This episode of Fintech Layer Cake podcast features the tech-forward fintech sponsor bank Column and a primer by Nick Rasines on partnerships. Listen to the show on iTunes, Spotify, or your favorite podcast app and find the transcript, below.
Intro
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 Nick Rasines from Column. In case you're not familiar, I consider Column to be one of the most tech-forward fintech sponsor banks out there. One of Plaid’s co-founders, William Hockey, purchased the bank in 2021 and rebuilt the tech from scratch to be developer focused. At Column, Nick leads the cards business and also oversees a number of the bank's strategic partnerships. Partnerships is a crucial role not just for banks, but for fintechs too, and we'll cover why in the episode.
I'm also excited about this episode because it’s co-hosted by one of my colleagues, Alli Nilsen. Alli is our Senior Strategic Partnerships Manager and oversees all of Lithic’s relationships and projects with banks where, for example, we provide card issuer processing services for a card program that partners directly with the sponsor bank.
From the way Nick talks in our conversation, it was clear to me that he knows how partnerships need to think about all the various considerations they face working in a highly regulated industry. I loved his primer on what the partnerships’ function is, and I thought his discussion with the common misconceptions he encounters will be particularly useful for fintech founders and operators.
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.
Full Transcript
Reggie Young:
Nick, welcome to Fintech Layer Cake. Excited to have you on the podcast today, and also excited for my colleague, Alli Nilsen, to be joining to help co-host. Nick, I think probably the best starting place for this podcast is the basics, the kind of 101, about partnerships, your function. What is partnerships? What should folks know about it if they don't have any understanding or background working with partnerships folks?
Nick Rasines:
Partnerships, in my mind, varies a ton by industry, by company, by product. But in its basic sense, most generic sense, it's people working with other people to actually deliver a product or service. I've seen everything from like Salesforce, working with like an Accenture from a CRM implementation project, through like AWS selling something like Segment through its marketplace, or even somebody like Meta, like Facebook, using Twilio APIs to deliver WhatsApp messaging. At the end of the day, those are companies coming together to either combine products from an integration standpoint, or combine delivery, and so working with another party to actually come to deliver that product to market.
I've led teams on both sides of that from a technology perspective, working with integration partners, white labeling, that kind of thing, and then as well on the channel side and the go-to-market side working with service partners or resellers to actually deliver that product to market. Some of these relationships are relatively formal, so you think of ones where it's really well documented, or used like a white label like an OEM-type solution where it's really well documented, there's major reliability, long-term nature. There's a lot of, I’ll say, intertwined nature in the way that that business goes to market together. And there are things that are super informal, so referral relationships, service relationships, where it's like, hey, we want to be top of mind for you and build trust that way. And so it really does vary super dramatically.
One of the things that I think a lot about with partnerships is that partner life cycle. I’ve spent a lot of time thinking through what partnership strategy, what good partnerships look like. And it's everything from identifying what is our product and who's going to use our products, almost like the core things you have to think about as a company, and then figuring out the partners that actually fit that kind of product and that go-to-market motion. It's identifying the right partners that you actually fit well with, go-to-market motion fits, people actually match in terms of the style of the business operating. It's figuring out incentives and figuring out aligned objectives and goals. It's actually onboarding them and training them well, because I think that's a part where partnerships tend to fall down. It's one thing to just toss something over the fence, and it's a very different thing to actually train them on a product that they aren't used to selling or they aren't used to working with.
And then it goes through the backside of that partner life cycle where there are certain relationships that just aren't a great fit. So you go, you test, you try to establish a really high-potential relationship, and it doesn't work. And so figuring out a way, and hopefully that's few and far between, but to offward some of those partners as well. I think healthy partnerships, and just to your initial question about what partnership is, it's figuring out partners that fit well throughout that life cycle and being able to create a sustainable business together.
Reggie Young:
Drilling into the angle focused on fintech and what you do, what is the partnerships’ role within fintech then?
Nick Rasines:
What I think about fintech is figuring out people who can work with us as a regulated institution to actually deliver a financial product to the market. That's building a level of trust with the partner that we're going to bring on. It's making sure that they're actually built and ready to deliver a financial product to their customers. And in many cases, it's people that are in this industry and have actually worked with the bank in the past. They know what it means to work in a regulated space, but at the same time, actually deliver an innovative solution.
So what we try to do at Column is to think about how can we deliver the regulated financial products that we're able to offer through other parties and work with those parties to create differentiated use cases. At the end of the day, an ACH is an ACH, a wire is a wire, but the way you can deliver that through technology to allow a third-party partner to actually operate and deliver that to end customers is really where we think we can succeed with our partnerships at Column.
Alli Nilsen:
I really liked that, one of the statements you made is work with us and a level of trust needs to be built in those partnerships so that you have that first life cycle of things go well, not that second one of maybe kind of churn. I'm curious from your perspective, what are the hallmark characteristics of what it would take to build that trust and work well together?
Nick Rasines:
I think a big thing is we'll call it a diligence process, but really it's a vetting process on both sides. The way that I think about this, and this is financial services or not candidly, it's thinking about, hey, is this a party that we want to work with and we want to invest in, because these are long-term relationships. There's a lot of money on the line. There's a lot of time on the line. There's an investment from a senior level all the way down that requires to stand up some of these partnerships. And that goes on both sides of the table. So we want to make sure that that party is also invested in us.
