and that level of infrastructure that Wireless payment infrastructure does not exist in the u.s. at all so like you give the card to your waiter the waiter runs off with you why don't they introduce it to the mains it would be expensive well that is true but they actually to go reintroduce all the chip machines is very expensive as well but in October there is a liability shift so for the longest time merchants could conceivably not have liability if the card itself was a replica it was effectively a stolen created card and it was very easy to just create a magstripe you can go to eBay and get not a mag stripe reader but a mag stripe writer for 20 bucks or less so the main benefit of switching over to chip and the way that they've actually encouraged almost every merchant in the u.s. to do it is that if you're a merchant and there's a card that has a chip and you don't read the chip you instead read the mag stripe you and you alone as the merchants are responsible for fraud so this is caused I mean so you know imagine that your target and in addition to being hacked and everything else that has gone wrong for target use you lose a few hundred million dollars a year on fraud and you might have that if you switch over to chip and you look at the capex that's required to go replace all of your terminals all of your your little checkout machines your POS systems that actually might be like amortize that I was going to a sheep er then dealing with the additional fraud the u.s. just looked at the the issue was I mean chip-and-pin would be more effective yeah but just going to chip as a first step was enough for me save billions of dollars because a lot of the fraud was people just they get the credit card number and it's yeah it's a 16 digit number that's pretty easy i buy the twenty dollar gizmo on ebay and then boom i come up with a fake credit card and then i go steal stuff in store and not just online actually online fraud rules were much better than in store for our rules where you just go like this and then you're done but I hear both of you saying that you know post 2008 that consumers lost faith in banks and maybe bankers lost faith in banks but they're all asking for something new and at some level I sort of don't believe that I mean what are they asking for and what are the what is your evidence that they you know that they really want it another quick question have build on that if the crisis had never happened I don't buy that that's primary driver because it feels like it would we'd still be in this moment of FinTech if even if it hadn't happened like there's something coming together if we're wrong three different things though right so like Lending Club is really a bank and I use this term a lot and and companies like Lending Club are banks but they're not banks at the same time because think back to when Gmail came out so Gmail comes out in 2004 April 1st 2004 people thought it was an April Fool's joke and they give you a gigabyte of space and everybody else gave you ten megabytes right so it's very very hard to change your email very hard because you have to tell people don't contact me here and then of course Yahoo AOL hotmail the big incumbent mail providers did not make it easy so if you wanted to have an auto-response message saying I'm not using this email anymore please email me over here AOL would not allow that I'm very smart of that right because they wouldn't want you to switch but Gmail just said we recognize that it is a royal pain in the butt to go change your email we're going to make it objectively a hundred times better like compute a like right yeah add two zeros to the end of the ten megabytes and even if Yahoo wanted to do that well a yahoo had a revenue stream that was required I mean you had to pay 20 bucks a year to get Yahoo Mail plus where you got I think 100 megabytes and B so they have to get rid of that and cannibalize their own sales and then bu which is almost more problematic and they didn't have the computational capacity to go give a hundred million people one gigabyte of space that's that's a massive amount of memory and servers to have that stored redundantly so they just couldn't do it and that was enough me and even with that it took I don't know 10 years for Gmail to get even close to the number of yahoo mail accounts despite being a hundred times better and yahoo eventually caught up and I'd say the same thing is really true for banking which is I have a bank account it stores my money if somebody like how is somebody a hundred times better than that I mean to give a hundred times better interest rate that's very challenging right these if I'm getting 1% which I'm not but let's just say I could get 1% somewhere nobody's gonna give me a hundred percent right so what you do see is when the pain point is a little bit stronger like lending market places again in the same way that somebody's not looking for a fin tech company somebody's not looking for a lending market place somebody says wow I have I'm in debt and I'm paying 19 percent interest to my credit card a friend or an app like Credit Karma told me that I can save a lot of money if I go sign up for Lending Club and refinance my debt well I just graduated from school and wow I have a lot of student debt a friend told me that I can go save a lot of money if I refinance my student and people have understood this with mortgages for a long time so like those things there actually is poll for people want that but I think it's just fundamentally very very hard with banking or insurance or things that have very very high inertia and very very long periods on which people might decide to go change I think you're right from a utility standpoint but I also think even less tactically what a lot of consumers are pulling for now is convenience literally like better usability in UX so one of your portfolio companies based here in London transferwise you know it's hard to argue that as you say you could have done better than what Western Union did you walk into a place you drop $100 you see that you know whatever it's gonna be 80 pounds is gonna come out the other side so you go tell somebody in London to go pick it up that seemed to work really well you know transferwise was able to demonstrate well