1086. News: Wise tries again in the US, Western Union shuts its digital bank and Brazil reinvents BNPL

0:05This is Fintech Insider News. This week, wise to refile US bank chart application after OCC rejection, Western Union winds down its digital bank service and eBanks and Pagalev blend PIX and BNPL to expand access to installment plans in Brazil. We'll be tackling all of this and more on today's news show, so don't go anywhere.

0:38Hello, and welcome to episode 1086 of FinTech Inside and Knees, brought to you by 11FS, the six-time consultancy of the year that works with financial providers, big and small, to build the next generation of financial services. I'm Kate Meadie, Customer Strategy Director here at 11FS, and I'm joined to unpack some of the biggest and most interesting stories from fintech and financial services from the past week by a brilliant panel of guests. First up, we have a welcome to the podcast from Matthew Goldman, founder and managing member at Tatavi. Hello, Matthew. I mean, first and foremost, massive apologies if I mispronounced that, but would you mind introducing yourself and tell us a little bit more about you and what you do, please?

1:17Yeah, pleasure to be back. Tatavi is a consultancy in the United States, and we help fintechs and established companies to build and manage card programs primarily. And I've been in payments my whole career, over 20 years doing debit, credit, and everything in between. Awesome. We are looking forward to picking your brain. So thanks very much for joining us. We also are welcoming to the show Neera Jones, advisor, keynote speaker, and author. Welcome to the podcast. Again, how are you doing? Would you mind introducing yourself to our listeners, please? Absolutely. I'm Neera Jones. I'm an independent advisor.

1:54I've been in payments and banking and financial services for a very, very long time. I won't tell you how many years because I'll show my age. Suffice to say, I remember Cobalt. So anyway, so I'm there. I'm a self-confessed payments nerd. I'm also an author. I've written three books about payments. That's so nerdy I am. I won't bore people with my bio. I'm an advisor. I'm an expert witness and an international speaker. My LinkedIn profile is up to date and I'm always delighted to make new connections. Well, this is absolutely a home for FinTech and financial services nerds. So you are exceptionally welcome.

2:30Thank you for joining us. And last but not least, we also have a welcome back to the show for Bruno Denise, managing a partner at Spirulam. Again, Bruno, always great to have you on the show. How are you doing? And would you mind reintroducing yourself and Spirulam to our audience, please? Definitely, Kate. So great to be back. So I wear some different hats. One of them is Spiritland, which is my consulting firm, basically helping corporates and also regulators and other institutions to innovate in finance and abroad and locally here in the country, in Brazil, where I'm based. Besides that, I'm also a teacher at University of Sao Paulo at the MBA courses.

3:08I was appointed in 25 independent advisor at Open Finance in Brazil, and I'm currently chairman of Open Finance Brazil. and also an author of books. So I have three books on fintech and another one co-authored with Brad King and some other folks about branches and bank branches and how all the downfall of bank branches that we had recently. So that's a little short for what I do and great to be back again here. Amazing. Well, yeah, what an awesome panel of guests. I'm so excited to hear all of your takes on the news. So let's get into it. Our first story is taken from the papers, but covered in quite a few places, and that is WISE to refile US bank charter application after OCC rejection.

3:54WISE is preparing to refile its application for a US national trust bank charter after its original bid was rejected by the Office of the Comptroller of the Currency, or OCC, last week. The company says the decision reflects changes in the regulatory landscape over the past year, including new Federal Reserve policies on payment system access and the introduction of the Genius Act, rather than any impact on its existing U.S. business. Wise says it has strengthened its U.S. compliance framework following a 2025 consent order and plans to submit a revised application designed to align with today's regulatory environment.

4:28The company believes the Trust Charter would better position it to connect traditional payment infrastructure with emerging technologies, including stablecoins, as it continues to expand its global payments network. We are sport for choice with a variety of payments nerds on the show today. But I mean, Matthew, maybe I'll start with you. Wise has built a global payments network without being a bank in the US. What was the driver, do you think, for this move for a bank charter? Yeah, I think it's a super interesting time in the United States. A couple of things that stand out about our market is we have so many depository institutions, almost 10 ,000 of them, whereas many other countries have very few.