I think in my past life outside of financial services, I've seen that fall down on both sides, either the party that we thought was a great fit didn't sell into the right customer base. And so as they tried to sell our product, it just wasn't a fit. Or we weren't top of mind, we were number 12 on the priority list in terms of being able to integrate that product into existing tooling they had, whether that was Workday or AWS or whatever else. And then I've seen it fall down on the flip side where the product that we're selling doesn't resonate with that partner either. And so as they've added us, it's like, I'm not going to make enough money, or you know what, this is actually competitive with my core solution that I'm trying to sell, whether that's AWS or whatever else.
And so I think being able to make sure as you build that trust that people are transparent, that, hey, here's the product we're building, here's how we're going to market together, that people prove what they say they're going to do. I think that's a big thing that I personally try to hold myself to, is when I put my word out there, actually delivering on my word, because I think that's one of the things. Financial services is a really small space, and making sure that we actually deliver on what we say we're going to do is a big element of building trust.
I think the other thing, just from a trust perspective but overall success perspective, is just clear roles and responsibilities, so being able to outline those. Some of those are super formal written down, it's a contract in certain circumstances, and in others, it's not. And I use oversight as an example in the fintech world. We're reliant on each other in many ways. We are trusting them to execute responsibilities. And at the same time, they're trusting us as a regulated institution that we're going to be able to uphold our end of the bargain as well. I think that's a big piece that I spend a lot of time thinking about, is just how we set each other up for success.
Alli Nilsen:
That makes total sense to me. That all comes down to setting expectations and then having that integrity of following through, which all you explained is definitely leading towards a healthy partnership. Do you have examples of where things do bottleneck and what leads to those, whether personal experience or things you've watched happen that could be a good opposite side view of what to look out for?
Nick Rasines:
Yeah. One thing that I think a lot about is partnerships aren’t zero sum. I think there are a lot of relationships and I think in a core sales capacity where it's like, hey, I want the lowest price, and I do want to get up and running as quickly as possible. I don't really care, I'm buying tires for my car. It's like I want a certain level of quality. And then as long as I'm at that certain level of quality, it's good to go.
I think it's a little bit different when I think about long-term partnerships where it doesn't actually have to be zero sum. What's super important for one party actually might not matter as much for the other party. And I think particularly with banking relationships or core infrastructure relationships, I think people are willing to invest, or I would hope that people are willing to invest in a product that will set them up for long-term success. So actually setting them up and vetting products in a way that it's not, oh, it's going to solve my next 12-month problem, but instead it's going to solve my next five-year, my next decade problem.
Reggie Young:
I love one of the themes and some of your answers being you need to be able to address wind-downs and breakups. That is like a hallmark of responsible partnerships, I think. And we're seeing this a lot in fintech news right now. There's a lot of pain around that. It's something we talk about ASAP with these programs. Let's talk about what happens if you need to wind down. It's not a conversation any card program wants to have, not a conversation any fintech wants to have, but it's also a reality of being a responsible actor in the space. Before Column, you held partnership roles, like non-fintech, software-type companies. So would love to hear the comparison of how the function differs for fintech compared to those other more software-focused companies.
Nick Rasines:
Yeah, happy to jump into that. I actually want to go back to the wind-down point because I think it's a good point. I’ve never been part of a partnership team that doesn't have wind-downs. It happens, whether that's enterprise software or those financial services, whether that's you're selling through Whole Foods and you're going to get kicked out of the store. In those situations, I think a couple things that I spend a lot of time thinking about. One is supporting that end customer. If you're selling enterprise software and somebody's using your tool to communicate with their organization, you can't flip the lights off overnight, and so being able to make sure you ultimately support them to figure out a viable alternative.
And then the second point that dovetails with that is communication. It’s just making sure that stuff is well communicated, just because I think that's where the customer experience falls apart is that things are a surprise or things are out of the blue. It's really, really difficult. And particularly in finance services, we're talking about people's money. It gets increasingly important that you all communicate and do something in a timely fashion.
And then jumping into your next point as we think about non-financial services versus financial services, one of the things that surprised me a lot in financial services particularly, and banks in particular, is technology differentiation. In software, everybody's a technology company, everybody has APIs, people move relatively quickly. We're here in the Bay Area, it’s, I think, a different tempo and it's a different quality of technology. In the banking space, I was really surprised that in certain cases, the fact that most banks outsource core technology. Their actual cores weren't built in-house. And in many cases, they were the same core that everybody else was using.
At Column, we tried to take a different approach. We built everything from the ground up and built that core ourselves, which meant we can directly partner with end parties rather than relying on one of the core providers to actually help us deliver that solution. That's one of the things that we're seeing a lot in the market right now, is some of these middleware providers where things are falling apart, where the relationship with the end party was actually through a middleware provider to the bank. And I think we, from day one, have taken an alternative approach of just more of a direct relationship. And that's what I saw in non-financial services, is there were both flavors as well. There were some that were very much through another party, and you didn't really talk to the end customer as much. It was purely through somebody else. And then there were others where it was clearly that kind of a co-relationship where they were signing direct terms with the software provider and terms with the partner.
