The Ghost of Fintech Future: Fraud, UK Fintech Lessons, and Sardine Insights with Simon Taylor of Sardine

In this episode of Fintech Layer Cake, host Reggie Young sits down with Simon Taylor, Head of Strategy and Content at Sardine, renowned author of the Fintech Brainfood newsletter, and host of the Fintech Brainfood podcast.

Dubbed the "Ghost of Fintech Future," Simon shares his insights on the evolving landscape of fintech, lessons learned from the UK's fintech scene, and the growing threat of fraud in financial services.

They discuss how Sardine is tackling these challenges with innovative fraud detection techniques and the personal story that drives Simon's passion for financial security. This episode is packed with forward-thinking perspectives, practical strategies, and a look into the future of fintech.

Transcript

Reggie Young:

Welcome back to Fintech Layer Cake, where we uncover secret recipes and practical insights from fintech leaders and experts. I'm your host, Reggie Young, Senior Product Lawyer at Lithic. On today's episode, I chat with Simon Taylor, the Head of Strategy and Content at Sardine, author of the widely read Fintech Brainfood newsletter and host of Fintech Brainfood podcast.

Folks sometimes refer to Simon as a ghost of fintech future because he's experienced fintech in the UK, which is in many ways years ahead of the US in many parts of the globe. So he and I cover some of those future insights he has as well as how he got into fintech and the personal story behind why he cares so much about financial services fraud that he joined Sardine.

If you're going to Money 20/20 in Vegas this year, I'll be there along with a handful of Lithic colleagues. So if you're interested in connecting with us while you're there, feel free to reach out to me or fill out a contact form at lithic.com/contact.

Fintech Layer Cake is powered by the card-issuing platform Lithic. We provide payments infrastructure that enables companies to offer their own card programs. Nothing in this podcast should be construed as legal or financial advice.

Reggie Young:

Simon, welcome to Fintech Layer Cake. Excited for our conversation. You've been on my radar as somebody to get on as a guest for quite some time. I know Eduardo, formerly of Lithic, is now at Sardine. He and I've been texting for a while about getting- we've had Soups on. Of course, folks should go listen to that episode. But Eduardo and I have been texting for a while about trying to get you on, so excited that the day has finally come.

Simon Taylor:

Thanks for having me. You are my favorite example of a company that does B2B marketing well because of this podcast. It's small but mighty, right? Do not underestimate the power of going into that operator level of depth and the difference that makes for people. So you're doing the world a service. Thank you for doing what you do.

Reggie Young:

Well, thank you. I appreciate that. I always tell folks we're aimed at founders and operators, and I really want to get to savvy experience-based learnings. Fortunately, a lot of great folks are willing to be guests and share their insights in fintech. So I can't take much credit for the actual useful substance, but we do what we can.

I love to start out with the reality that I bet a lot of folks think that all you do at Sardine is write tweets and LinkedIn posts and prep to talk at conferences, but you actually have a day job beyond that. So what is it? Maybe for folks who aren't familiar, maybe start with what Sardine is. Again, listeners should go check out our podcast with Soups if they haven't yet. Fantastic episode. Probably one of the foremost leaders in fintech fraud right now, so folks should go look at the list. But yeah, maybe like a quick spiel on Sardine, and then what you actually do at Sardine.

Simon Taylor:

Yeah. I'm wearing a LoanPro shirt, shout out to Colton, but I don't actually work for LoanPro. I work for a company called Sardine. And if that sounds fishy, it's because it's about detecting things that look weird and look wrong with AI and data. The story actually goes to Soups' career. He starts in cybersecurity doing bot detection, then gets into Coinbase where he's hired with the hardest data problem they had at the time, which was fraud, which in 2014 in crypto was an interesting challenge because you didn't have a lot of solutions yet and you had a massive, massive scam spike. Then he goes to Revolute and tries to build out their fraud and their AML side. So he's worked in cybersecurity, fraud, and AML. These three worlds are completely disconnected. The vendor ecosystem is completely disconnected. You've got to work with 30 different companies. None of them do what you want them to, and most of their R&D isn't moving forward.

There are a few good exceptions to that, but most of it is like this patchwork problem. And there are a couple of potential solutions to that. One might be the fine folks at Alloy come along and say, we'll help orchestrate all that for you. Shout out to those guys doing a good job. The other solution is to say, let's be data led. Soups is a data scientist by trade with a PhD in using machine learning to detect DDoS attacks. He's a problem solver. So he figures out, how do I take all of these data sources and bake them into something really, really unique? And what he starts with is user's device and user's behavior on device.

