1038. News: What happens when the world's biggest YouTuber buys a fintech?

0:28This is Fintech Insider News.

0:36Hello, and welcome to episode 1038 of FinTech Insider News, brought to you by 11FS, the five-time consultancy of the year that works with financial providers, big and small, to build the next generation of financial services. I'm Kate Moody, Customer Strategy Director at 11FS. And this week, I've mostly been trying to escape from childcare commitments by going to Finnovate Europe, which was a lot of fun. So lots of chat about AI, obviously, and lots of other things besides. So that was great. But glad to be back in the world of podcasting. So to help me unpack the biggest and most interesting stories from FinTech and financial services from the past week, I'm joined by a brilliant panel of guests.

1:12First up, we have a welcome back to the show for Jess Kath, Managing Partner at Thistle Initiatives. Great to see you, Jess. How are you doing? How are things at Thistle? I'm very, very well, thank you. And all good at Thistle, just very busy in terms of financial crime and compliance stuff. I mean, I'm guessing that's pretty much always the case, right? But yeah, thank you very much for making the time to join us. Always great to have you on the show. Next up, we have another return to the podcast for Andy Russell, CEO of Project Arno at 11Fest Holdings. Thanks for joining us, Andy. Again, maybe for people that haven't come across you on the show before, would you mind giving them a bit of context on yourself, Project Arno and 11Fest Holdings, please?

1:47Okay, thanks for having me on. So Andy Russell, FinTech CEO, previously 10X UK robo-advisor Wealthify, before moving across to join the 11FS crew, where I'm building out Project HONOR, which is a UK neo-private bank. We're going to be taking on the private banks and delivering new wealth services like the UK have never seen before. Awesome. Fingers crossed. And last but not least, completing our lineup, we have a true FinTech insider, OG, Sam Moore, Head of Business Development at Move. Sam, always great to have you back on the show. how things going since you were last on the pod. Oh, just OG.

2:30Yeah, yeah. That means very old grandfather. I mean, you said it, not me. Yeah, I knew what the sarcasm was there. I'm doing good. I'm enjoying, you know, not much happening in the US. It's really mellow over here. So, all the good stuff. All the good stuff. Well, thank you very much for taking time out from the chaos to join us. So, we have a panel. Let's get on with the show. Our first story this week is, and it's covered in quite a few places, NatWest to buy wealth manager Evelyn Partners for£2.7 billion. NatWest Group has agreed to buy wealth manager Evelyn Partners for£2.7 billion, marking its largest acquisition since the 2008 financial crisis bailout.

3:11Evelyn Partners manages about£69 billion of client assets and offers financial planning, investment management, and the best invest platform. The deal, expected to complete in the summer of 2026, strengthens NatWest's private banking and wealth management offering alongside brands like Coots. Combining Evelyn with NatWest's existing business will more than double its assets under management to around£127 billion. To secure the acquisition, NatWest outbid rival bidders, including Barclays. Andy, you've got, I suppose, probably the greatest wealth management expertise on the panel today. So I'll give you first shot at this one.

3:48What did you make of the move. That's very kind of you, Kate. I thought it was very interesting to start off with. I think it shows that the wealth management market is very much a seller's market at the moment. We've got NatWest acquiring Evelyn. Nuveen today announced they're acquiring Schroder's. JPM Chase announced they're acquiring WealthOS about a week or two ago. There's lots of of movement in the M &A market, in what's quite a frothy market at the moment. We've got kind of financial markets across the world hitting record highs. It might have come off a little bit in the last week or two, but it's certainly a frothy market.

4:32So interesting to see that wealth is driving the space in the acquisition side. I guess positives and negatives for me, I think as you've mentioned on the positive side, it fills out the spectrum. If we were playing financial services monopoly, NatWest has just kind of gone down the right-hand side of the board and acquired all the properties on the right-hand side of the board. Because you've got your NatWest investments online. You've kind of got your best invest for the D2C investors, which are kind of slightly higher pot sizes. You've got Evelyn, which is IFAs. And then you've got Cooch at the top end.