Obviously, one of the big things is just regulation compliance. It's a very different beast in financial services and something we take very seriously. We have to play within the set of laws and regulations that are out there. There's certain stuff that is just very clearly black and white. And we'd love to work with our partners to execute within that box. I think the big reason and the reason that we think a lot about that is for long-term success, regulatory certainty and regulatory stability can be a question mark for programs. They care a lot about setting this up for a 5-, 10-, 20-year horizon. And we have to make sure we uphold our end of the bargain to actually support them through that
I think the other thing that I think a lot about just in terms of oversight is you have to be a lot more involved in the long-term oversight than some enterprise software relationships I've seen in the past, where it was much more in the past, enable a partner, allow that partner to deliver a product, and then we'll sit back and make sure stuff doesn't go wrong. But there was less of a, call it, active oversight, particularly if you're selling a communication tool or a chat tool or whatever it might be. In financial services, that just doesn't work. There has to be a level of oversight. I think particularly partners that have worked with banks in the past realize that. I think that was fresh and enlightening to see. But I think folks who haven't worked in financial services, I think, are still understanding that and still obviously ingesting that, that different structure of relationships.
And then I think the thing that I spend a lot of time just in my role on the card side thinking about is cards as a business is built with partnerships. We ultimately can't be successful without the success of our partners and our end clients. Using Lithic as a great example, Lithic is a great partner of Column’s. And we have to work with Lithic, an issuer processor, and we have to work with the network. And we also have to work with that end party as a partner as well for anything to be successful. If any parts of that- let’s call it a table because it has four legs there. If any of those legs fall apart, the program just doesn't launch. I think that's why it's super important thinking about the right partners to actually set up the program. Otherwise, ultimately, Column alone can't make that program successful.
Reggie Young:
I love your point about the way you phrase that compliance and stability and oversight is not optional, because I think folks who come from a pure software background coming into fintech may look at like, oh, you have a product road map where you make trade-offs. It's like, no, you just cannot not do this stuff. I think most of the super successful programs we've seen, like the founders I've had on the podcast that built great companies, I'm thinking of Daniel Simon from Coast a few episodes ago, both at Bread and at Coast, he's talked about compliance as a super early investment and a steady investment. It was not an optional thing. I think that's a common misconception that I think some first-time entrants to fintech may have. This is not optional stuff. You’ve got to prioritize and make sure it gets done.
Nick Rasines:
Yeah, I think that's exactly right. I think a lot of the best companies are doing that. They're investing in compliance early, and they’re investing in that program early. We talked to a lot of founders who are really new to fintech and are thinking about it, and we had this exact conversation. And the best ones go, oh, that makes a lot of sense, let me go back and build that and come back to us 6 or 12 months later with actually a very robust program, and they're ready to go. And then there are others who are like, okay, you're probably not a fit for us, and they go look somewhere else. Honestly, some of those boomerang back around because I think that's the theme right now in the market.
Alli Nilsen:
Yeah. And it's going to be an interesting lesson to learn as you go through that journey. I came from tech outside of cards, and I think most of us do to some degree. And it is really interesting, like to Reggie's point on the road map of this given a choice, I'm never running around my old office talking to engineers and then always double checking with compliance, do these all the time. One thing I'm really curious, though, is from your perspective, because for me, I didn't know what I was getting into fully, what drew you to cards with Column? Because it's exciting world, I love being in it. I’ll probably be in cards and payments for a really long time, but it is a different beast for sure in a fun way.
Nick Rasines:
Yeah, I can't disagree with you on that. I'll be totally candid. I wasn't initially like, oh my gosh, cards, like that's the thing. I tried to get up to speed really quickly. And so when I was considering joining the early team, it was one of things where I had as many conversations as I could. I've talked with a lot of executives and colleagues and friends that were in fintech or had spent time in fintech. And there was one consistent thing, which was working with a partner bank was painful. It was just over and over again, it's frustrating, it's slow, and ultimately prevented them from delivering exceptional products. And so it felt like a real pain point. It felt like an opportunity, like something better could be built. And then it was how do you solve that and how do you actually build it in a regulated space.
There's obviously, I think, the range of what quality of businesses are looking for in terms of you have public companies all the way down to YC, or even like mom-and-pop merchants that are looking to work with the bank in a different way, and so figuring out what is the right way that banks operate. And so then to your point on cards, in particular, going back to the earlier point that cards is functionally built of partnerships. If I think about well-functioning card organizations, they actually rely on other parties that are best in class to actually deliver that product. And so it sits well with my background of understanding incentives, working with people and working with other parties to actually deliver something better than you could deliver on your own. That's why I was drawn particularly to cards once I started looking into the space.
I think specifically with Column, because particularly in the last three years, the market has been pretty dynamic, and there's a lot of changes, a lot of people that are looking at the next version of what a bank could look like. Column has some of the smartest people I've ever met. I've worked with some incredible, exceptional people in the past, but there were just some really, really sharp people across a variety of disciplines at Column. When I was initially looking, and we continue, most of that team is still with Column. I think it was one of those situations where I was like, there seems to be a pain point, there seems to be an actual option with people with experience. William obviously had as much visibility to the pain points than anybody. It felt like the team that could actually execute on that, from a technology point of view, from a risk and compliance point of view, from a business point of view. And so it seemed really interesting. It seemed like something I was excited to explore.
