Transitioning from Traditional Banking to Fintech - Dana Lawrence | #518

Join host Stephen Sargeant in an insightful episode of the Around The Coin Podcast, where he discusses Banking as a Service (BaaS) with Dana Lawrence, Senior Director of FinTech Compliance at Pacific West Bank. Dana is a global leader for governance in emerging technology. After a decade in traditional financial services, she joined the first US neobank Simple in 2014 where she worked closely with regulators, global bank partners and technology innovators to create the early fintech/sponsor bank governance model. After 10 years of leadership roles on the fintech side, she joined Pacific West Bank in 2022 to create a best in class Banking as a Service program providing concierge level service to fintechs while delivering strong regulatory compliance outcomes. She also enjoys empowering professionals globally and has provided live training to over 30,000 people since 2022 on topics such as digital assets, AI, fintech and responsible innovation.

Host: Stephen Sargeant

Guest: Dana Lawrence

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Episode Transcript

Stephen: This is the Around The Coin Podcast, your host Stephen Sargeant, and today we're talking all about BaaS. No, not the fish. Banking as a service. And who better to help us discuss this but Dana Lawrence, the Senior Director of FinTech Compliance at Pacific West Bank. It's a community bank that's all about profits, all about the planet, and all about providing amazing customer service.

We get into BaaS. How are these crypto exchanges? Cannabis companies, neobanks, fintechs, all powered by large banking institutions and banking partners. We get to understand the whole ecosystem, along with some of the benefits, but along with some of the regulatory and other challenges that these organizations face.

But Dana is not just a banking and compliance professional. She's working with VC startup companies and she's working with VC back companies. So she gives us an entrepreneurial lens of how organization and how companies and entrepreneurs with only an idea can help get capital and help get investment.

And we talk a lot about what success means. How the mindset of Dana and others are powering this ecosystem. This is a great podcast for you to get in touch with BaaS, with Fintechs, Neobanks, and crypto exchanges, all those apps that you're using. You're going to find out about the ecosystem right here on the Around The Coin podcast.

Stephen: This is your host, Stephen Sargeant, the Around The Coin podcast. And this episode is all going to be about BaaS, and not the fish. Let's talk to Dana Lawrence, who's the Senior Director of FinTech. Compliance at Pacific West Bank. Dana, give us a little bit of intro and yes, you are going to hear more of those bad jokes throughout.

Dana: Oh my gosh, I can't believe you just came right out of the gate with a Fishing pun. Stephen, I'm so excited to be here. I have been a, you know, a friendly face. You've been a friendly face for me on LinkedIn for years. You've been such a supporter. I absolutely love everything you're doing to connect the compliance community.

So I'm super excited to chat with you today. So my name is Dana Lawrence and I've been in financial services for 20 years. The last 10. I've been working on the fintech startup side. So I actually got my start in tech working at Simple, which is what a lot of people consider one of the first neobanks really kind of got this whole fintech thing going.

From there I worked for Aslo, which was a fintech for small to mid sized business. And in both those organizations, I led their compliance function, their enterprise risk management function, and kind of, acted as a chief. Risk Officer slash Chief Compliance Officer. I had a one year stop at Scilla, which was a banking as a service technology fintech aggregator.

So we connected fintech opportunities, including crypto to bank partners in the U.S. So that brings us up to present where I'm currently at a small community bank in Portland, Oregon. It's a benefit corporation for good, which means We want to be successful, but we also care about people and planet. So it's a triple bottom line of people, planet, and profit.

It makes me feel really good about going to work there. And I've been building out a banking as a service program where we really focus on creating great experiences for our fintech partners and also have really close relationships with our regulators and we want to make sure we're doing everything in a super compliant manner.

So there's my extremely long intro.

Stephen: No, that was perfect. Tell me a little bit about it being a community bank, because I think most of our listeners are based in the U. S. I'm in Canada, so we have five major bank monopoly and then, you know, maybe a couple other tiered banks, smaller banks. And we also have Credit Unions or Cassez Populaire if you're in Quebec and speak French, and I probably butchered that.