actually you do it online you make it a lot easier three clicks whatever you know you to scan a copy of your passport you create an account you make it really easy great customer support and you know what look at how many users they have you know better than me right so it wasn't necessarily changing the utility but it was changing the UX and a convenience you know you were talking about the timing of things the iPhone itself was only introduced in 2007 look at all the industries that have been just well quote disrupted or at least evolved just because of consumer convenience having it in your hand being able to walk around and do something whether it's on-demand or otherwise and then I think much to what Alex was pointing out the issue for the incumbents is that they end up with infrastructure capex which prevents them from being able to respond or deliver what consumers then start pulling for whether they're doing it consciously or not and I think what's interesting about the financial services sector is at least here in Europe about something like 90 percent more than that of all the banks are using one of two back-end suppliers if I ask sir if I serve which prohibits them from being able to do things faster like literally they cannot you know look up a transaction that you've made or that's been made on your credit card without blocking the card you know now you're realizing that well actually you could actually freeze the card for a bit you don't have to actually get a new one sent to you the whole in and just incumbents couldn't do this because their systems just didn't allow them to do this and it a lot of it just comes down to customer service and UX which is sounds crazy right but I think that's what's gonna be changed well I think that that's the point of FinTech as well which is if you look at credit cards you had very novel approaches to who gets credit so Capital One came out it's a thirty billion dollar company today started partially by a British expatriate and a really remarkable company they've done a great job I think more so than most other banks in the u.s. in terms of just intelligence around granting credit but their whole system is built on company called tsys which is built actually it sounded off you know tsys total systems Corp it's a spin-off of a bank they've been around for a few dozen years they're based in Columbus Georgia which is right on the Alabama Georgia border I've been there many times and actually one of the cool stats is it's right on the central time zone so it's like I always have the people that work there it's working like a different time zone how does that work but and you cross the little bridge that goes across a river and then you're in central time 9:00 you're in the eastern time zone but anyway I digress the point is that Tisa's is effectively the operating system for maybe half of all credit card companies that issue credit cards and they're not really a tech company I mean they are a tech company if you ask them what they do oh we are a technology company that provides an operating system just like Fiserv just like FIS but these companies like this is the infrastructure that if you're starting a bank from scratch if you're starting a credit card company from scratch you're much better served if you want speed to market and just like to have something that's like everything else out there you use one of those guys just like if you're a community bank you don't build your own thing you use digital insight or Jack Henry or one of these other services that says okay you're a five person bank you can have an app you can have a website because you need that if you're chase and you have 250,000 people you'll build your own but there's a lot of blood there's a lot of legacy code that dates back to the 1950s there so I think that's the opportunity but that in and of itself is not enough you can't have a solution in search of a problem and like just saying okay we've got a new bank and it's tech enabled and instead of getting two basis points of interest on your I learned that a checking account is called a current account and current account exactly so you know you're getting in the u.s. it's about one basis point on a checking account if you get two basis points or three basis points that's not going to work out too well no matter how much technical technology and technological innovation you have powering that so but I do think that the the way to get into FinTech or the way to get into the banking sector and disrupt it is you start off with a wedge and then on top of that and the wedge being like I think what sofa is doing is very interesting because they get people when they graduate from school you graduate from schooling we have no investment so far so this is a genuine admiration for what they've built here you graduate from school you've got lots of college debt they look at you and they uniquely relative to every other bank and refinancing company out there save you a ton of money because they say wow we trust you we want to invest in you because you went to a good school that's kind of their algorithm right now it's not that complicated now I go get a mortgage with them I go getting a check I go get a checking account with them I go get a credit card and ideally if they do all of those things and they really do become a tech company and not just a refinance company he's doing mortgage refinance there's not that much work involved with mortgage refinance that's not technology the underwriting might have some technology around it but I think there's a big opportunity and this is what we're doing with a firm as well which is can we reinvent all of that stuff which is reinventing it is not enough I mean it's this is the the quote that I use around the office all the time which is the battle between the incumbent and the startup comes down to whether the incumbent gets innovation before the startup gets distribution and it's very very hard I mean that the deck is stacked against you a hundred to one if you're a startup and you're going after financial services because distribution is just that powerful and is that unique and regulation is certainly a part of this but is that unique to FinTech as a as opposed to I mean we talk about Gmail