And as we've continued to build, I think the thing that keeps me excited about Column, it doubles down on the people and the quality of what we're building. I've watched our payment ops team as an example. Again, I talked about differentiation of us versus recently the banks. I've seen our payment ops seem to go to the end of the earth to fight for getting clients funds back. They're actually working with other banks trying to support our clients, where, ultimately, we don't have a lot of options to get them their funds back, but really investing in that service side of things to help our clients.
I watched our legal risk and compliance teams try and think about ways to simplify products. I think in many ways, particularly software, people are like, oh, how do I make this even more featured? How do I add more stuff to it? I think, in many ways, we're actually trying to simplify things because we want to be that building block. We want to go, hey, here's the regulated product as simple as possible. And then you can build up the stack, something really cool and really differentiated. And so it's thinking about ways that we can ultimately make it safer, we can make it more secure, but just building simple things, which I think takes a lot of work to take the complexity and simplify it down, but thinking about ways you can deliver just simple product for them.
And then I watched our engineering team. I think that's one of the groups that I've been just blown away with, is their ability, particularly within the regulatory perimeter, of delivering what, in many cases, billion-dollar businesses elsewhere. I think about our international wires business, being able to build that because we can directly integrate the SWIFT and we can do things and get access to things that other non-bank institutions just don't have access to. And I think our ability to iterate and move quickly to deliver those for clients, because we noticed there was client demand, we figured out, can we do this? And do we have the ability and the access to do this? And then you could actually go build it for them. And now we see people actually using that.
And then I think going to what keeps me excited about partnerships within Column, I think it's just a good vantage point into the broader business. Within partnerships, obviously, cards is a piece of that. But if I think about cards, on the debit card side, they have DDAs with us. They do payments, ACH wire with us. If I think of our prepaid, you're getting funds into the account, and so we see ACH wire coming in. If we're doing credit cards or charge cards, we're actually originating credit, we're facilitating repayments. And so it gives me a really good vantage point, inviting good vantage point, just to understand how people are using our business more holistically. And I think we've seen that with clients we've onboarded. So being able to bring folks on, start with one use case, and then because we can do those other products, being able to expand. I think it's just been a great way, going back to the trust point, people we already trust, we've already vetted them, they've shown the ability to scale in the initial product, and then being able to expand and deliver additional products with them.
Alli Nilsen:
It's super exciting when you get the chance to bring together problem solving, people solving, architecture from a technology standpoint, and collaborate in that partnership form to bring it to life. So really like that.
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Reggie Young:
This is all a great segue to drilling into Column a little more because I wanted to focus on Column’s journey for at least a segment of this podcast. You've been at Column for several years. You joined before the bank was really known as a leader, before it publicly launched effectively. I would love to hear about what was it like working at the bank before you were a public entity in fintech?
Nick Rasines:
Yeah, it's a good question. I get this question a lot, particularly friends that are thinking about what it was like to be at a regulated institution before we told everybody what we are working on. In many ways, I had some of the hallmarks of a traditional start-up. We got user feedback as aggressively as possible to just improve the product. We make quick iterations, long hours, a lot of work, the kind of things you would traditionally think of as a start-up. But we didn't have the luxury of being in the kind of move fast and break things type industry. It wasn't one of those things where we could just like, hey, let's see how this goes and then come back to the drawing board. It was much more, I'll say, methodical in the way that we had to approach it. And we had to really set the bank up for success being a long-term bank partner to our clients.
I remember some of those initial transactions as we actually did wires to start and we were looking at wires. And I remember, that was all processed through our new core, and so being able to log into my JPMorgan account instead of wire into my Column account. And so being able to see that actually get credited, ledgered effectively, all the data that we promised came through, and we knew, hey, we could deliver this to our clients the same way via API. It was pretty cool to actually watch that in motion, seeing that account debit on day four, and so I had seen a credit, it actually worked. And I think that was pretty validating, all the work that had gone into it, we realize this is something we can actually do and do effectively.
We took it really, really seriously thinking about initial clients we wanted to work with behind the scenes before we launched. It was really selective in terms of folks that we reached out to. Most of those were close relationships of our early team. And we were able to build, I'll say, close and deep relationships with those clients to allow them to use our payment rails before anybody really knew we were coming. There were rumors floating around, and we got a lot of questions from people, but nobody really knew what was happening back at that point. And so it allowed us to really just walk and operate it for them rather than have to deal with the broader market, I'll say, questioning of what's going on and investors and everything else. I think it allowed us to be a little bit more targeted.
That day, I still remember when we launched, everybody was fielding inbound inquiries. And it was everything from actually really great opportunities, to people just genuinely curious, media, and everything else. And it was like everybody was taking calls, which was, from a team building perspective, awesome. But it was also cool to understand what people wanted to build, because they didn't give us a pretty good viewpoint of just like, hey, this is what I'm thinking about, this is what I love to use Column for. There were things we didn't even think about, things we couldn't deliver at that point, some of the use cases, but it was really interesting just to see what market demand looked like.