Sardine is a platform for fraud detection and prevention and anti-money laundering. But it's rooted in the user's device and their behavior. That's our core intellectual property, and it's what we do different to anybody else. So if you're familiar withThreatMetrix, Behaviorsec, BioCatch, imagine all of that together, but in the platform, the dashboard that your data science team would build if they had capacity and that your engineering team would build for you if they have capacity. Because, of course, you could build it, but are you going to get the budget and the resource to go do it the way you really want to? And Soups had been there. So that's exactly what Sardine is. It's like, ah, I'm just going to go do this. So incredible founder market fit.

Company's a little over four years old, about 120 people, clients like everybody from Ramp, Brex, to Novo, Airbase in the fintech side. But you would include the likes of Nike on the Web3 side, Coinbase, Kraken, Gemini, all of that side, but now some of the world's largest merchants and marketplaces, gift card marketplaces like Blackhawk Network. And we're really seeing wherever there is risk, there is really a pull towards the Sardine product because it's what you would build internally. I've been with the company about three years, and it's a lot of fun.

Reggie Young:

Yeah, that's a great overview of Sardine, and folks should go YouTube Soups' presentations at conferences. I saw him at Fintech DevCon. I think it was maybe the first year that DevCon happened. I'm a huge dork for behavioral psychology and seeing like, oh, here's a user's behavior and here's how a fraudster behaves when they just copy paste the SSN versus an actual human that types theirs in pretty quickly because they haven't memorized. Fascinating, huge light bulb moment for me. This presentation Soups gives where he walks through some of these actual fraud behavior differences are just mind blowing, fascinating stuff.

Simon Taylor:

The crazy one is fake investment advisor scams are the number one form of scam, and they usually involve something in crypto. So whether you're one of the largest banks or whether you're a retailer, there's probably some kind of impact on you at some point from this, whether it's a data breach or whatever else. So having a lot of crypto companies and having somebody that worked in crypto is very, very helpful for that. It becomes like this risk point that's the center of everything.

And of course, fake investment advisors, one of the most common things they do is install remote screen sharing software, and you're targeting elderly or it's business compromises as well. Oh, tech support issue, don't worry, install this any desk team viewer, we'll use Microsoft teams. And detecting that is still incredibly poor, but the little things you can do looking at the way the mouse moves, network traffic, etc., to be able to detect remote screen sharing is a game changer. And it makes a massive, massive difference when that's the number one source of scams in most countries that you can make a difference there. So yeah, I love working in the company because it's like seeing all of this from behind the scenes and the things that we're not allowed to say I get to see, but I'm like, oh, I really want to say that.

Reggie Young:

Yep. Yep, in due time, hopefully. But yeah, speaking of your work at the company, so what do you do beyond just amazing, insightful newsletters and tweets and all that stuff?

Simon Taylor:

Anything written that comes out of the company is usually my purview, but a lot of it is also prepping the organization to be able to produce its product marketing, to be able to produce its outbound messaging and go direct to different campaign groups. So it looks like content marketing plus plus, and then also acting in a biz dev capacity. I act as like a hybrid salesperson slash- because I was a founder of a little company called 11:FS. I've worked with some clients. I've done a few sales. So I act in that capacity as well. So I'm kind of boots on the ground here in the UK, meeting some of our largest prospects and clients, door opening, and generally trying to bring that as close to the organization as possible, as well as working in a traditional content marketing side, but I've never done content marketing before.

And then a lot of it is just problem solving and whatever comes up in a start-up, you know how that goes. So it's a real mix. If you see it written, video, audio coming out of the company, if you see a presentation on stage from Mr. Soups Ranjan, behind the scenes, there's a lot of help going into that. I find that so fun. Collaborating with folks like Soups, getting his raw ideas and trying to bring those to life is really fun.