but as opposed to any other startup going after an incumbent industry in in and I think it really is because because of the regulation that you mentioned that's a big one I think it's also this trust element which is it's different than the cable industry where that is a legally chartered monopoly so like this is this is what I call the TiVo problem because if your TiVo and you're selling into an industry that only has nine different people that's not good like things are not gonna work out well for you and they they almost never do and if you're going so they're two ways of doing this right there's the full stack method which is I have software which I'm going to sell to every bank and I don't think anybody in FinTech think thinks that that's a tremendously great idea just because the banks I mean some some are and I think some people have a chance to build an operating system actually this is one of our theses which is operating systems just in general for finance if you can get traction or good but it could take years to do that and you know there are ten banks I mean this is one of the big differences if you look at credit card issuance in the u.s. in the top ten banks for like 70 80 percent of the market and once upon a time like there was a company called WaMu there was a company called Wachovia and these are all big mortgage lenders credit card issuers they're gone right and it's consolidated more at the top I mean Wells Fargo has a trillion dollars plus of deposits and these are small like individual account deposits Chase has the same so there's been so much consolidation at the top and that's really different today so I but what I was saying is that the there are a variety of reasons why selling here if you go full stack the like you get obliterated on on marketing cost I think that's the other problem because Geico spends a billion dollars a year on marketing and insurance not banking but kind of same overall field of FinTech so the problem is that if you want to build an insurance company for the 21st century it's like a triple whammy it's incredibly capital intensive because a you have to lose your equity to build out your actuarial models and the same thing goes like if you're building a lending company you have to lose your equity intentionally to go lend and figure out oh I shouldn't lend to people that have no credit I'd say they're not gonna pay me back and but how would you know that ex-ante you have to actually make loans to figure out if people are going to pay bad loans right yeah like alright I want to start a life insurance company will have to wait 25 years for people to die this is very very hard and the models that current life insurance have a companies have very very valuable so and then you have to spend a ton of money on marketing because people don't wake up in the middle of the night I think this is actually the most important thing unless you have a wedge to get in people don't wake up at 1:00 a.m. in a cold sweat saying I need to change my bank right or I need a different insurance company so - and then Geico does not spend money very effectively and that's normally a bad thing if you're a guy co shareholder you're like wow I would love it if Geico they could probably get just as many new customers per year spending five hundred million dollars here I'm going on the lemon not spending a billion dollars here but the fact that they poorly spend marketing funds is actually terrific for them because it keeps out all of the the new competitors from going in where you know if Geico was only spending $15 a click on Google then a start-up could compete if they're spending $100 a click on Google this startup can one reason I like the sector so much and again why I think it's such an interesting one why we probably spend so much time on it is because that's maybe just scratching the surface and that what's great about FinTech is there's all this sort of plumbing behind the scenes so like Alex mentioned kyc and AML earlier you know we're seeing the reason why the FinTech sector here is so sort of really really interesting and deep within London is because you see a lot of startups also going after these sort of non sexy you know FinTech plays so non consumer acquisition type plays or a distribution reliant but actually serving other customers within the finance services sector so more the b2b side so you know for instance there are companies I haven't invested in either of these but you know on Fido or passport which are both london-based trying to tackle kyc AML identity verification and trying to figure out how a company a financial services company that has all the problems Alex was just talking about can sort of take money out of their costs base and cost of acquisition or you know having to comply by to comply to regulation or you say things like fraud or you see think you mentioned insurance which is actually on the back end I think there's a lot to service you know Barclays has been publicly establishing that they spend three billion pounds a year which is about five million dollar five billion dollars a year on its IT spend or its tech spend you know doing a start-up that just services Barclays not a bad you know revenue drivers so I think there's a lot more underneath I guess like if you think of an iceberg type analogy you've got all the challenges on the consumer facing side but under the water under the surface of the water there's so much more to tackle I want to go back to something you both kind of alluded to Eileen you mentioned the UX which i think is a really important and often overlooked point especially when we have like sort of a new generation that's coming into banking that's completely mobile native and used to a certain type of experience and Alex you mentioned very briefly the word trust as part of why incumbents you know have a certain distribution like I think the ability to do certain things that startups can't does that really matter for I hate using this phrase Millennials but does that really matter for like snake people I mean Millennials I mean does that really do things for big here in the same way yeah I think absolutely I mean if you're dealing like would you give a hundred percent of your net worth even if the net worth is