Since then we've just continued to build. And I'd say that's across the products we were already offering better ways to do it, as well as new products and thinking about ways we can better support them. I mentioned the international wire side, so integrating in SWIFT, things like FedNow, as people think about faster payment options. And then particularly doubling down on our card issuing side and working on the card side, making sure that we can help our clients deliver differentiated card programs. I think we know, with that, it comes with an obligation from a risk and compliance perspective that we're able to support them. Again, going back to the stability and security of working with a stable bank over the long term, that is going to set these programs up for success.
We now support dozens of clients across a variety of use cases. They're all running on rails across various use cases. I think we had talked about it when we chatted in the past that the market right now is very dynamic. I think it's a challenging market. There's a lot of-
Reggie Young:
Understatement.
Nick Rasines:
Yeah. I think it's a nice bit of it. I’ll say post SVB, I think there's just been a material change in the market and a desire to understand how secure and safe is your bank partner that you're actually working with. You just focus on redundancy, but also just like, is it the partner that can support me over the next decade? I think within the SVB side, I remember, last March, thinking through, how are we going to support these clients and onboard everybody that is coming in? It was people calling that Thursday, Friday, like, I just need to get money out, what are we going to do? We actually looked at, how can we methodically support people and do so in a way that sets us up for success? Because cutting corners isn't going to work, or regulated banks can't do that. But at the same time, how can we mobilize the troops? Our entire team was working through the weekend, and everybody was on staff, everybody's in the office kind of thing, to make sure we could actually help those people just continue their business. Getting calls from CEOs over the weekend going, I'm trying to make payroll on Monday, what can I do? I felt for them. I think it was one of those moments where, I obviously was not in their shoes, but I felt the pain coming through of just like, I'm worried about just being able to pay my employees.
I think we're fortunate that we actually were able to onboard a lot of folks during that time. And those people stayed with us. I think it was one of those things, going back to the trust point, is we came through for them over the course of that week and that weekend. I think that resonated where they were like, wow, I never thought about [teaming] partners, but this happened, and like, oh, this is pretty interesting for Column. I think it's allowed them to take advantage of things we do differently than other banks. I'll use some of our co-ledgering capability and our payment rails and speed capabilities. I think with that, it goes back to the regulatory scrutiny point of how do we ensure that as regulatory scrutiny continues, they're still set up for success? I think some of the early decisions we made, and that wasn't popular back then, to be totally candid, things like having ledger visibility and being able to have sub ledgers, it's played out really well. I think in hindsight, that has aged well. And I think we get much less pushback on it now. So that's one thing with the market scrutiny that helps, is I think some of those things before that were friction points and we got a lot of pushback on, now are a little bit more of a commonplace.
Reggie Young:
I know Alli has some questions on this Column journey topic. But again, you keep using phrases that I love, like the whole we should flex but not cut regulatory corners. This is actually a phrasing that I've used before. It is super important to not cut compliance corners. You can move fast, you can get flexible on things. And I actually think this is where partnerships and Biz Ops, other functions, really come into play. There are always creative solutions you can do in those crisis moments. The solution is not, not do KYC on account holders. There are ways to get creative, and cutting regulatory compliance corners is not it.
Nick Rasines:
Yep, totally. That was the thing is there were a lot of folks that were pretty desperate. They were just like, we'll do anything to just get in the hands. We will do everything we can to support you, but there are things we just can’t.
Reggie Young:
It's so hard in those moments because, like you're saying, you're trying to support these businesses that can't make payroll. You're all trying to do this good thing, but there are also hard requirements that you have to comply with.
Alli Nilsen:
Yeah, it's a good fun balance for sure because you want to make sure that everyone's taken care of, but you also don't want to then put your other clients at risk by doing that one client a favor kind of scenario. One phrase you've used multiple times that I love is methodical. You've used that term multiple times in Column’s journey as well as how you guys are even currently approaching the market. One thing I've noticed in my career is product road maps are either very reactive or they're very methodical. And you can have success in both forms. I've seen both ways go well. And you guys are, from an outsider's perspective as well as chatting with you, methodical across the board for sure. How do you feel like that's played out in your client journey, like in the clients that you're attracted to or that they seek you out as well? Because it definitely changes the game when they're asking for all these things, and you're like, maybe not on our road map right now, but let's dig into it and that can change the relationship.
Nick Rasines:
I think it's a great question. One of the things before we actually launched that we identified, there were clear pain points that we could fix. And I think we thought about the core, and we thought about data we could provide and the connectivity, frankly, to the Fed and sort of what can we actually offer to our clients. And so we had a pretty, I'll say, consistent idea of what we needed to build from day one. That being said, once we build that core functionality, we do take customer feedback into account. And so we've listened to what's in the market. And those are customers that we've onboarded already, that are thinking about expansion, as well as net new market up, like what's going to help us, what are people thinking about. And there are things that I think in the market sound really sexy, and people are like, oh, we want to be able to offer XYZ. And as we talk to people, we're like, that's probably not needed, it's fulfilled by this other product.