Reggie Young:

Yeah, no, totally. I love how you kind of frame that too of how do you communicate what the product does and what it solves. At the end of law school, I got a little bored of law school classes, took a few of the MBA classes. One of them was marketing. And I loved the first lecture, like totally reframed marketing, the marketing function for me. The professor was like, this is not about SEO optimized ads. This is about how you communicate the value you have to the people who actually want that value but don't know it exists. That was a huge light bulb moment for me and part of why I've-

I read my own newsletter for a while, like this podcast, you have to be able to communicate your value. If people don't know you exist, then nobody's going to come buy this awesome product that genuinely makes their life better. So if you were like, fighting fraud is an easy concept, but then there's actually a lot of nuance and complexity that you have to be able to distill so that fintech who benefit from it actually understands that like, oh, working with Sardine is going to save us X amount of dollars and pain and headache and friction, and this incredible solution that we could spend years building ourselves, but it doesn't make sense to because it's already been built by somebody, by a whole team of great folks. You know what they're doing.

Simon Taylor:

The problem you've got especially in fraud and anti-money laundering is that two different worlds, the buyers think in two different languages. And actually, it's kind of common in fintech companies for those to be kind of the same people, like your head of compliance is thinking about fraud. In the world of traditional financial services, they're just night and day. And they have different incentives, different KPIs. They're different, I get it.

But fraud is a predicate crime for money laundering. What starts out looking like fraud could actually be mule activity and it could be something else. So I kind of need it to be the same data or I need it to be the same platform. I need to be able to react when something new happens. So it can't be the case that I have to start a project with my vendor to get a new rule in place to catch this particular thing that started to happen from this particular crime ring. I have to be able to do all of that myself.

How do I communicate all of this stuff that the platform does? There was a great quote by Logan Bartlett when talking about Ramp, which is I've never seen a company whose feature velocity makes it so incredibly hard to communicate to customers the value they bring. That is my riddle, my friend, because if I were to tell you what Sardine does today, by the time this airs, it will do more. And so it's from that school of like the nature of, I think, reacting to a new crime ring. Anybody who fights fraud day to day, anybody in the fraud squad is like, got to do something right now. I've seen Soups over a weekend, big event happens in the industry, and he's on there and he's writing Jira tickets and he's trying to get stuff into production. It's crazy to me.

Reggie Young:

That's amazing.

Simon Taylor:

But also, I can see that being intimidating first day on the job, the CEO's assignment. But it's from a good place. Fundamentally, the nature of risk management is reactive. It's like that new threat occurred, now what do we do? And I need to be able to move quickly in order to be able to do it. So how do I communicate that in a consistent way? And I think, honestly, a lot of it is to not fight that. It's to communicate the new thing and play the dopamine social game. So a lot of what we do is new fraud just dropped. Here's this typology. All right, actually, technically, a scam is not a new idea, an IRS scam is not a new idea, but this is what's new about it. By the way, here's what you should do with that. Here's something you can use in your day job, which is what Eduardo says was one of the things that really stood out about Sardine is we break that taboo of not telling you how to catch the bad guys. We're not going to give you the whole game away, but why? They're telling each other how to be bad guys. Why don't we tell each other how to catch them? How much are we-

Reggie Young:

Right. And they're going to be using different tools in three months anyway. So if you tell them how to catch the current trench of bad guys, there's going to be a whole new version in three months.

Simon Taylor:

And you're going to have to react faster. So it becomes this constant game of moving faster than the threat and moving together with it. So the Sardine metaphor actually really, really fits that sort of, we all move as quick as possible and have to pivot.

Reggie Young:

Yeah. I love hearing the endless plays in the name. They're great. Love them. What led you to join Sardine in the first place?

Simon Taylor:

I actually met Soups not long after- funnily enough, I had a family member lose a lot of money to a scam. I was in a position where I was sort of thinking about what was next anyway. And I was at Money 20/20 in Las Vegas. I just had this phone call a week or so earlier where this family member had lost a good chunk of retirement savings to this fake investment advisor scam. And a good friend, Angela Strange, introduced me to- well, didn't introduce me. I was meeting with her to just brainstorm some stuff. She's lovely and really fun and enjoys brainstorming. And she brought Soups along, and we just ended up chatting, didn't think anything of it.

But then through one way or another, I think I was talking to a couple of friends and taking some career advice. Soups figured out that like, hey, Simon might be thinking about his next chapter. And he reached out and said, would you have a chat with us? I was like, sure. So I had this chat with him and he immediately- this is so Soups- here's our gone calls. You can see all the sales. Here's our pipeline. Here's everything, just full transparency. And I'm like, whoa, that's amazing. I'd never experienced that from anybody else I talked to. Wonderful people I did speak to, but that was just different.

