1080. News: Klarna applies for a US banking licence, LemFi buys Wealth8, and Santander open-sources AI

25:38And then remittance is a hard world. It's a competitive world. It's all about price points. And so by offering a wider service of people who trust them in there, they not only are probably, you know, getting an easy acquisition to a wider product set because they've got people who trust them for the remittance piece, but they're also now extending what actually is kept within their world on their balance sheets and be able to sort of, you know, increase their scale as a company as well at the same time. I think the acquisition is interesting because for me it lets them run forward very quickly without having to partner or build it themselves or anything like that.

26:29Often the, why do you buy? It's about getting there quick. Not having to wait to get to market on things by bringing things in. whether you know that shows that they were relatively cash rich or or had you know a good view of a strategy around their investing i don't know but um you know it's it's a smart move to actually have it as part of your your world as opposed to to going out and partnering if that's

26:59Ross Gallagher:your long-term strategy for sure i like that you're uh keeping us honest with the the cynical view i think it's easy to get carried away you know i'll sit around and be like yeah it's so great um but no i appreciate that i guess dave as well you you starting to sort of um touch on that sort of like build partner by strategy and i suppose there's uh without wanting to generalize too much because i appreciate obviously this will be an individual decision for each business that's making it but um you know how do how do fintechs in particular tend to think about that what what informs that decision yeah well often depends where you are in you know in in your your life cycle in in in your investment position you know if you want to get there if you want to get somewhere quickly you tend to partner you know and often works well at small scale um as you start to grow you know that is you know every time that you've got a layer of partner you're giving a slice away.

28:01And so as you scale, you want to have it in your own world so that you're not giving it away and you're not having to pay fees out to other people and you're keeping that all within your own control. So there's a balance where that twists over. It's one of the things we talk a lot in Foundry EOS where one of the things about switching where you're partnering is often an economic decision about the scale of where you are. you know, what you're connecting to may work really well day one, but, you know, six months, eight months out when you've got, you know, a million customers, that doesn't work at all and economically becomes unviable quite quickly.

28:44So that ability to switch things out there, in there. The fact that they went straight into this with something that they owned is the interesting bit on this rather than starting partnering with something and then thinking about bringing something in when they've proved it to be successful. It's quite a ballsy move.

29:04Ross Gallagher:Yeah, and there's risks, right? I mean, ultimately, how good this feels from an end-user perspective will depend on how successful that integration has gone or not. Kylie, any final thoughts from you on this one? Yeah, so I guess two points. I kind of want to respond to what Dave said about the skepticism. I think super fair. I mentioned that at Artvest we have seen demand from remissence companies to begin offering investment products and I think it speaks to the fact that their end users are also demanding this or expecting that anywhere that they're leaving money at some point it should grow obviously you could have base rates of interest but we all know that inflation moves a lot quicker than interest so you know it's not a great outcome for that end user I think when you think specifically about Lemphire and WealthAid's customer base is those underserved, underrepresented communities.

29:58And Jason spoke about some stats from the US and we have similar stats in the UK in terms of that ethnic wealth gap. I think it was like five years ago, there was an article or a paper about the fact that for every, I think the wealth gap for black British and Bangladeshi households on average will have 10 times less wealth than a white British person. So that gap still very much exists. And I think the decision for anyone to send money home is not because it's from disposable income, it's a need. And they've often maybe moved to this country to serve the need of their families back home. So I think, yes, granted, it is also a opportunity from a commercial perspective for a lemphire for a wealth eight but ultimately they still met that customer at their um at the point of need so maybe it'll start with sending money back home maybe then a year later it will be about building savings and then eventually hopefully it should be about investing for their future so yeah i take your point it is definitely a revenue generating um scheme and opportunity but it also for that end user it's unlocking something that they might otherwise not have access to so I definitely think it's important to bear that in mind and then on the point of infrastructure I work at an infrastructure provider so you know there's an element of an angle that I'm approaching this question with as well but there is so much happening in the financial space and in the industry even when we think of regulations new things that are coming out AI open finance there is so much going on targeted support as well for firms to have time to build and to keep pace with their competitors often it's not a case of okay should I build in house or should I outsource it's a case of okay if I want to keep up with everything else that everyone else is doing I need to have engineering and product resource to be able to do that and so So day-to-day outsourcing of, say, an investment infrastructure arm or buying that via another company, I think actually can also be a long-term strategy just to keep up with everything else that's going on in the industry.

32:15But I appreciate with scale, like that can also involve a lot of costs. So yeah, those are my just two cents on those points.