a very small number to a start-up and you just saw that the last four startups just went out of business I mean I think a lot of it is people don't understand I understand too well like what the capitalization requirements are for a bank well you're so paranoid well because I know that you can't use customer deposits to go fund the operations of the bit like there are certain things that you cannot do whereas how would how would somebody that knows nothing about this sector actually understand this this is actually where regulation if it were well communicated might be more helpful is saying or like the the effective like FDIC insurance in the US and whatever the equivalent is here like that's that's effective as a means of establishing trust I mean this is how you dealt with the whole financial crisis in 1929 is when when the FDIC was set up when FDR set this up that was that was tremendously effective and you had like five or six day bank holiday and then people decided to trust their banks again and that reestablished the financial system so you know I I think the trust is important if you have things like that that are well communicated and well understood by a younger demographic then maybe it doesn't matter as much because you know okay there are very very few Millennials they graduate from school they have 250,000 dollars in liquid net worth so therefore if a bank is covered by FDIC and they trusted and it's a better UX and blah blah blah then they'll use it but I just don't know how well that actually is understood yeah I think that's right I think the concept of trust is still really important or as a USP or whatever I mean as a driver but I do think what's interesting about the younger demographic is that surveys are saying and you know I don't know how much is true you know that the younger generation is not trusting what the previous generations trusted so what is the stat you know I don't know what the percentage basis is but some massive percentage certainly more than 50 I think was close to eighty percent of Millennials trust the brands you know Facebook or Google or Apple I think was the top of the pile much more than their banks and they're wanting to see services come from those companies before they would actually open up like a second or a new bank account and so then I think what's interesting and we think about this when we're investing in some of the FinTech startups is your exit opportunities aside from staying independent and maybe going public or whatever is potentially on the buyout side you may not be selling to a bank you might be selling to Facebook you might be selling to Amazon you might be selling to Google as they try to expand what they offer in terms of you know they're not gonna call financial services or FinTech there's going to talk about you know it was like in app purchases or whatever or it's you know gaming you know sort of gaming upper bulking up your purchases and they're gonna look at ways to reduce friction on what they they have to manage with money and transactions on their systems I actually personally believe I mean I'm not an expert in this space means but I actually personally believe that all the sort of stealth players that have these sort of shadow payment systems we're giving them your credit card like lyft and uber and I always think to myself like god I wish I could just like use that to buy everything in the world without even having to put my credit card every like iTunes having I don't know have more credit card numbers than any other network for the longest time or Alibaba I think is like one of the biggest threats not threats would Ally pay right in terms of how many people actually make purchasing decisions and have their payment details with that company right we actually published a very in-depth primer on WeChat and one of the most fascinating things is how the messaging into all the services became sort of having the credit card allowed all this traction for all these other cross purchases to happen it's just incredible wallet right right yeah I mean the two things on that I think it's really interesting I think part of the reason why Millennials don't trust their bank is I don't think this is unique to banking but like the larger the company and the less product driven it is the more the innovation is around like how do we charge more so you hire Mackenzie Mackenzie comes in and says ooh you know if you charge late fee you can make an extra four billion dollars a year that sounds great or comcast in the u.s. is about to roll out if you use more than 300 gigabytes of a bandwidth per month there's an additional fee that's their innovation of the year Comcast already site exactly but I think banks have done a tremendous and I mean this in a very sarcastic way but but banks have done a tremendous job of layering on new fees and doing things that are not transparent where again the service rendered is totally disconnected from the fee structure that's actually you know foisted upon the consumer and consumers don't like that and Apple there's no way there's no gotcha on an Apple product and the only gotcha is like damn I wish my my iPhone battery lasted more than a year and I have to buy a new iPhone to get a new battery but it's not like ooh like after 90 days of using your iPhone it will only continue to work if you paid this special fee and that's a lot of stuff that people have found to be very prevalent with banking so I think that's part of the reason why they're not very popular you know on the point of I think it's a very interesting topic that we were just mentioning and it actually came up with you talking about the Oyster card I mean so the the largest metropolitan area in the entire world is Tokyo so Tokyo is a city proper is not as big but like the Tokyo metropolitan area is almost 15 million people and everybody has what's called a sweet cut card which is kind of like an oyster card here and it works through all the different public transportation systems but it also works in every vending machine it's like there are I'm incredibly bearish on any startup that says we're gonna build a new payment system because it doesn't work that way like these things kind of they start organically and then they expand out