I think we ultimately try to build building blocks for people. I think the differentiation within financial services oftentimes happens up the stack, is we try to provide the best core infrastructure we can and then allow people to differentiate above that within constraints. I think within product road map and being able to communicate what the product road map looks like and how people can plan, going back to the communication piece, is I think our team coming from software and financial services realizes the cost of breaking changes. If you, halfway through the journey, make a massive breaking change, it slows everybody down. One, it's just expensive for us to rebuild things. And two, it's really hard on partners once they're a couple of months into a journey having to rebuild a bunch of stuff. And so we thought getting those foundational building blocks right day one was really important for us to be able to then set our clients up for success.
That being said, with the kind of core that we built and allowing that is communicating, hey, we may need to change things. There may be on the margin things that need to change, whether that's unlocking new fields, whether that's requiring certain information, particularly as we think about scoping out a new product. But at the end of the day, we haven't changed the core functionality. And I think that was a very intentional move. And I think William is an incredible technologist and an operator and executive of having a vision of what is the p-zero we must have and we must not have flex on from day zero versus what are those things that do have some flexibility in our areas that we can tweak and optimize as we think about the long term.
I think the other piece, when we tend to talk about product road map, many people often compare product road map tech versus compliance and other capabilities. Don't view those as a one-to-one trade-off. I actually think you can deliver with both and have to. I think you ultimately need to deliver both. I think that oftentimes gets lost. I think to be a good bank partner, we have to execute and be exceptional across the board. It can't be like, oh, you know what, we spent too much time on risk and compliance [inaudible] to the tax kind of stuff, or we spent too much time on the tax, so the risk and compliance is going to suffer. It's got to be one piece. I think those are the businesses and the banks that will make others successful, and it's very much how we think about operating business.
Reggie Young:
Two points. The first one is I've been talking- Alli can tell you, I talk a lot internally about the concept of an MVP in fintech is different than an MVP in other industries. You can't just ship the tech in fintech and be like, this is our MVP. It's like, no, no, you need to build all the compliance functions to back it up too at launch. These can't be like fast follows, a little different than MVPs in other industries. I love your point too around advising the partners, the programs you work with on like, hey, you think it's going to work that you try to achieve x, but actually, that's not going to do. This is absolutely a pain I've seen at Lithic. It's a really tricky thing because you want to counsel them. You want to be like, hey, that feature isn't going to deliver the thing that you think- and based on our experience, we know customers don't actually think it's that important. Your card holders don't think it's that important. But you're also trying to win their business, and so they're looking at you like you have incentives to convince us, but you're trying to give genuine advice. It's such a fascinating psychological problem to me. We've definitely experienced that similar.
Nick Rasines:
Yeah. I think that's the interesting thing is, too, there are constraints, and I'll use payment limits on certain payment rails, or like domestic payment rails aren't going to work to send that thing to France. I think there are actual misunderstandings in the market. I think, Reggie, something that probably is an issue for you, like MTLs. I talked to international companies, I was like, I'm going to get my one MTL, and like, that covers me, right? That's good to go? Your state MTL license, it doesn't carry- and so I think there is just a complexity in the regulatory system of working in the US and just payments in general that I think very much gets lost depending on the company.
Reggie Young:
Yep, MTL is the number one misunderstood thing I get asked about.
Alli Nilsen:
Yeah, it's a challenging balance, like Reggie pointed out. You want to be encouraging and excited with them, but how do you balance that, especially when you're dealing with prospects of, hey, we're here to be a collaborator, we're here to support you. We might need to inhibit you slightly because you don't want to crap on their ideas in certain ways by any means, or like immediately say, hey, that's never going to happen. And I do feel that too when I talk to prospects about banking partnerships, because they'll come in with all these preconceived notions of what they need in a bank or how they want to function with a bank. And so I'm curious, from your perspective, what misconceptions do you come across the most frequently when you're talking to new potential partners or they're onboarding with you, and it's, oh, wait, this does not align kind of thing?
Nick Rasines:
Yeah, a couple come immediately to mind, and also something you'd mentioned jumps to mind, is particularly with folks that have worked with the bank before, I think they come in with expectations that are, in many cases, similar expectations to what we would have for somebody. They've invested in risk and compliance. They've invested in operations personnel. They have an idea in a scope for a flow of funds and regulatory requirements, etc. I think before new programs that are thinking to launch, look at this like a software play, and they're like, oh, I can just get an MVP into market, and like, let's see how it goes. I think we're much more of a mindset of you have to invest in that MVP for it to be successful. What that means is sometimes we're not the best fit for somebody just to test an MVP. I think in many cases, we're an even better fit for people that actually do understand the product they want to build and they want to invest in that product over the long term. That's one thing that kind of surprised me from the get go.
I would say the other thing from an expectation setting is the flexibility to change things. I think we call and try to set things up so that they are scalable. So as needs changes, scope changes, we can support them. But scope changes and needs changes do come with functional adjustments that have to happen, so whether it's changing disclosures, whether that's technical implementation details that change. I think in other situations, it's like, oh, I'm reselling a product, that product changes, yeah, maybe terms change slightly, but otherwise, we're good to go, I can sell the same enterprise software tool.