32:24Ross Gallagher:That's awesome, Kylie. Great point. Thank you so much. All right. Well, look, on that note, we are just going to take a very quick pause here and we should be back with you very shortly.

32:38Ross Gallagher:Before we get back to the news, we wanted to tell you about our latest Insight show. This week, Kate Moody is joined by Joe Colchester and Olivia Vasek from the 11FS Pulse team to explore the next generation of AI experiences in financial services. Drawing on Pulse's latest research and exclusive conversations with Robin Hood and Public, they discuss what separates genuinely useful AI products from AI hype, and what the rest of the industry can learn. Now back to the news, and our final main story this week is from Finextra, with the headline, Santander publishes AI projects on GitHub. Santander has published a number of its internal AI projects on GitHub, making them freely available under an open source license in an effort to encourage collaboration across the industry.

33:28Ross Gallagher:The bank has released 11 projects developed by its AI lab, including tools for generating synthetic fraud data and testing AI systems for fairness and bias without exposing real customer information. The move comes as Santander continues to scale AI across the organization, with plans to give all 185 ,000 employees access to AI tools and an expectation that the technology will generate more than 200 million euros in business value next year. Dave, look, obviously very keen to come to you first on this. I know this is something you've been looking at for a little while, but what's your reaction?

34:08Ross Gallagher:What's your experience? Yeah, well, obviously, you know, right now in what we're doing at Foundry OS and the wider world that we're working with the 11FS Holdings team and David Breer and the team there. There's a lot of AI things we're doing on there about sort of, you know, AI driven onboarding and other aspects of things. So it was interesting to see them publishing this. And, you know, I'm a big fan of this sort of collaboration in that space. There's a lot of people trying to get their heads around what does AI in a regulated world mean to a lot of people. We talk a lot about a lot of the things that you have to do in the regulated space really have to stay on the left brain size.

34:56It's very decision rule based things that you couldn't give to a lot of these LLM models and things like that that are very much predictive in what they do because you need the same outcome every time. And you're not necessarily going to get the same outcome every time on those models. Whereas, Because if you're making a decision about onboarding a customer, you need the same outcome. You need to be able to prove that every time. And so some of those things. So some of the things that they're looking there around some of those guardrails in there and some of the things are sort of lined up with some of the things we're working on.

35:31And so it was interesting to see some of that stuff. Actually the synthetic fraud stuff, we were actually starting to work on our fraud monitoring piece and things like that and actually taking we took advantage of some of the stuff that I'd lobbed out there because it was actually great just to build billions of transactions out to actually play around with and things with sort of embedded fraud profiles within that data so some of that's been really useful and I can see a lot of that sort of collaboration there. We use a lot of open source in other things and people contribute from my team back out to those projects I think will probably contribute back to some of this stuff as well.

36:12and I think that collaboration can only be a good thing for the wider industry, for sure. Yeah, completely agree.

36:20Ross Gallagher:Carly, I saw you again kind of nodding along during some of Dave's points. What's your reaction to this one? Yeah, no, I do think it's a move that definitely makes sense. I think, Dave, you spoke about, you know, awaiting to see what the regulators do in the AI space in particular, and I think talking about fraud fairness and AI in a collaborative way is really essential because they are industry-wide challenges. It's not just something that Santander will be experiencing or one bank will be experiencing. And almost in a fairness perspective, I wouldn't want me to be less protected by fraud depending on who I bank with, for example.

36:57So I think in a highly regulated space like banking, these problems are so interconnected that it's not solvable for any one single institution to like do it by themselves, right? So ultimately, if the end goal is reducing fraud, it's having regulations that define appropriate use of AI, for everyone in the industry, it does kind of require us to collaborate and do so. So I think even day to day, we at Artverse, we often share how we are using AI internally with our customers and our clients. I think that also builds trust, even from a client and a supplier perspective to know what we're doing, the fact that we're being innovative, but we're also being very mindful and conscious of how we use it as well.

37:42So yeah, I think collaboration is key across the board.

37:45Ross Gallagher:I couldn't agree more, and especially when you're talking about solving for really big problems, major problems like fraud. Jason, what's your reaction? Yeah, I mean, I think at a time when there's both a lot of excitement and growth around AI and AI tools, but simultaneously, you know, a certain amount of skepticism and even backlash from consumers, I think it makes a lot of sense to be more transparent in how industry can benefit from some of these tools, right? So I think, you know, it is, I think fair to say, unusual for financial services institutions to make tools and things that they've developed internally, you know, fully open source.