5:08But for the last 10 plus years, the kind of door has been closed for folks to create net new chartered financial institutions. And over the last year or so, the door has been opened wide and we're seeing so many new charters, both kind of totally de novo companies as well as existing fintechs, you know, starting a banking charter to bring services in-house and vertically integrate and save money. I think that's where WISE has to be going. I cannot believe they got rejected. Usually you withdraw your application because you've been warned that you're going to be rejected. It's really astounding.

5:45I don't particularly buy the, like, oh, we just wanted to change our plans. I don't think you end up in this spot with a rejection if you want to change your plans. And reading the letter, it's relatively damning that, you know, WISE is a money transfer solution and they have serious AML and BSA problems. And that's the big red flag. And while the current administration in the U.S. is very friendly to people trying new things and doing crypto and whatever, they really still don't like financing of global terror groups and especially ones that are on their hot lists, right? So WISE has been in trouble with seeing funds allegedly sent to Palestinian organizations, which the current administration is very unfriendly to.

6:29So I think they're trying to save face. There is new regulation. Like, that is true. And the Genius Act has created a different approach to these charters for national trust companies. I could see how that's a better fit, but I don't really buy the underlying argument that this is, like, of their choosing. If it had been, they would have withdrawn their application. And I'm not sure it really gives them an infrastructure advantage separate from any other type of charter. Okay. Yeah, an absolutely interesting take. Nira, what did you make of the story when you heard it? Well, it was really unsurprising because it's a very different regulatory environment in the States.

7:11If you recall, TransferWise back in 2018, before they rebranded, were actually the first fintech in the UK to gain access to the faster payment system. Now, different regulations in the US don't allow you to do that, you know, other than for a sponsor, but they've been there having access to FPS directly, not relying on sponsor banks. So for them, the UK is not particularly interesting to get a banking license, but it is in the US. So what I make of it, what exactly is happening is that there is a direction of travel and a signaling from the regulators. And essentially, the old model that fintechs could innovate and grow very fast and break things and professionalize later, so to speak.

8:06That was acceptable back then because it was new. But now the regulators are saying, hang on a picking second, later is actually too late if you want banking privileges. So that means that fintechs essentially now need some sort of bank-grade governance, risk discipline, as Matthew was mentioning just earlier on, and the kind of operating maturity that you need before you actually get the keys, not after you've actually left the car park, which was what was happening before. So the more interesting point about all of this, of course, is that it's not just about ticking boxes. It's about whether the firm has the institutional muscle memory to manage edge cases, failures, escalations, and oversight in a way that will look credible to a regulator.

9:06And that's a much higher bar than simply having a great and tidy product and a really good growth story. Because let's not forget, regulations in financial services and in the banking sector in general have been around for a very long time. And they've been around specifically for incumbent financial services institutions. So if you look at the banking industry, which has been around for hundreds of years, what kind of growth do we kind of expect for a bank in general? kind of about 67 % roughly year on year. And that's kind of traditional growth for banks. So regulation can cope with 67 % because that's not massive growth.

9:56When you look at the likes of a new bank and others and indeed all those fintechs that are growing at incredible rates, regulations are actually not capable of coping with that yet, which is why the regulators are becoming more stringent. Yeah, okay. No, I can see that for sure. And Bruno, obviously keen to get your take as well before we kind of dig into some of the additional details around this. But yeah, what was your take on this story? Well, I believe that the case for the denial of OCC was basically related to some kind of AML, you know, historical, you know, issues that we saw that Wise was involved.

10:35And that sometimes, that also translates in some type of message for the whole market. And, you know, there are so many players now, fintechs trying to move and become banks. But in this case specifically, I think that there was like a specific answer from the OCC and this whole AMAO problem that we saw that Wise was involved was something that in some sense was important for this decision. But, you know, they're going to refile it again and let's see how it's going to unfold. Yeah. I mean, Matthew, how big a setback do you think this is for WISE? I mean, obviously they have been, in terms of their day-to-day operations, they haven't needed this charter to operate to date.