The second thing is he showed me how this auditing platform even back then would have detected the specific scam that my family member suffered from. And I was like, if I'm going to leave something that I helped create and found to go to the next chapter to figure out what's next, this feels really right. How can I pour attention on this? Because we were in the pandemic, fintech volumes were skyrocketing. As a student of embedded finance with 20 years in financial services behind me, I knew that digital account opening already had a fraud problem. This was going to get a lot worse as a generation of people came in. I had this lived experience behind it. How can I actually do something that pays the bills, that I really like the people, but I can actually make a difference to the industry? Because this is going to go wrong. I have to pour attention on this. That's exactly what my motivation was.

Reggie Young:

Yeah, I love it. I mean, you and I chatted in our intro call about this a little bit, but I'd known of the Privacy.com card before joining Lithic. And then since joining, every time I go back to visit my parents, I ask them if they've signed up for it yet, because I'm just so worried about them getting scammed, especially with being on a podcast and somebody can easily rip my voice using AI. I've had a lot of conversations with my folks about, you gotta be smart with this stuff and be careful. And are you using privacy cards yet? Because I really want them to because eventually there's their info. I'm sure their info is out there, like my info, definitely.

I've had experience of having breaches. Lord knows, probably all Americans, all citizens, their, whatever, government ID numbers or whatever IDs are all out there on the dark web. I find it mind blowing that the credit scores in the US are not default locked. I have mine default locked because I've had my stuff stolen. But that is such a different era thinking. In my opinion, they should all be default locked, given the amount of crazy fraud, given all the digital avenues there are nowadays.

Simon Taylor:

100%. I know a lot of fraud operators now consider it a negative signal if your data has not been breached, because it probably is a synthetic identity, like hasn't this data PII appeared in a breach before? That's really weird. It probably should have, especially given its links to this, this and this. This name doesn't match this SSN. And also, this email is really, really new, and they've just created it on Proton Mail, and it's only two weeks old, or it's actually two years. Everything's triangulation of these things.

And so much of it is, as you say, built on this legacy understanding of what risk is, and it's built on platforms that you can't possibly change. And that's incredibly frustrating, right? You've got to operate within the realms of what you can change. The safe words are getting more esoteric. Now imagine if your job was in part hunting for esoteric fraud patents to inform the industry about via the company you work for. Yeah, you get reasonably paranoid about that stuff. But a lot of it becomes about that you will be compromised, how do you recover? You will be compromised, so what do they get to take once they get through the door and how do you minimize that? This is a different way of thinking.

Reggie Young:

Yeah, it seems paranoid on a daily basis, but over the span of five years, it's not so paranoid when you consider it's going to happen.

Simon Taylor:

No, see, I had you down as a prepper. You're going to go hide somewhere and do all that.

Reggie Young:

Okay, so we talked about why you joined Sardine. Even one step further, how'd you get into fintech originally? Because my understanding is you really didn't start out in fintech. You didn't really start on the content marketing side. So what's the Simon Taylor origin story?

Simon Taylor:

Yes, I did leave school at 16 because my dad put a job application in front of me for a software engineering job. I was going to get into video gaming, as you probably see behind me. Video gaming was always my passion. It still is, even though as a dad of two, I rarely get to play anymore. That was my route there. And my choice was do this now at 16 and then figure out where video gaming is from the telco that I worked for at the time, or complete school to 18, then go to university and come out with a load of debt and then figure out if I can get a job. Even at 16, I was like, this seems like a good idea.

And actually, what I was doing in that day job was taking stuff that existed on a mainframe and publishing it to the dotcom, so screen scraping, effectively, which turns out, in retrospect, to be a really useful grounding in all of financial services. Everything is dealing with flat files. It's dealing with mainframes. It's screen scraping, and it's like, this could be handy someday. In 2007, I was diagnosed with testicular cancer. Touch wood, I was really, really well and healthy, caught it super early, so I had surgery. But during recovery from that, I decided that I wanted to go try something else, and traveled. I took a big redundancy package, learned a bunch of stuff.

And I was always into whatever was new, Twitter was just coming about, and playing and experimenting. And in the end, I had to get a job. And I got a job working for a payments company.

Payments company was TSYS in the north of England. Whilst I'm scrolling on my Blackberry at the time, this is how old I am, I read about this start-up that Jack Dorsey, the founder of Twitter, is launching called- I think it was Squirrel at the time, later became Square. And I emailed to the CEOs and the C-suite. And instead of firing me, they created a job for me as head of innovation.