But tell me about the essence of a community bank. Are you serving a specific community? Is it around a specific trade? Is that how it started? Tell me a little bit about community banks in the U. S. Versus like what people have heard of, like the J. P. Morgans and these large financial institutions.

Dana: So absolutely, you have the J. P. Morgans, the Bank of America's, the U. S. Bank, the Wells Fargo, the super mega banks. Community banks are, as you mentioned, kind of more specific to a particular community or niche. The bank that I work at is focused on small to medium sized businesses. So we really are banking.

A lot of Portland's like most iconic brands and what that means and how we can serve them differently than a large bank is we're more in tune with the local kind of economic trends. We might maybe take a bit more risk on lending decisions. So maybe if you went into Bank of America or I'm not going to pick on any large bank, but I think the point there is we can.

Provide services that are a little bit more tailored to that community person. Also, which I'm super excited about is probably 25 percent of our business is for nonprofit and social justice businesses. So that is a super fun part. We're constantly reinvesting our time and resources. and money into these non profit events and organizations.

We, I have to remember not to like literally say our customers names are but we allow customers to come in and use our beautiful office space for their board meetings their social events. If they want to do like a networking wine and cheese type of situation, we're all about Connecting the local community.

So, yeah, that's kind of the difference of a community bank.

Stephen: I've never heard of that kind of scenario or breakdown. And it's great for the not for profits. Yeah. You know, we had Brett King on this podcast, who's, you know, prolific. You were early like him 10 years ago in the fintech industry. He had brought over moving and even on the podcast, he's just a little too early, you know, just before they needed to kind of, you know, regulatory situation has set up.

What are your thoughts from 10 years ago when you kind of entered into the fintech space and from what you're seeing now and where innovation has gone over the last decade?

Dana: Sure. Well, I joined Simple in 2014 and. It was an absolute culture shock going from a traditional bank where, you know, you would get dress coded if you were wearing capri pants, cause it had to be like a full length pant or, you know, just like very conservative.

But culturally it was a culture shock because people were so open. The CEO. Sat maybe like a couple of seats down from you and you could go up and talk to them. any executive you could go up and talk to different teams would share what they were working on. We would have weekly lunches where we would like all sit down and everyone would hang out together, engineering, customer service, marketing.

We would have an all hands talk, like people would just get up and talk. And for me to see. Like such a spirit of collaboration, like low ego, super smart, high collaboration people. It was like really a magic moment in time. I also witnessed people building technology that It just wasn't a thing. And you couldn't even come up with this stuff at a bank.

And you just have these computer engineers just doing hackathons and being like, Oh, we're going to just create this, this feature. And just here it is now, now it's a thing in the world. You're just like, wow. What is happening? One thing that blew my mind when I was there. So, you know, how you're a compliance person, you know, how you have disclosures, right?

There's a disclosure for everything in financial services. And I don't know about you, but even myself, a compliance officer, like I

Stephen: never read them.

Dana: I don't know what I've expected. Like terms and conditions of Apple, you know, whatever. But at Simple, we had such innovative people who didn't all come from banking.

So they didn't have that preconceived box of this is what's possible. We're just going to keep slowly iterating. They're like, Why does, why do disclosures have to be awful? Like they don't. Let's make a disclosure not awful. So for our regulation e disclosure, and I don't know if you have that in Canada, but it basically covers disputes.

You know, there, someone, someone bought a thousand dollars of Target gift cards. It wasn't me. Reg E governs that. But Our team, our marketing team, worked with our compliance team and our legal team and they came up with this piece of compliance art that was a reggie disclosure in a real human language with like examples and like The cute little the art director got involved in the disclosure and made it delightful.

And I feel like, you know, maybe now more people do stuff like that, but it was extremely revolutionary and it blew up Twitter and, you know, just stuff like that where it's like, why do disclosures have to be bad? They actually don't. It's just, it's just kind of the default.

Stephen: But it's not just disclosures, like even Brent King was talking about banking's bad, like the customer service is bad what are your thoughts?