11:21They've got their kind of money transmitter licenses across 48 states, I believe. So is this just a bump in the road, or do you see this as a more significant setback? I think it's a bump in the road. I think they're going to have to make some changes to their programs. And as was also mentioned in the OCC letter, the OCC was unimpressed with the board of directors and the oversight experience. And changing charter types doesn't solve that problem. So we're going to have to make some personnel changes. But as you said, Kate, you don't need to be a bank to do all this stuff in the United States.

11:53That's the way we've all done it for 15, 20 years is working with sponsor banks. And there's actually a very good argument that you are better off not as the bank itself. And I think it's interesting seeing kind of all the fintech companies rushing the gates to become banks. There are some margin advantages potentially, but there's a big, as Nira put it, like that kind of, you know, that collision between the regulatory framework and the tech companies. And the bank, the sponsor banks can do a very good job there. So I think they can continue doing what they're doing today. They can probably do any new products they wanted without it.

12:30they're probably giving up some margin or what they believe is some control. But I don't universally advise people that they should go get a bank charter. It's often a bad choice if you're a tech company and it's better to work with a banking partner or multiple. A lot of fintech companies work with one for wires and one for ACHs and one for deposit accounts and one for credit cards. And each of those banks has a specialization. And that's a thing that a tech company can do. So I think they'll be okay. It's a bit embarrassing, the whole thing, in my opinion, to get rejected and to be the one application that got formally rejected in the last 18 months is a bit rough, but they'll make it out.

13:12Yeah. And they're obviously there, WISE have now said that they're planning to structure their new application around the Genius Act. Obviously, that in theory gives them more options around how that might interrelate with stable coins, how traditional networks might be interoperable or other payment networks as well. Do you kind of see that as potentially a game changer for WISE? Are they going to be able to start to offer new things in the payment space if they can get this license in alignment with Genius Act, or is it not so much a big deal? Well, I tend to agree with Matthew. It's kind of not so much a big deal.

13:47And what's happened here, it's two things. One is, obviously, the regulators are raising the bar for any kind of fintech that wants to apply for a bank charter, no matter how big their badge is and their recognition in the industry. But it's also symptomatic of Wise's own story, as both Bruno and Matthew actually pointed out. I mean, they have their own supervisory baggage. So the bar has definitely risen for me. So if you are now, what's changed? if you are now applying for banking powers, be it the banking charter in the US or whatever else in other geography, you're not just being judged on your ambition to become a bank.

14:33You're actually being judged on whether you already behave like a serious institution. And that's what you're looking at now. So this essentially for organizations like WISE changes the strategic calculus, so to speak. A banking charter is no longer a badge of maturity you get after growth. It is a test of whether growth has been matched by control, resilience and governance. So essentially what we're saying here, the regulator is asking, have you built a bank are just a bank-shaped company? That's what they're asking. Yeah, no, I can see it's a critical question. And I suppose just to close this story out, Matthew, we've seen cross-border payments improve in many ways over the last decade, but I'm keen to get your perspective maybe just to close this out on, where do you still think the biggest frictions are today?

15:36What types of problems would you like someone like Wise to really be focused on trying to solve? Yeah, I think that there's a couple interesting cases. We've solved a lot of, I want to send money from myself to this particular person. I think there's a lot of opportunities still in B2B cross-border payments, many of which are still running over Swift, and there's a lot of account numbers. And, you know, the idea of you seeing folks, you know, other providers be able to spin up accounts very rapidly in different geographies so you can do local receiving, right? I think that's a very interesting play is also the kind of like I can have an account in multiple geographies so that the person I'm interacting with, it's kind of native to them.

16:17And then whether it happens over a Swift or, you know, stable coins or whatever, like nobody cares, right? I think cross borders are those things where the sender and the recipient just want it to be easy and local and native. And they want someone else to deal with it in the middle. And we still have a long way to go. Why is this big? Others are big. But Western Union and MoneyGram are still bigger, I think. And that's what a lot of people are using. And so that's the opportunity still to shift people into the modern version. Okay. Well, it's almost as if you've read the show notes, but that is a perfect segue onto our next story.