Head of innovation job was to come up with new products, sell it to the first client and hand it to the sales team. First product we did that with was a mobile banking app in 2010, which ended up being the second mobile banking app in the UK market. And a lot of that came down to, well, I understood the mainframe, I understood the vendor, I understood mobile, I had just this experience that meant, wow, in the land of the blind, a half good software engineer is really, really valuable, especially when you're in a commercial position and reasonably articulate.

And if you've ever dealt with Capital One, they brought 30 people to a room with just me in it, and it was terrifying. But I learned so much through that process that I was then able to move on to work at Barclays where I was involved in payments change and mobile delivery on the Barclays side, working on their Ping app, corporate banking, getting closer to faster payments, SEPA implementation, PSD2 implementations, then went on to the founding team of Barclays Rise, which some listeners will know about, that brought companies like Alloy and Chainalysis through its programs in New York, we had an office in London, and then was briefly head of crypto R&D for Barclays, which when you're head of crypto R&D at a bank, you get pulled up in front of the regulator and every risk person internally expected to be like, explain this stuff to me, like, tell me how this changed my job. And that becomes a useful skill to have if you ever fancy yourself as a rinky-dink blogger or newsletter writer.

And in 2016, I was sort of getting a bit frazzled with the internal working at a big bank. Had done it, had implemented change inside of a large bank, had worked at a vendor to a bank. But these consultants kept telling us what to do, and I was like, oh, we can go challenge them. So I joined David Greer and Jason Bates and co-founded 11:FS. And the idea there was could we build a challenging consultancy. And fast forward a few years later, 11:FS has built digital challenger banks around the world. But it really got popular for its Fintech Insider podcast, which went on, I think, to be formative in a lot of people's journey in fintech.

Reggie Young:

Including me. Great podcast.

Simon Taylor:

And then that brings us up to joining Sardine many years after. And 11:FS as well, the education continues because I'm working with everybody from Grab Financial Group, to some of the largest banks in the world, to tiny start-ups, to everything in between. It was a phenomenal experience.

Reggie Young:

Yeah, amazing journey. It's funny how so many folks in fintech just unintentionally sucked into it by working on adjacent problems and ended up realizing the payments piece was the hardest part of the whatever product cycle to figure out and then just going deeper and deeper and deeper.

Simon Taylor:

Yeah. I think, consistently, I've been willing to be wrong and have egg on my face. And it still happens every single week. And people keep calling you an expert if you publish your thoughts, but I'm just thinking in public and willing to be wrong very often, because the fastest way to be learned is be wrong on the internet. Wow. They find you and they tell you how you're wrong. And it's like, great, I learned, I got better a little bit, but maybe I can help people with this.

Reggie Young:

Yep, no doubt. Willing to be wrong publicly is definitely a superpower. So when you sit down- I want to dig into your writing a little bit. When you sit down to write, who do you have in mind? Who are you writing for?

Simon Taylor:

It actually started as- the reason I called it a weekly rant is there's a little bit of everybody that always told me that I was wrong. When I worked in the payments company, I remember buying- I think that's where it started. I remember buying four Facebook shares at IPO, and everybody around me thought I was absolutely stupid. I still have those four shares. Disclosure, never made it very rich. And then I remember being suggesting that this PSD II thing is really going to be a big deal and open banking should be a thing, and the Stripe thing is going to be important. We should do something along those lines and be pushing for it. And looking back rationally on it, that kid was correct, but that kid didn't know how to move that organization or whether that organization was ready for it. But still, the chip on the shoulder is there.

So that's kind of the fuel now. I think that everybody in the industry in some way, they all have that like, oh, if we could only, and that's my energy when I'm writing. It’s like, oh, could we, what if we. On the other side, though, the audience found me. And I think the audience is founders and operators in fintech primarily. In fact, I divide it in four: founders and operators in fintech, people working at a bank who want to do their job better or do it in a more tech-savvy kind of way, regulators, small but consistent, and then VCs, as you would expect, founders, managing partners. That's almost there.

By volume, I would say that it's almost an even split between banks and the fintech companies. Whilst I generally, I think, speak the language of fintech and to fintech operators, I also have worked at a bank for a long time. And I know how hard it is to get things done, and I will poke fun at it but in a way that we would have poked fun at it whilst we work there. A lot of people who work in banks reach out to me and go spot on. That really resonates.