5:11So kind of monopoly on that, on the one side of the boat or bingo, if that's your game of choice. Um, I think the terms of 2.7 billion, um, are proportionally in line with when Tilney bought Smith and Williamson's in the merger that created Evelyn in 2020. Um, that literally is just proportioned up from that amount, um, uh, reflecting the fact that they've grown since then. and I guess growth will be, as you said, it doubles NatWest's investment, AUM. That'll tick a big KPI box in the NatWest boardrooms, I'm sure. Growing that much in one fell swoop will be a big KPI tick. I guess on the negative side for me or the challenger side, should I say, felt a bit toppy, 15 times EBITDA.

6:05you're probably looking at somewhere between 10 and 15 in that market so 15 is not the end of the world they've got to hit about 60 million of savings per annum to bring it down from the 15 to the 10 that I think they've said they're going to aim to do it creates a little bit of a mismatch in all the different propositions they have each of the ones I've just gone through are on different tech, they serve different customers, they've all got different price points. I've not seen a clear statement around how they're going to shape that up post-acquisition. And so as a result, it's not really clear to me what the customer serving strategy is post-strategy.

6:49It feels like a really good corporate KPI tick we've doubled. But what does that mean for customers? I'm not sure. I've not seen anything yet on that. Sam, what was your take on this one? I find it really fascinating. Funny enough, about 30, little over 30 years ago, I started my career in banking in, Andy, ready for this? Wealth management. So Northern Trust, a big white bird bank in the U.S. based out of Chicago, acquired a company that did DC and DB management. So 401k management and pension plan management. Believe it or not, we used to have pensions in the U.S. That tells you how old I am.

7:27owned it for 10 years and ran it. And then Andy, guess what they did? Sold that. Flipped it. Decided it wasn't core to their business and sold it to Hewitt Consulting. Yeah, so I've been down this path before where you have a very, you have a bank at the scale of Northern Trust, which is known as a white bird. So very big on the high wealth side and went lower market, right? With 401ks, I think that's like ISAs, if I remember right, in the UK, was along those lines. and after about a decade of running this, decided it wasn't a fit. I like NatWest. They were my bank when I lived in the UK. They were the reason I started coming to the UK.

8:04It was back when Royal Bank of Scotland and NatWest had that incredibly interesting merger. So I kind of get the philosophy behind it. You want to be sticky. You want the full life cycle, if you will, with your customers. How they execute, I think that's what's going to be interesting. Yeah, absolutely. Do you think that's like a company out view of the world, though, that stickiness, Sam, rather than like a customer? Customers don't care, Andy. I don't think customers care. No, indeed. I've spoke to, as I'm setting up the private bank, I've spoke to a fair few customers across the wealth spectrum, and none of them have kind of said, what would be really good is as I move from kind of 15 grand to 70 grand, if I could move tech, please, and have a slightly different proposition, then when i get a 250 grand or half a million quid i'd like a slightly different they don't like this is a this is a like i can see why there would be sensational rationale for netwest to do this i'm not really seeing the customer rationale i i agree um i think we always kind of look at this like alice and wonderland you know through the looking glass her on the one side we are way too close to this we think everybody cares about ai everybody cares about robo advisors everybody cares about crypto.

9:20It's just, come on, we're just too close to the flame. So yes, I do believe I would agree with you, Andy. It makes sense for the company if I'm a consumer. I'm like, yeah, that's very American. How's it for you, Kate? Jess, I want to bring you on this one as well. What was it that most interested you about this piece of news? Yeah, I thought this is very interesting because we do a lot of work in the kind of investment space, a lot of M &A stuff. and we are seeing a lot of activity in this market, which is really, really exciting and I think good for the consumer. But I think the main challenge here is, as Andy and both Sam have said, is the integration risk.

9:55Because on paper, this looks great, but what about the integration risk? And of course, we have talked a little bit about robo-advisors and new technology, but there are a lot of players that are starting to consolidate, which means there will be opportunities to enhance technology and look at new ways of doing things. But of course, there's going to be buckets of things to integrate and absolute nightmares that come along with that. So it's really going to be looking at that integration risk, how they go about executing that integration and what they bring to the customer in terms of the experience, the systems, the tooling as well.

10:32Yeah, for sure. I mean, Andy, do you think Barclays are going to be pissed off that they missed out on this one? It's interesting, I suppose, that they were bidding as well, right? Yeah, I think there was a couple in there. I think Barclays was the main one. I mean, it sounds like it all came down to price. And I guess NatWest outbid them. As I said, I think it feels toppy. It sounds like it was quite a competitive bid to get to that level. It doesn't seem like it was an overpay. It just seems like it was the top of a range. And they just must have outbid Barclays. But, you know, it's a frothy market at the moment, as I said earlier on.