38:34I mean, maybe you see some of this, you know, quote unquote collaboration in the form of bank owned consortiums. So, I mean, in the U.S., for example, I mean, even Visa and MasterCard were, or at least Visa was, was born out of a bank owned consortium that sort of served the needs of all these banks. Obviously, this is a little bit distinct, but I think, not to put on my somewhat cynical hat, but I think from a sort of PR standpoint, it is a positive to be able to say, hey, look, we have developed, in this case Santander, has developed these tools using AI technology, AI capabilities, and they are using them to do what I think anyone would agree are generally positive things.

39:20trying to block fraud, trying to ensure systems they are building are fair and free from illegal bias. And so I think by making these available through GitHub on an open source basis, I mean, one, hopefully it helps other financial services players in the industry to benefit from the resources Santander has expended to develop these. And again, maybe a little bit cynical on my part, but it also is sort of a, demonstrates the potential positive force that AI tools and technologies can have on industry and on consumers. And it's also incredibly important that, you know, financial providers, financial services providers in this space are proactive, right?

40:14Ross Gallagher:Because we know that the bad actors are going to be using these tools, right? So it's they already are. Right, exactly. And actually the rate at which they're, um, they're evolving and improving is terrifying. And so, Carly, going back to your point, which I think you articulated so well, this is an industry wide challenge and we have to come together to, uh, to sort of, yeah, create the tools and the protections for consumers. Yeah, exactly. I think it is really, really important. I don't want to like reiterate everything that has been said, but there is so much scope with AI, like even internally operationally, when it comes to engineering and releasing things, when it comes to how one industry is using AI versus another, there is so much that we're yet to uncover.

41:01And so I think there is a lot of learning out there and a lot of learning to be had. So yeah, the moment we collaborate, the better it will be.

41:10Ross Gallagher:And Dave, I, you know, I think, look, as an industry, we've probably been guilty of being maybe a little bit parochial and generally tending towards protecting our competitive advantage rather than sort of collaborating with other players. But, you know, we're not, what we're not saying here is that banks are giving up their competitive advantage in terms of how they use AI to design better customer propositions and experiences and all that sort of stuff. What we're saying is we're talking about a very well defined set of problems and co-creating a set of tools to help. And those two things can coexist, right?

41:46Yeah, absolutely. These are tools and framework things. And some of the things in there are fairly basic. There's no secret sauce, there's nothing in there that they're putting out there for sure. So, you know, although they're helpful, I think it helps people understand how to work on those sorts of frameworks around how AI is going to work into the complications of our regulated world that we sit within. And I think the other challenge for a lot of people is how and where do we best use AI? Because there's so many people who are on the hype at the moment who are consuming the crack of AI, which they are going to end up in problems.

42:34I know people in engineering teams who are struggling with the costs where the token price is because they're just consuming it for everything. A healthy skepticism of some of this stuff is quite important because use AI for adding value, not just for the sake of it. We know there's only one direction the cost of tokens is going. These people have got to make a lot of money back on these big investments. And so So, you know, the anthropics and the open AIs are very happily wanting us to just use it for everything and get us bought into the addiction to it because that's where, you know, they will get us all back on it all.

43:17But for me, it's about looking very carefully and going, there's a lot of value that AI can add, but use it for the things that are adding a lot of value, not just for the sake of it.

43:26Ross Gallagher:Yeah, and Carly, I mean, the value point's interesting, isn't it? I mean, Santander said that they're going to generate more than 200 million euros in business value sort of with AI next year. Do you think is that a useful way for them to be thinking about measuring its success? So I'm just laughing at Jason's reaction to that. But yeah, I mean, the value definitely has to be measured at some point. You know, AI is almost a bottomless bucket in terms of how much you can spend on AI. So value definitely does have to be measured. I think it's actually up to each business owner within Santander or any other company to define how they're going to measure it as well.

44:06At Artvest, for example, each individual has 20 ,000 euros worth of tokens each year to spend on AI, which is a huge amount of money. But you'd want to be seeing where that value is being, you know, use how it's being driven. And so for me, with my operational hat on, I'd be thinking about, okay, am I saving costs, my increase in efficiency, have my cost to serve reduced for every client that we have, for example? And how can AI adoption drive that? How can I measure that? If I worked in commercial, I might be thinking about, okay, have I released AI through hyper-personalization for my end user?