And then really, I'm trying to be provocative but fair. If I'm calling something out, yeah, I'm going to call out, but I'm not doing it to grandstand. Maybe it appears that way. And it is theatrical, it's fun, but it's meant to be fair. And I work pretty hard at that. And in fact, if there's any criticism that bothers me, it's when somebody has perceived what I've written as being unfair, and I read it back and go, yeah, I can see that, actually. That's the thing where I'm like, yeah, okay, didn't live up to my own expectation.

Reggie Young:

Yeah, interesting. I like the point about people like to gripe at banks being slow. But either when you've worked at a bank or been in fintech financial services long enough, you realize that there's usually a reason for all of that. So it can be over the top, it can be overkill, it can be just slow culture that doesn't want to change, but a lot of times, that's intentional. It's not a bug. It's a feature that these decisions can take some time.

Simon Taylor:

It's a feature, not a bug, but it's not the most useful feature. It's like short-term beneficial, long-term opportunity destroying. If you don't care about destroying opportunity because you're already huge, fine. I don't think Jamie Dimon is terrified. But weirdly, he's the only one that's come out and said he's shit scared of fintech. That, to me, speaks a lot to their overall success as an organization that like, they are actually constantly chasing their tail and trying to get better. As an organization, it's an oil tanker, but they're trying to turn it the right way and they're trying to do the right things, whereas there are other organizations that will internally laugh about not being the fastest land animal. That's the culture, is to just accept it. And there's a few people that want to make it different, but they generally stand out because they do. That is the path to erosion.

Unless you can build a balance sheet that's so big it's going to create its own center of gravity. If you're a regional bank, that's existential because if revenue growth and your profitability growth is less than inflation in real terms, you start to look like an M&A target. You start to look like people who are keeping the seat warm until the thing got acquired. And if that's what the exec team wants, it's what the shareholders want, then credit to you. But I think there's a lot more ambition in this world to make financial services better. And for those people, I think as a large institution, there's an awful lot you can learn from fintech. But as a fintech company, my goodness, there's a lot you can learn from how banks do things, but also more importantly, why they do it. And I think from first principles, why did they put that process in place that really annoys you. If you understand that, then you can have a conversation.

Reggie Young:

Yep. No, this is part of what makes me so excited about the movement we've seen in the past few years of banks like Column and Lead in the US, where it's like they're coming in with the bank perspective and understanding the importance of slow compliance things, but also pushing the boundary of innovation and opening the doors for a lot of awesome stuff that is going to create a lot of competition in the bank space, a healthy competition, not overly risky competition. So I'm excited to see that trend continue.

Simon Taylor:

Just on that, actually, I think headless banks are where embedded finance ultimately goes. There will be banks that have branches and everything else that have a headless bank division. But if you look in the UK, like Clearbank and Griffin, there's a handful of others that play that side, they have done far better in embedded finance in a market where there's constant pressure on interchange and any sort of fees from payment is just non-existent. All payments are instant, so what do you do? Well, you build a balance sheet, and you build a bank, and you do it with all of the governance of a nationally chartered institution. But you do it as a programmatically brand-new, tech-savvy business.

I often say, and I think few people have said, Nubank appears to be one of the best run technology businesses in the world. That just happens to be a bank. That means they have a whole bunch of responsibilities that come with it, but you can build the way you would implement the controls that a bank has to worry about from first principles, knowing what modern technology could do if you were a bank and you have that ability. It's very different to how you would layer infrastructure over the top of it and try and chisel away at the regulatory kind of just laser beams in a heist scenario that you've got to do to get anything live when you're layering over the top of a bank.

Reggie Young:

Yep. That's a great segue. So Nubank, I think if I remember correctly, you've mentioned that you think that something like a new bank would not be possible in the US. Am I remembering that correctly? What's the thesis or rationale there?

Simon Taylor:

Yeah. As we record this, I hadn't published it yet, but it'll probably go next weekend, so listeners might hear it soon, which is I was puzzled by the fact that there is no new bank in the United States, right? There's Cash App, which is really big with 24 million monthly actives. And there's Varo that's got a charterm and there's SoFi. There's Chime, obviously, with 7 million monthly actives. These are not nothing. These are great businesses, phenomenal businesses. But neo bank as a term in the United States very much means no fee, no cost, targeting the subprime, the lower-income population. And that's not what Nubank- well, it is a big part of Nubank, but it's not what makes Nubank what it is. And it's certainly not what makes Monzo what it is. It's certainly not what makes Revolut what it is.