11:11And what we mean by that is markets across the world are hitting lots of highs, which means the underlying customer parts are hitting multiple highs, which means the revenues on the backs of those are making multiple highs. So kind of having a price derived off very kind of historically high amounts means I would suspect that Evelyn have come out of this stronger than Netwest and it was probably outside what Barclays wanted to pay. No, I think that feels fair. I mean, Sam, we're just seeing just a constant lot of chat in the industry generally around either Mass Affluent or all the big banks are talking about kind of trying to move into the space so these customers better.

11:54Obviously, I suppose the Lonefest Holdings team are looking at this space as well. But are you seeing similar amounts of focus on this part of the market in the U.S.? Oh, yeah. I mean, you know, the U.S., we have a massive case-shaped economy, which I know y 'all are well aware of. The wealth disparity over here is just increasing. We have a middle class that is just shrinking. And by the way, I am one of those believers that we aren't ready for the impact that's going to happen on jobs over here. The job market is shockingly tough over here. um, shockingly tough and, and not for just entry-level jobs.

12:33Um, you know, UPS just announced 30 ,000 cuts, the amount of cuts that Google and Amazon and others have done. You've got some very talented folks out there who have gone a year, two years plus without landing a role. So yeah, there's been this massive shift over into the high wealth side because that market's doing great, By the way, you know, we had a fascinating quote yesterday by our attorney general talking about, you know, the Epstein files and why we're not focused on the Dow being over 50 ,000, which has gotten so much ridicule over here because only about 36 % of Americans are actually in the stock market.

13:15So it's a great vanity metric. And then you look at the majority of Americans and it doesn't impact them. So I'm not surprised whatsoever that there's been this great shift over on the high wealth side because on the lower end, where's the money? Yeah. Not trying to be mean. Where's the money? I think both in the US and the UK, you are getting that K-shaped kind of customer cohort where you're getting the high-end customers, the more affluent customers, who are probably riding the economic storm and difficulties more easily than the less affluent people. And so we'll have different customer needs, which kind of bringing it back to the NetWest deal.

14:01You know, your coots and your high-end Evelyn customers are going to need something completely different to what your NetWest investing online and your best investors customers do. I think, interestingly, I find in the wealth space that tech has unusually started bottom up. We've had some really good kind of tech developments in the robo space with Nutmeg, with Wealthify, with lots of players who are trying to solve for the kind of standardization to create, to keep costs low to allow everybody to access the investment market. and if you can invest for 15-20 years and you beat inflation then you're better off generally than keeping it in savings it doesn't so it's kind of giving lower affluent people access to the same tools that the higher affluent people do but that doesn't mean that that's the only job that a high affluent person needs you know from we're looking at kind of things around And I've got a really complex financial and family and business lives.

15:10And I'm managing that across 30 different products across my family, across 20 different providers. The wealth I've created is really personal to me. And yet I'm giving it to somebody to invest in homogenized funds or I'm investing in homogenized funds. Or I need help and I want someone who's really good to help me. And the people I'm talking to are really good. but the tech that they've got underneath them's rubbish. And so I'm having to kind of, they're having to paper over the cracks. Those types of customer problems are completely different from the 10, 20 grand per year ISA customers. And in both the US and the UK, and it just, it's interesting how the market has started to bifurcate.

15:57And it's even more interesting to then see that a company has then decided to try and bridge all of that. And we'll have to wait and see how well, as you said, they actually managed to execute it. Okay, well, moving us on to our next story. This one comes from The Guardian, and that is Monzo wrongly denied refunds to thousands of fraud and scam victims. The UK's financial ombudsman found Monzo had incorrectly denied 34 % of escalated fraud complaints, one of the highest uphold rates in the sector, with NatWest and HSBC close behind. Fraud is now the most common crime in the UK, accounting for around 41 % of offences in England and Wales.

16:33While overall APP fraud cases fell in 2024, criminals still stole£450 million and only around£267 million was reimbursed. Monzo says many of the cases relate to historic fraud from more than two years ago and that it has since invested heavily in fraud prevention technology. Jess again you're probably going to be the numero uno expert on this one so let's start off with your take on this what did you make of this these figures yeah so 34 % is not a great number but I think we've got to put that into context because obviously this is the number of escalated cases that have gone up to the financial ombudsman service so it's not 34 % of all their cases, but this is the cases that are strong enough for customers to then raise with the financial ombudsman service.