In financial services and bank partnerships, if the flow of funds materially changes, that's a different program. And so I think it goes back to the communication thing, is making sure it's well communicated upfront on, what are we building together? What is this going to look like shifting from a debit card to a charge card? That's a very fundamental change. People, I think, oftentimes just assume it's like, oh, it's software, it's going to be easy to change this versus there are operational elements, there are regulatory elements, there are technological elements. Everything changes with some of these things. I think that's one thing that I was surprised about.
The other thing, going back to the dynamic, for lack of a better term, market right now is just that things are needing to change in terms of the structure of programs, the oversight of programs. I think a lot of people are like, but my bank two years ago let me do this, why can't I do it anymore? And I tell them, one of those banks doesn't exist and the market is very different than it was two years ago. I do think sophisticated programs doesn't even come up. But I think particularly for programs that maybe haven't thought about a change or now like, I'm getting kicked off my bank, that is very clearly still a gap.
Reggie Young:
Yeah, I love your flow of funds change comment. That's the new part. That is the number one way to get just an exasperated response out of somebody who's just like, oh, we just want to make this tiny change to our funds flow. Like no, it's never going to be simple. You may need to pay additional pricing because it's going to be a whole new- yeah, you're doing a credit card now, whatever.
Alli Nilsen:
Even just the idea of maybe you need to get a debt facility. Do you have the capital to manage this fund architecture? From the outside, it’s like, yeah, great, let's get all the accounts in line. And then when you dig into the details of reconciliation, headaches can just grow left and right.
Reggie Young:
I like your point on MVPs, too, like yes, some fintech programs come in, they want to do an MVP, super lightweight thing, totally understandable. You want to test, you want to get user feedback, all that stuff. However, financial services is so regulated that, honestly, the delta of work from an MVP to a full product is like, man, you don't realize once a product is live how much of a headache that's going to be. If you're doing a consumer credit thing, for example, let's say, oh, you want to test out new fees, it's like you got minimum 45 days’ notice you got to give. This is not like we're going to test this for two weeks and then undo it. It's like, no, no, no, this is going to be a three-month process to give notice, update your terms, get bank partner consent, and then you're going to have to go through it all over again to do the next iteration. This is not a two-week MVP, get some data and move on to the next two. It's like, no, no, you're talking six-month periods with engineering resources and product and all that fun stuff, so overcomplicated I think a lot folks think.
Nick Rasines:
Totally. I think about pricing and packaging is another good example, or like working in Meta, it's like we would change buttons and we could push out promotional pricing changes and different things to try and market. I can't do some of that stuff in financial services. To your point, disclosures and other elements, it's a very different process to make changes.
Reggie Young:
I’d be curious, Nick, is there anything going on in fintech that you've been thinking about a lot lately, but you think people in fintech aren't talking about enough?
Nick Rasines:
Yeah, I think the expectation point is a big one that I think happens, in many cases, behind closed doors. It’s like, hey, these programs look the same. You talk to them, and the flow of funds is way different. And so I think there's still misconceptions and expectation mismatch in many ways. I think that's changing. And I think we're seeing people that are starting to evaluate banks pretty methodically, where they're going and they're going, hey, my shortlist of these three banks, I'm going to really that these partners and make sure these are great long-term relationships for me to build. And I think that's the right way, if I'm in their shoes, building a sustainable, large business. That's how I would approach it, is shortlist who are the folks that meet your needs, and then go through and actually get those partners.
Reggie Young:
Just a quick side note, and I’ll let you continue. I've noticed in the past six months, all the law firm blogs and client alerts that I subscribe to, the number of law firm blogs that are like, here are 15 questions to ask your bank sponsor partner, diligence and prospective banks, was not an article written a year ago, a year and a half ago. Now it's like every law firm has to have that article because it is something people are searching for a lot.
Nick Rasines:
Yeah, I think that's exactly right. I do think the best companies to realize is that this is an investment gimmick. It's not, oh, I just want to try this thing again. But to the point of selecting the right partner, the best partner is probably not the cheapest option, and they're probably going to have requirements that set you up for long-term success. And so being ready to actually make that investment in the program, I think, is something that the best companies realize. I think some folks that are potentially new to fintech don't realize. That's one that I think we're continuing to see.
I also think banks are getting more and more selective about programs, which I think is putting a lot of pressure on certain programs. I think programs is they think about being funded over long term if they're private, or staying public in many ways rather than getting the less is like long-term unit economics and actually making sure the folks they're working with are actually the right partners over the long term. So I think that's one that with the sponsorship element of a bank relationship is you can't afford to run into any sort of either regulatory issues yourself or the contagion risk associated with other programs. And so actually making sure you're on stable infrastructure, means the same way that people work with AWS or GCP or Azure, you're choosing a trusted provider in many ways. I think that's how we look at this. It's an investment of setting the program up for long-term success rather than a relationship for the next year or two, and then you're going to find somewhere else. And so I think that's important.