44:47That's meant that actually they're putting more money into the platform, which means that I'm generating revenue off that. If I worked in support, I might be thinking, has my customer satisfaction gone up because they've had an experience with a bot that's given them really accurate information really quickly? so I think it's definitely up to each business stream to kind of define how they measure that value but I think also as a company as well like it has to be clear what the expectations are how they are protecting their staff from also the use of AI and ensuring that people are still thinking critically because I don't think I know anyone and I'm speaking for myself as well who's type something into Gemini or Claude and have the exact perfect answer.

45:33Like I've caught so many mistakes. So it's definitely important to still be thinking about things critically. But yeah, definitely important to still measure value. How that's defined, I think, has to be up to each kind of business owner, even within a company.

45:48Ross Gallagher:Love it. I think that sums it up really well. So then on that note, we are just going to take a very quick pause here and we will again be back with you very shortly.

46:02Ross Gallagher:Okay, now for a quick look at a story we don't have time to cover in full. This one comes from FF News with the headline, Starling Bank debuts UK first, quote, snatch theft detector to combat 64 % surge in summer phone fraud. So Starling Bank has introduced a pair of new security features designed to tackle the growing problem of phone theft and the fraud that often follows. The first is a, quote, snatch theft detector. which uses a smartphone's built-in motion centers to detect when a device has been forcibly grabbed. If triggered, the Starling app immediately locks itself, preventing access to banking services until the user authenticates with biometrics or their passcode.

46:45Ross Gallagher:The bank has also launched, quote, safe locations, allowing customers to nominate trusted places such as their home, where certain transactions can take place without additional checks. Attempts to move money outside those locations will trigger extra authentication, helping protect customers if criminals have managed to steal both their phone and passcode. Now, Bernadette Smith, Starling's Chief Customer and Banking Officer, sent us a soundbite about this product, so let's listen to it.

47:15This week at Starling, we launched Snatch Theft Detector. This is a UK-first banking tool that's designed to protect our customers from account takeover fraud, which can happen as a result of having your phone snatched. It works by using the accelerometer in your phone to detect if the device has been snatched at speed. If it detects movement, it will automatically lock the Starling app and require a passcode or biometric authentication to enter the app again. So for example, say you're watching the England game at the pub and you're checking your balance on the Starling app and a thief snatches your phone from your hands, they'll be locked out of the app entirely.

47:51This can make all the difference in protecting a customer's money, as it prevents the thief from draining funds from your account and into theirs. We're launching this tool now in the summer, as our fraud records indicate that the amount lost to account takeover fraud surged by 64 % in June, July and August of last year. It's a typical trend for the summer months. People are out and about more, enjoying festivals and sporting events and the longer evenings. But it also means that thieves have more opportunities to shoulder surf for their details, snatch their devices and access and drain their bank accounts.

48:23We're really excited to be launching Snatch Theft Detector. It joins our roster of fraud and scam prevention tools, including Scam Intelligence, which uses AI to detect the signs of romance scams, investment scams, and many more. And we've many more planned.

48:41Ross Gallagher:Wow, I mean, that 64 % surge in account takeover fraud is staggering and terrifying, and it's amazing to see financial services providers stepping up and, you know, putting the fraud prevention tools and controls in place to help protect this. Obviously, we saw Revolut announce its street mode not too long ago, slightly different angle insofar as Starlink's obviously focusing on detecting the physical act of a phone being snatched while Revolut focuses on making it harder for thieves to move money after the theft has happened. But again, look, I mean, incredible to see these types of fraud prevention techniques and tools being put in place to protect customers from what is already an enormous and obviously a growing problem.

49:31Ross Gallagher:All right. And finally, from banking licenses and AI to one of the most important financial institutions of them all. Wait for it. It's the Tooth Fairy. This one comes from the Financial Times with a headline, uh tooth fairy payout nears five pounds as uk childhood finances overtake inflation what actually worries me about reading that headline is they've got tooth fairy in um quotations i don't know how many young children read the financial times but that could give it away um the tooth fairy appears to have received a pay rise um according to nat west rooster money's latest podcast money index weeks.

50:10Ross Gallagher:The average payout for a lost tooth is now almost£5, while children are also receiving just under£10 a week in pocket money on average. Perhaps the biggest challenge though isn't the amount, it's how it's paid. Rather than finding coins under the pillow, many parents are now transferring the money into their children's savings or pocket money accounts. So we thought we'd finish with a little nostalgia and maybe a little parenting advice um jason i mean this is a cracking story no it it it's hilarious i mean i um you know the thing that occurred to me and particularly about paying the i guess the tooth fairy money into um children's directly into their like savings account as opposed to physically giving you know currency uh not to sound like the nerdy academic that that uh i am or i almost was But there are also studies that people are more likely to basically save and spend less when they're using tangible physical currency as opposed to the lower friction, you know, debit or credit card, or of course now, you know, mobile payments.