17:25So, they're the escalated cases that have gone up. So, it's a high number of escalated cases that the FOS has determined that actually they haven't reimbursed correctly. So, that is a very high number, which of course could point to a couple of different things. It could point to them making inconsistent decisions. It could point to them looking at interpreting the reimbursement rules that came out not too long ago incorrectly, or maybe getting the burden of proof slightly wrong in terms of putting too much of that burden on the customer and therefore not reimbursing. But it doesn't paint an ideal picture.

18:07But then on the flip side, we have to again put this into even more context, that Monzo seems to be at the forefront of this, but we can see that NatWest and HSBC, very traditional players, are not far behind. So whilst Monzo gets the headline, ultimately we've got a number of the incumbent banks also with challenges and high numbers. And again, some of these linked to historic cases, which again, Monzo is absolutely right. there are still some challenges here. I think though where they raised that this is linked to historic cases we can see in the market that since the tightening of the APP fraud rules back in and the launch of the reimbursement requirements back in 2024 we've suddenly seen everyone scrambling to treat fraud like they already treat AML.

19:00So up until this point fraud has kind of been seen as the annoying younger brother to AML. So everyone had really strong anti-money laundering controls. And then we had these fraud requirements come into place. And suddenly everyone's putting in new technology, better monitoring and much stronger frameworks. So when we're talking about historic cases, Monzo is right to say that actually they have made improvements and the same with NatWest and other banks as well. But ultimately, this is still a high number. And it's not just a problem that's related to Monzo. It's a problem that's related to incumbent banks as well.

19:38No, I think that's really important to call out. Sam, do you think Monzo are getting a slightly harsh coverage here? Yeah, I think it's an easy brand to go after. I get asked a lot by younger people who are moving into the industry what space they should be in. And, you know, it's easy. Follow Jessica's example. fraud, you know, it's, there is so much work in job security in combating this. It is amazing. I am old enough to remember what it was like in the U.S. when 9-11 happened and mad scramble we did around AML, right? The kickoff for this, and it's good push for that. And the reality is with what's taking place through technology and AI, it's kind of a mini 9-11 moment.

20:35Meaning the attacks that we're seeing, the sheer volume that is taking place is staggering. In the U.S., you look at Zelle, you look at P2P, and you look at the impact to people. And, you know, we don't have as great of tools to combat these, meaning the CFPB here has been extremely weakened, you know, from a consumer standpoint. so I think this is a a space that we are going to be looking at incredibly hard over the next five to ten years and the good news is Jessica, I mean correct me if I'm wrong we can use the same tools that we're getting hit with to combat it so we're seeing companies like Sardine Alloy in the U.S.

21:19really skyrocket in valuation because of this so I am encouraged on that side but yeah I think Monzo's getting is slightly ideal on this. I think it's easy to write a story about Monzo. Yeah. I mean, Andy, obviously, you're building a new business, right? So how is, and you've built businesses in the past, so how is, how you're having to incorporate fraud and fraud prevention different now to maybe businesses you've been involved in the past? Yeah, partner really, really well. So Middash, Secure, Sardine, all partners of Move, or money movement company in the U.S. So fraud has to be front and center.

21:56AML is front and center. OVAC is front. Compliance is front and center. So how are we handling this, Kate? Our compliance officer is a 20-year OCC veteran who wrote all the regs. That's fun, everybody. That's fun. Let me tell you. Well, that's a shout out to Kimberly Hebb, but oh my God. But that's how you do that. You take it seriously from the initial build. Yeah. Andy, what's your take? Yeah, the only bit I'd add to that is I completely agree with Sam. You need people that have been around the block, that have seen lots of these things before, that can understand what works and what doesn't work.

22:33You need new fresh blood in there to kind of combat the new ideas that the fraudsters are coming up with. But ultimately, I guess, answer your original question, Kate, around, you know, what's changed. Technology's changed. There's money in fraud, and whatever there's money in fraud, which there will always be, criminals are going to get better at tech to be able to get more money. And so companies need to continue to invest in as much as the fraudsters are investing in it to keep up with them. I guess the thing that I've seen develop in the last few years is a willingness to hunt impacts as the providers.