If you look on the global stage, the biggest neo banks outside the US are not necessarily just doing that. They're playing all across the mass affluence spectrum into the [inaudible], the 40-something that's got too little time and too little cash flow dealing with cost of living issues. And that is the prime segment, the window that the large financial institutions love to say that they have all to themselves. They're getting the direct deposit. They own the mortgage. That's their customers. Yeah, you can play in subprime and it's a little bit risky and have at it, go crazy. But why isn't there somebody that plays across that consumer spectrum in quite the same way in the US? I think there's a bunch of reasons for that. The US is fragmented. Like I said, the regulation is just this laser beams in a high scenario where just trying to figure out how you get live is half the job.

Reggie Young:

Such a good analogy.

Simon Taylor:

There's a whole bunch of issues. But some of it is just nobody's stuck the landing on nailing that mass consumer play for better money management. And I have some hypotheses of what you could do and things you could try, and I know there's lots of organizations trying. So some guy saying it doesn't mean you can go achieve it. But yeah, it really tickled me that the experience I have with Monzo is I've run my joint account there. I can see my mortgage in there. I can run my personal account through it. Any payment anywhere just works and is mostly free. I can aggregate all of my other accounts in there. It's my daily driver in every sense. And I can see my pension in there. I can also manage stocks in there.

SoFi will tell you they do all of these things, but they don't have a third of the adult working population as customers. Monzo does. They don't have the deposit base of some of the bigger banks, but Monzo will get that because they're gradually eating share of wallet and they offer a credit card. I think that experience just feels like it's missing. I mean, correct me if I'm wrong, but I just don't see it.

Reggie Young:

No, I think it is such a foreign concept to me as an American to think about. I can see all this stuff in one place. That's possible. You can see some of those things bundled in one place. There definitely are some banks that do that sort of stuff but not to the same degree, not with ubiquity and ease of use that I think you see in Monzo.

Simon Taylor:

It's about sticking the landing. It's funny. When I spoke to Immad of Mercury, the most requested feature was founder accounts and personal accounts. Because actually, if you look at the spend management side, like Ramp and Mercury and all those guys, they have great products. And if you could just have those in your personal life, could you imagine how much better you are potent? There's platforms like Lithic, there's many others that would let you build these amazing products. It's not a technology execution issue. I think it's something about go-to-market and something about timing. It's something about proposition. It's something about what problem do you solve for who and how. And so maybe the times now, because I think this cost of living thing is the white elephant in the room. It's hidden in plain sight. It's right there. Everybody in the middle class is feeling it. Go nail, go stick the landing on solving something for that. Yeah, I think there's something there.

Reggie Young:

Yeah. Earlier you mentioned the fragmented regulatory framework in the US. Putting my lawyer hat on, I think that that can be a huge driver to write. I've worked in commercial lending at Bluevine, now in cards at Lithic, and those are very deep regulatory areas that you need to know. And the prospect of me also working at a company that does mortgages or other things is just mind blowing. It seems like a whole different field of play that knowing cards doesn't necessarily give you strengths in dealing with mortgage regulations and all that fun stuff.

Simon Taylor:

The platforms now exist to whereby you could let that be somebody else's problem even if you had a call checking out. The question is how do you monetize that flywheel and in what order. Because you could build the product, but how do you monetize the flywheel? I think just being really thoughtful about what's the first problem I solve, and then what's the adjacent possible problems I can solve, and how do I work my way through those to gradually own share of wallet over 10, 15 years of somebody's life, that's a long-term horizon proposition thing that probably doesn't fit inside of a VC pitch very neatly, but actually is the critical thing.

Reggie Young:

Yeah. Would love to circle back to the headless banking in the UK, because I know you are sometimes referred to as the ghost of fintech future given that you have this UK orientation. I'd love to hang on that for a little bit, maybe as our last topic. Coming from the future of financial services in the UK looking at the US, what are your lessons as the ghost of fintech future? Where do you expect the US to go?

Simon Taylor:

The first obvious one is open finance regulation is not all upside. Actually, it caps opportunity. So whilst everybody is annoyed at the conversion in open finance, and it's not effective enough, and 60% of the time, it works every time, open finance doesn't solve that. Having regulated open banking in the United Kingdom means we have open checking. I can see whatever I want so long as it’s checking account through regulation from anywhere. Doing anything else requires the exact same as the US. That's extreme. It remains an extremely hard problem to solve.