16:54And that is also covered in multiple places, but that is Western Union to discontinue its Western Union digital bank service. Western Union has announced it will discontinue its Western Union digital bank service, closing all customer accounts. The company says the decision follows a regular review of its products and services and does not affect its core money transfer business, which will continue to operate as normal. The digital bank offered customers an app-based current account with an IBAN and debit card separate from Western Union's remittance business. Customers have been instructed to withdraw or transfer their remaining balances, update any salary payments, direct debits, or subscriptions linked to their account, and download any account statements before their account is closed.

17:35Neera, obviously, this is a globally recognized brand, millions of customers. What does this decision tell us about how hard it is to be a successful digital bank? Well, it tells us one very clear thing, and that is brand recognition is not the same thing as product market fit, which is essentially what we're looking at here. A digital bank isn't automatically a sensible extension of a remittance franchise, which is what Western Union is. So even if we've got a very big logo like Western Union and it's on the app and the customer base is large. So in some cases, not specifically talking about Western Union, the adjacency of the product is actually real.

18:27In others, it's just, for lack of a better term, organizational optimism with a PowerPoint deck. So if we look at it this way, for Western Union, this is actually portfolio pruning. It's not a U-turn. They have been already signaling a broader digital and strategic reset for some time. You know, they've been going through that, including their sort of beyond and evolve positioning. So closing the digital bank for me suggests it's cutting an adjacent proposition that didn't create enough standalone value. So Western Union is also a useful reminder that the hardest part is not the launch of a product such as a digital bank, it's adoption.

19:24So it's relatively easy to build a digital bank wrapper around what you already have, especially if you have a strong brand, you kind of got off the starting blocks a bit quicker. It's actually much harder to make that wrapper genuinely sticky when the core value proposition still sits somewhere else in the case of Western Union. So a digital bank that does not deepen engagement for their core business or indeed change behaviors can become a very expensive badge. So I completely understand why they did this. Yeah. Bruno, what's your take on why this hasn't worked out for Western Union? Well, that's a normal shift.

20:12I always saw other players trying to be more specialized on their core. One thing I think that I believe that is going to be, you know, seen more often in the market is basically some of the companies like the case of Western Union becoming providers of some type of banking as a service solution for the market based on their specialization. So we see the case for Wise. They have the Wise platform. So just for the record, the Wise platform was the one habilitating new bank international remittances capabilities in Brazil. So I believe that this expansion on trying to become a digital bank and have other capabilities is hard to scale.

20:58It's hard to drive adoption, especially because you're very well recognized for having this particular product. And in some cases, we're going to see some companies taking a step back and trying to focus on their core again. But there are some other ways for them to still be a relevant player. They are already a very recognized brand in the sector. It's about how to productify that and maybe enable that in other ecosystems of other players like some other competitors are doing right now. Yeah. And Matthew, you alluded to Western Union, I suppose at the turn of our previous story, as competitor to Wise, also being another player in the space for Wise.

21:44I mean, is this a sign of Western Union in decline? Or is it, as maybe Nero is implying, let's just a sensible pivot? What do you think? Yeah, it's not the first time Western Union has tried kind of cash management accounts. They had a prepaid card product here in the States many, many years ago that I think, you know, didn't really survive. I think it's, as Nero kind of went, like it's a natural thing that people think in, you know, strategy meetings, like we should, you know, expand and wrap more around. But I think these companies to ask, like, what's our right to win this space? And how do we differentiate in this space versus our core offering?

22:22Western Union does something very specific. And they do it pretty well. And they've served, you know, the world for a very long time. And they move a lot of money. And that's a very different problem than I want to deposit my money with you, right? Like, those are, you know, I think very different relationships when people think about them. And I imagine they will try something new. they're a big company, they need to think about their growth. I don't think it's like they're never going to try deposit accounts again. Maybe they'll try a credit card. Who knows, right? They'll try something. They want to build those relationships with their users and protect their franchise.