We've seen a lot of banks exit the space, whether of their own volition or not. But I think choosing a bank who's just starting to do this, or if you're their only program, it sounds great. It's like, oh, there's no contagion risk. We’re their only program, things are great. They can decide to just pull the plug. They always have to communicate with you. It goes back to our wind-down conversation before. But there's risk there. They may just go, hey, it's not worth it, I don't want to do this anymore. I think we've taken the approach of, this is our business model, but we are building for sponsorship and actually working with companies. But there are others who are like, I love fantastic consumer business, I'll just direct consumer business somewhere else and consumer whenever. It's like, I don't really want to work with fintech companies, and I don't want to work with other companies delivering financial products anymore.
I do think being through that vetting process, making sure it's somebody that's for the long term with you is something that I still think I hear people going like, oh, I want to find somebody that's just getting into this so I can have a lot of control, have a lot of power, whatever it might be, and that can backfire in many ways. And then I do think the environment is just more challenging. At the end of the day, it's like there's just more scrutiny. I think the best companies are going to continue to be well funded. I think they're going to become profitable because unit economics make sense. They'll work with great bank partners, and their bank partners will continue to invest in them. But I think there will be a lot of folks that don't make it, where it's just hard to make the economics work, it's hard to find a bank partner that is willing to meet their expectations in certain ways. So I think there's going to continue to be more movement in the space as we think about the next 6, 9, 12 months.
Alli Nilsen:
It'll be interesting to watch how that unfolds because I definitely see new banks entering the space that I personally talked to once that have been established for a long time. And everyone approaches it in different ways. And they're all thinking about long-term success, like you mentioned. I do agree, I think it's going to be a lot of popcorn eating over here on this side as we watch it all play out and also trying to help them make sure everyone in the ecosystem is supported.
When you think about the long term, so we've talked about that multiple times through the podcast, either success or setting expectations or finding the right partners, there's definitely an element of challenge across the board in this industry. I saw people come in super excited and be like, this was the wrong career move, I need to back out, go back to something else. And then there's other people who are addicted and they love it. What keeps you in payments, and specifically, what do you love about being at Column in your individual role? I'm really curious to know, are you that addicted individual? Are we going to see you around 5, 10 years from now? What does it look like?
Nick Rasines:
Yeah, you will still see me around 5, 10 years from now. A few things that I control for as I think about my own career and I think about Column in particular, I like working with brilliant people. I just like working with really sharp people that can make me, frankly, better. I think it pushes my thinking. And I think that comes with trust, working with smart people that are not condescending, that are going to work together. That's one thing that I love at Column and part of how I think about navigating my career.
I like working with clients on complex problems. So people come in, this is what I want to build. And it's really cool, and like, how can we get there? And I like solutioning with them. I think financial services in particular is unique in that way of there's a certain box to play in, and it's how do we solve with banking infrastructure, what they need to have solved from a regulatory perspective and from a banking services perspective, and then unlock them to build other really cool stuff for clients on top of the stack. What that manifests itself is just digging into their challenges, is going through from a scoping and discovery process and trying to understand, what are they trying to deliver? What does the customer base look like? And I think a lot of people are very unique. On the surface level, a lot of these businesses seem super similar. But in both business banking, I’ll use business banking as an example, it's like, they're offering what looks like to the market, in many ways, the same product, but then when you actually dig under the covers, the value prop varies pretty dramatically, depending on what it is you want to offer. Some cases, it's slightly different products. And in some cases, the same product is marketed in a different way, or it's scoped to a different vertical. I think that's been really cool to see.
I think the other thing that I enjoy is we're not a one-product company. There's a lot of companies out there that are just like, hey, there's one champion product, and that is what they do. I think we have a suite of products. And so I think what that creates is the opportunity to grow with clients and more than I've seen elsewhere or other places, great, they can use a little bit more of API X, there's always so much compute you can use versus here, there's multiple ways that we can work with them. And then I think at the end of the day, because particularly the card side is such a partner-centric business, we only work well if we are able to work well with Lithic as the issuer processor, and the network is able to sign off on it and we’re able to actually work with them to get to launch. It's different from the other places I've been where it's like, you sell a product, and it's like, we'll see how successful they are. We hope that they're super successful. And we'll help them with implementation, but I hope they're successful. It's kind of where it ends. Here, it's much more like supporting them through that journey, because we're ultimately responsible. This is a bank program. And so I think being able to work with them through that journey and seeing the customer life cycle, I just didn't see the same way with other partnerships elsewhere.
Reggie Young:
Nick, I know Alli and I could keep talking with you for hours, but I know we're approaching time. So thanks so much for coming on the podcast. If folks wanted to go find out more about Column or get in touch with you, where should they go?
Nick Rasines:
Check out Column.com. We have a Contact Us form there, and we respond and see everything there. You can reach me at nick@column.com. So if you want to give me any feedback or share any thoughts, you can shoot me a note directly. But overall, thanks for having me. This was really fun.
Alli Nilsen:
Awesome to have you.
Reggie Young:
Thanks for coming on.
Thanks for listening to today's episode of Fintech Layer Cake. If you like listening to the podcast, please leave a review on Apple Podcasts and Spotify to help other folks in fintech find the show. The podcast is powered by Lithic, the modern card issuer. If you're hungry for more content with hard-to-find fintech insights, check out our other episodes as well as the blogs and other information we have at Lithic.com. Thanks for listening.