On the headless banking side, you then have to figure out how do you build a business that is sustainable as a fintech company getting closer to the customer or closer to the mattered ones. The forces are really pulling you towards do you want to own a balance sheet or own payments infrastructure, and do you want to be like a scale player? It could be either. You could be the payments part of a bank, or you could be the classic JPMorgan payments. A very big part of that bank is moving towards APIs. And understandably so, but who's the headless payments bank? Well, I think about a cross river moving towards payments a lot more, but also they're on the balance sheet side. But who's the pure balance sheet bank? Who's the JPMorgan balance sheet or Fortress balance sheet?

That's actually a much harder moat to crack and build, and who's intentionally, thoughtfully building balance sheet with all the different products. That's what drives you down. There will always be unit economic challenges with intermediary layers unless they can add meaningful value into the stack. I don't know what meaningful value you can add, especially in a market where the interchange fees and the payments fees are capped. And inevitably, there is a race to the bottom on the fee revenue from payments. So if you buy that principle, it's a matter of time until there's real margin compression at any level over the top.

There are lots of people with a balance sheet with payments capabilities that might need solution providers, and that's a path that many are taking and that makes sense. But as a financial institution, what's your go-to-market for headless banking. You're always the ones with the economies of scale. You're always going to be in that position, and you own the risks, so how do you productize it.

And then having interviewed Ramp and Mercury and many others on the Fintech Brainfood podcast, the thing that really stuck out to me about the Eric Gleiman thing was, there is now a fintech infrastructure API provider for just about everything. The competitive differentiation is how do you put them together to solve a problem for a customer. So if you're in fintech or broadly, that putting it together part thoughtfully is where you see the difference between Monzo with 10 million customers on a path to IPO, Starling doing well, Revolut with 45 billion valuation. Revolut is now valued higher than Lloyd's Banking Group, one of the big four banks in the United Kingdom.

Now I know valuation is different and there's a whole bunch of caveats that we could litigate today, but that's meaningful. That's really, really meaningful. And they rely a lot on a network of partners. They only just got their banking license, for instance. There's a lot of it is in-house built, but they were blitz scaling. So there's a lot of partnerships under that. So you're getting closer to the customer, you're getting closer to the metal, you're building balance sheet and payments headlessly, or you’re building customer experience. Therefore, how do you position yourself? Because the last place to be is stuck in the middle.

Reggie Young:

Yeah, I love that. There's folks who often talk about the API is all the way down concept, right? Often admitted is this like, you actually have to execute and be strategic and thoughtful on how all these APIs are weaved together. So I love that. Love that discourse.

Simon Taylor:

Start-ups are like fractals of different APIs and SaaS. It creates this interesting challenge for which SaaS platform do I use nex. But there's an operating system emerging in a stack for sure.

Reggie Young:

Awesome. Well, Simon, thanks for coming on. This has been a fantastic conversation. You mentioned the Fintech Brainfood podcast, which folks should go listen to. You've launched with an awesome slate of founders, tons of insights in there. I've loved listening to all those episodes. Folks, I'm going to guess, all of our listeners probably subscribe to Fintech Brainfood already, but if they don't, they should. If folks want to learn more about Sardine or get in touch with you, where should they go?

Simon Taylor:

Sardine.ai. Check out the website and tell me if we did a reasonable job of explaining it. Mark my homework. You can find me on LinkedIn, Simon Taylor, or on Twitter, @sytaylor. I will never call it the other thing. It's still Twitter to me.

Reggie Young:

I'm also in that camp. It's going to be Twitter till the day I die.

Simon Taylor:

I'm just staying on that side of the fence the whole way through. And people should- if they've not told everybody they know about the Fintech Layer Cake podcast, just go out and do that and leave a review. You have no idea, as a veteran of fintech podcasts, how much that boosts downloads. So if you've enjoyed Reggie’s work, please leave him a review right now. That is my request.

Reggie Young:

That's hilarious. I love that. We were just talking internally about doing a push for asking people to review. So this is perfect. I don't need to coordinate that social media push. Now you did it for me.

Simon Taylor:

I will say it on all of my platforms when this thing comes out, because I have seen the analytics, my friend. It's incredible. We should do a podcast about podcasting and B2B at some point.

Reggie Young:

Yeah. I would love to.

Simon Taylor:

I think there's something to be said for that.

Reggie Young:

Yep. Yep. A lot of interesting stuff there for sure. Awesome, Simon. Thanks so much for coming on.

Simon Taylor:

Anytime, my friend. Thanks for having me.