23:16A company on their own doing AML checks and suspicious transaction monitoring is great, especially if they've got the old guard and the new guard in the team that can do all these great checks it's never going to be as strong as five companies doing that or 10 companies that all speak to each other learn from each other and work out um what's just happened in one place and can we prevent it happening in one of the other other places because these fraudsters will try on on one place and they'll see whether what's successful and what it isn't and the successful stuff they'll try elsewhere. And so you see it going around the market a lot more.

23:49And so I've seen a willingness, I think we could do a lot more of it, but I've seen a willingness development in the last, say, two years or so, where there's a lot more talking in the community, the experts are getting together a lot more, and they're sharing a lot more data to help prevent this as they hunt in packs. Just to come back on that, though, there's a couple of things. So one thing that Sam said, it's absolutely critical that financial crime and compliance frameworks are seen as an enabler for new businesses particularly if you're looking to scale grow and then go on to sell that business it has to be in place there has to be strong because that's the only way you're going to enable business growth and then to Andy's point around the industry coming together to actually share information and talk and collaborate more closely I would challenge that slightly because financial crime professionals have been doing that for a long time.

24:42But of course, the regulatory frameworks around privacy and around data sharing have been quite stifling. And we've come up against a lot of kind of legal challenges. And there's often been a lot of conversations between financial crime and compliance and your legal teams in order to figure out what you can and cannot share, because of course, that's very, very important. But customers want to have the perfect fraud prevention technology, but then they also want to have ultimate privacy. And this is fundamentally at odds. And ultimately, if we do want to be successful at challenging fraudsters that are constantly changing their methodologies, constantly deploying new technologies, we do need to look at pushing the boundaries in terms of sharing things between firms.

25:28Now, we do have better regulatory frameworks now, and we are starting to be able to do that more. But there are certainly a few more things that we need to work on in terms of coming together to share that information. But we are seeing more and more good things come out of the frameworks and the regulators because they know that we have to. Yeah, I've got something from a U.S. perspective that I think, Andy, Jessica, Kate, you'll enjoy. We had this event called the Super Bowl, which we think is so cool, yet Man City of Liverpool had a bigger viewing audience, but we'll leave that alone. But the Super Bowl took place last week, and one of the commercials, the biggest thing about the Super Bowl is the commercials that are on.

26:03One of the commercials was by the makers of the Ring Doorbell. And what the commercial was about was how they have a new feature that if you lose your dog, the ring doorbell can do recognition of the dog and find it and report it back. And they've already rescued like hundreds of dogs using this feature. They thought it was the coolest commercial ever. The uproar in the U.S. around a surveillance tool without permissions exploded. So there's this balance of technology and customer rights that is fascinating that we keep, it's an onion, right? We keep peeling and going, this is incredible. Oh, wait a minute.

26:45Wait a minute. So it's this balance that you have to have. But honestly, there's your news story for next week, Kate. Look up Ring Doorbell, Lost Dogs. That's my weekend sorted. Yeah. Have some. Oh, I'm here for that and Mr. Beast, Kate. Between those two? Go on YouTube. Go crazy. I mean, yeah, I feel like we could probably talk about this for the entire rest of the show, right? Because as you say, there's so many complexities to this. I suppose, Jess, just give our listeners a little bit of a practical end to this story. If someone does think their bank has rejected a scam claim unfairly, what do you think they should do next?

27:20If the decision is unfair, what advice would you give people? Yeah, so first things first is to ask them to make sure that decision's in writing. So we need to understand why, what's the reason for refusal. You can then, of course, formally complain to the bank, go through their complaints process. And then, of course, if it's unresolved from there, you can go to the financial ombudsman service. The FOS are actually free, independent and very sympathetic to fraud victims. So if it does go across to them, it's highly likely they will rule in your favour. It is a long process, but most claims that we see that go through there do rule in the customer's favor.

28:06Okay, so good to know. Awesome. Well, we're going to take a quick pause here. We'll be back very shortly. Hey, folks. David Breer here, CEO of 11FS. Here's something you might not know about me. I get a lot of people trying to impersonate me online, fake profiles, scam emails, the lot. And a big part of that comes from data brokers. hundreds of them quietly collecting and selling your personal information. Your phone number, email, home address, job title, all out there and all fueling identity theft, scam calls and spam. If you've ever searched your own name online, hands up, who hasn't? You'll know how exposed you really are.