concentric Li dating back to BankAmericard which became visa in Fresno California it started off in a very small town and then just expanded concentric Li outward but I think you do have a number of interesting like some of the larger companies that are not financial services companies at all whether it is like if if Ulster wanted to become a payment card in London enough people have that at least on one side of the distribution for consumers where you could get merchants to do it the thing that's very very interesting in my mind about payments right now is everybody hates Visa and MasterCard I mean pretty much every merchant now the issuing banks don't like them either like nobody likes them because they're making all of this money and I mean the fact that Visa Europe is selling to Visa is a big big windfall for for UK and EU based banks and they kind of need that capital right now but but the reason why I mention this is for merchants to switch people out of their current habits of using a payment card they have to pay the consumer effectively more as a bribe to get them to change pieces very hard to change behavior than the fees that they currently pay the credit card companies so you have all these merchants in the u.s. that are saying okay we don't like Visa we don't like MasterCard we're paying two percent in fees I know we're gonna switch people to use our own card oh wait they won't do that on their own we have to give them five percent cashback which is of course more expensive than the two percent they're paying right now whereas in Europe this is another thing that I think is going to force a lot more innovation so what's happening in Europe right now is there's a European mandate on interchange which is reducing debit interchange to 20 basis points in credit interchange to I believe 40 basis points so all rewards on all credit cards are gone they there are effectively term because who pays for your miles or your Amazon points or your cashback well it's actually the merchant and that 2% fee half of it is going back to you as a consumer on your rewards card in Europe that's gone in Australia that's gone so that's another thing that people in the US are not aware of I think it's going to happen in the u.s. eventually but in Europe it's going to trigger I think a little bit more of a ooh who can give me a card that actually offers a reward and it's probably not going to be a big bank I think actually this is a major opportunity for a lot of startups to come in because as a consumer right now you don't get rewards on a card you want to get rewards on a card it actually it's triggering a shift I was checking Google Trends in Europe for like credit card searches and they are ticking up which is abnormal like why would people wake up and say I want a new credit card a lot of it is that they got it they got a letter from their bank this summer as saying your rewards program is terminated I mean it also sort of suggests that a company like Amazon which could afford and would benefit from like keeping you within the Amazonian financial system could offer something like that I mean Amazon already kind of is like to me it's exactly like the way I use Lipton uber I buy everything on Amazon because they have everything conveniently I don't have to even think about it right I mean it's in my head it is a payment this is gets to the subject of trust but we were talking about countries and economies where there is solid infrastructure where there is you know choice but like it makes me think of Argentina where like all of a sudden you know my life savings the sort of frozen in my bank account and the pesos been devalued or China where they devalue the yuan and I sort of or the Bremen bee and I do those kinds of situations were really kind of there's if I wanted to invent a financial system in Argentina people sort of were doing it on the fly for themselves do they give us any indication or clues as to where some of this all might go I mean I think those are different there are different motivations for those markets like I think the lack of infrastructure and the fact that they sort of leapfrog or they kind of then kind of take every other step that we might see the US or the UK or Europe take is really quite interesting because like all those markets you about what's probably driving a lot of maybe innovation on traditional financial services is the fact that the largest parts of the population didn't have access to it so it's all about inclusion it's about access it's about you know the fact that they didn't necessarily have 10-15 years of like broadband and desktops or laptops in their homes to start and do online banking in the way that you know Americans have been used to for doing online they'll pay for I don't know 20 years they just started doing micro payments as we call them now but person-to-person payments on their mobile phones you know like you look at em pace in Kenya or you look at what's happened in India they've had 190 million people open up bank accounts in the last four years but those aren't bank accounts like we get at Wells Fargo their bank accounts that they're gonna access through their mobile phones because they now have more mobile phones and mobile subscribers than they do you know people with a national identity card that kind of thing so you have a different set of problems I think I do think there's stuff we can learn I it's a little be a question though of whether or not everyone is keeping up with everybody else or as I was saying you leapfrog and you actually have sort of every other point of innovation gets achieved in a certain market or an emerging market as I guess we would call it first is what we would see here and if we're gonna then leapfrog and go to the next stage or or how that works I think you're just gonna have different types of use cases I think my wallet is happier for this discussion in the sense of like it has something to look forward to so you're not a millennial it's gonna make that really how you feel I have trust I have hope in this FinTech thing although I think we have to lose the name you want a better bank I want a better Bank company on that note we will never say FinTech again Alex Eileen thank you guys so much thank you thank you