51:26and I mean I will you know I know this is an audio medium I will reveal my age and it's like growing up you know my allowance was a physical in my case$10 bill not a 10 quid bill and yeah I had a savings account with a physical with a physical passbook that I could like write down you know when I deposited money and yes this is like oldie timey and I doubt that you know any parents listening to this are going to do that. But I do think that those rituals teach certain habits and responsibilities that are much harder to replicate in a purely digital way.

52:08Ross Gallagher:I love, Jason, how you've moved on from sort of like very succinctly navigating politics to now very succinctly navigating time travel. I feel like we should probably spend the rest of this show just explaining what a past book is. for our listeners. Dave, what was your reaction to this one? I'm not that old for the record. Well, you did say you'd reveal your age and then you didn't, so now we've just left it hanging and it's just up to our listeners' own judgment. Yeah, I'm quite happy you didn't reveal because I'm sure I'm much older. The nostalgia of the past book that I used to have as well, the printer, when you took it in and it was printed in, I still remember that noise of the, you know, the impact printer going across those.

52:54Yeah. I can't see how I'm sorry. You know, I remember it's a long time now, because my kids are in their late twenties and they're coming up to 30, but, um, you know, it was always cash, um, under the pillow and, and, and it had the mysticism of it that, you know, it hadn't come from you as a parent and, you know, I'm not sure how long it lasted before they were like, I know it's come from, from you parents. But it's going to arrive in their pocket money account or their Monzo account or whatever. Obviously it's coming from mum and dad and the transaction reference says tooth perry on it. I'm sure there's not quite the same mysticism to it in that.

53:40That's amazing. With a tooth emoji.

53:47Ross Gallagher:I'm kind of with you, Dave. I mean, look, we love digital. I mean, our podcast is called FinTech Insider. But Carly, what do you think? For me, I feel like you lose something when it's instead of getting something under your pillow, it's like, well, go check your app. Yeah, dare I say, I actually also do remember having like a little book, which I take to the bank. Mine was actually from Abbey National, which doesn't even exist anymore. So I'm also feeling pretty old in the group. I never got money from the tooth fairy, but I did get£10 a week when I started going to secondary school. So that was kind of my first exposure to money.

54:24What I will say is I don't know if maybe we're also viewing it a bit differently because I guess for kids now, you know, pocket money and penny sweets aren't really a thing anymore. So maybe actually this is just how the next generation are going to view money. And maybe it's an opportunity for parents to actually talk about money in the sense that, oh, let's all look at our banking apps. How much have you got? Oh, you did like your chores this week. Oh, I can see an extra five pounds for little Tim or, you know. So maybe this is actually just how the world is going. And I think even places where you can spend cash nowadays is dramatically reducing.

55:05as well. So maybe, you know, giving the kid a pound, I don't know how far that's really going to go. So yeah, it's a really good point.

55:13Ross Gallagher:And I love you pulling us like, like, like nostalgic, like back into the modern world. I think that is really useful. All right, look, I'm going to wrap us there. Thank you so much to today's guests. If we just do a quick whiz round, maybe you can tell us a little bit more about where, where people can get in touch with you, where people can find out more about both you as an individual and I guess your companies. Dave, let's start with you. Yeah, you can find me, Dave Morris on LinkedIn, or all of our content at foundry-os.com. Amazing. Thank you, Dave. Carly, how about you? Yeah, you can find me on LinkedIn as well.

55:52So Carly Addo, without an R, confusingly, but working for Upvest. And yeah, you'll see me post a lot about what I do on a day-to-day basis and also the things I'm interested in. Amazing. Jason, how about you? You can find me at fintechbusinessweekly.com as well as on X and LinkedIn. And my best-selling book about bank fintech partnerships is available on Amazon.

56:17Ross Gallagher:Amazing. Thank you, Jason. And as for me, as ever, you can find me on LinkedIn. That wraps up today's episode. Thank you so much for listening to today's show. If you like what you heard, please make sure to follow us on your favorite podcast platform of choice. And if you really like what you've heard, why not share the podcast with a colleague or friend. As always, if you want to join the conversation, find us on social media, just search for 11FS or FinTech Insider or email podcasts at 11FS.com. Thank you again and goodbye.