23:01But I think it's very hard to the other point here and you made about branding. Like the power of a strong brand is people think of it in a certain way. it's great to have a brand everyone recognizes but if when people hear Western Union they think money transfer then they're not going to think something else and that is how a brand can both be an asset and detrimental to future growth Yeah, I know for sure I mean one of the things they have announced this year is that they're launching a stablecoin I think US DPT on the Solana blockchain so again what's your take on that Matthew do you think I mean it's an interesting move right Because the rise of remittances via stablecoins, from certainly my limited understanding, is probably one of the biggest threats to the likes of Western Union in some parts of the world.

23:50So, yeah, are they kind of trying to become their own competitor? It's interesting to see kind of what the cannibalization is going to be. I think you should. I mean, I'm a big fan of the innovator's dilemma in the standpoint of companies that survive are companies that are paranoid and that look at their competitors and don't say, well, those guys are small. They say, how are they doing this better, faster, more efficiently than I am? And what can I learn from that? If, I don't know, I don't know that everyone needs their own stablecoin, but if having their own stablecoin lets Wells Fargo, excuse me, not Wells Fargo, if having their own stablecoin allows Western Union to move money more efficiently, either get better margins or provide lower costs or turn the transfers around, then that's, again, what matters.

24:37I don't think the people sending money care how it gets there. They care that it does get there and that they pay a fair price. Besides that, they already recognize it as someone that helps moving money around the globe. It's just a matter of the technology that you're going to do that. It's not the case. It's just like trying to reinforce and be competitive comparing to other players that we still have in the market right now. So it's a different type of jungle that we have from when they, you know, are dominant, used to be dominant in this sector. Yeah, I mean, it's such a fascinating space.

25:15It's absolutely not one that I would claim to have any expertise in at all. In fact, I had, I think, one of my most humbling experiences as a researcher before I even joined 11FS many moons ago when I was trying to write a quantitative survey to ask people ways in which they moved money internationally. and I think the other open text box had an astronomically high percentage of selections and when you looked at kind of the written comments of all the different ways and means that people were using I think this was looking at specific corridors in Europe between Greece and Romania or things like that but yeah, the sheer volume of channels and ways and means in which people were moving money from one place to another just really, really humbled me, blew my mind and made me realise I need to work harder as a researcher to understand some of these spaces.

26:02I think one of the ones which stood out, what I found most interesting was, I think there are multiple instances where people were cited that they were providing cash to bus drivers, drivers that were driving bus routes really, really consistently. So, you know, you could just go and give a bus driver your money and they would physically drive it to the town where your family members live. So obviously we've moved on a lot from, that was a long time ago, as you said at the beginning about not aging yourself, I'm probably aging myself now. But things have changed in many ways, But, Nira, do you think some of these physical channels, these physical touch points still matter in this space?

26:35Obviously, that's one way in which the Western Union has stood out to people in the past, is known for its physical touch points. Do you think they are going to lose those as part of this new version of Western Union, or is that still part of the strategy? No, I don't think so. because when you look at what Western have been doing and have been very successful at, is playing a whole sort of ecosystem with cash outlets, of course, and overlaying all sorts of products on top of that. So cash is absolutely still essential in some markets. I mean, you've said yourself in some corridors, remittance is still done manually by a bus driver.

27:17I hadn't heard that one before. So essentially, especially where the income is informal, where banking penetration is uneven, or indeed trust in digital rights is still developing. So cash is still very relevant in those markets. But I think perhaps the most important point is that cash is becoming context-specific rather than universal. In some corridors, it's still core infrastructure. In others, it's kind of a fallback. So what that means for organizations like Western Union is physical networks are not irrelevant at all, but they are no longer the only story. The strategic challenge for a company such as Western Union is to serve both worlds without letting the legacy network define the future model, hence applying for bank charters and whatever else they're trying to do.

28:17So this is a very hard balance, really, and not every company gets it right admittedly. So the strategic opportunity for digital adoption around all of that core infrastructure is still there, just not in the digital bank wrapper. And indeed, they've realized that very, very soon. So the interesting play is not basically become a bank, but use digital tools to strengthen remittances, as Bruno just said, customer retention, and of course, corridor economics, because it is specific to the context. So if they can redirect their energy into higher conviction, digital assets, perhaps partnerships, rails or product layers that sit closer to their core infrastructure, this could actually improve their focus rather than shrink their ambition.