You came from a big bank, we're not trying to pick on the big banks, but I'm assuming the community banks is trying to fix those gaps, right? More of a personalized service. More features, more care on the accounts that you're working on. Like I started my business two years ago. I get the odd email about business loans, but nobody calls me up and says, Hey, you know, Stephen, we see you doing this in your business.

Have you ever thought about opening up this type of an account? There's no customer service. And there hasn't been for the 25 years that I've been banking through every single bank in Canada. Why, why are they doing wrong? And maybe we can end the discussion later on about how AI and automation could probably improve that.

But where do you think the gap is? Like, why is that gap still here today in 2024?

Dana: Good question. So I will touch on what I learned from Simple and then maybe some thoughts on what we're doing today at Pacific West Bank. So at Simple, the customer service was literally legendary. I mean, we had like fanatical customers because the customer service was so good.

The tone was an informed friend and we really talked about it simple how money and finances are like a deeply emotional thing. Like no matter how well you manage your money, there's, you know, maybe there's an unexpected car repair or, you know, a medical bill. It can really kind of throw your situation.

So empathy was like woven into everything. And It was just like really intentional. Also the customer service people, I feel like had a lot of agency to be themselves. And that's a really hard thing to scale because you want to make sure, you know, especially at a large bank, that that's probably like a bank CEO's worst nightmare.

No, we want you to stick to the script and it's a risk. It's a risk. Right. But I just remember there would be like these legendary. Customer service, like interactions that would just surprise and delight our customers. And it was just very personal. That I think is almost impossible to scale. And unfortunately Simple was acquired and then they shut it down. So we never really got to see the full evolution of that. Also another thing at Simple is because of some of the tech that was built, it really worked with human psychology. It helps people save money really effortlessly. So everything was designed with that, like human empathy and all of that baked in.

And so we would have customer success stories of literally, I just paid off $20, 000 of debt. You're life changing. People would send us fan art. Like it was just, it was just a whole moment in time and Simple did that really well. Fast forward to maybe Pacific West Bank. And again, these are, these are my own sentiments.

I'm not a necessarily a spokesperson for the bank. And actually, let's see here. So what was the question again? Like, how do you get really good or how do you, how do you differentiate yourself, really take care of people?

Stephen: Yeah. Like, how do you take care of your customers? And what you said is interesting.

Cause you said it's impossible to scale. I don't think it's impossible. It's just hard to scale, right? Cause then you need to hire more bodies. You need to train more people. It's, you're in a different business. You're no longer in the banking business. You're in the training, recruiting, and, you know, growing and developing people, which that's how you scale that, right?

Where, you know, I don't think a lot of banks or even financial institutions Have the time or resources to kind of put into that model, but to your point, it's possible.

Dana: And you, I actually agree, and I'm glad you clarified that. I might have said impossible, but it's, it is possible. I think it's challenging.

And like I personally, in my career have not, you know, been able to participate in doing that effectively yet. So working at a small community bank, for instance, when let's say there is a tech company that we would love to bank, instead of saying, I want your business. I want your business. I want your business.

Give me your money. Give me your money. Can I have your money now? Can I have your money now? We're thinking more holistically of like, how can I support that business to meet its goals? Such as, do they want to use our space to host clients so that they look really good? Do they want to use our space to have a board meeting so that people feel really special and we will cater it for them?

Can we? Host an event, and I'm, these are all event related examples, but could we host an event where we are bringing in potential prospects for them? Can we give them guidance on how to restructure things? So they're saving money on fees and potentially you know, getting more out of their banking relationship.

We might, we might kind of consider them a friend of the bank, even if they aren't banking with us. And we're still going to include them. And then hopefully, just by that continued service, people are probably not thinking about changing their bank on a daily basis. But if that does happen to come up, then maybe they would consider banking with us if they mesh with our values.

Stephen: I think people are thinking on a regular basis, but the amount of effort to do it though, we're like, ah, nah, we're not going down that road. But I think we all think about Hey, anyone that's on a wire transfer is yo, I think I need to get out of the banking system altogether.

Dana: It's maybe like a values match. We're a benefit corporation for goods. So that means we have it's kind of like a B Corp, but a little bit lighter. And I don't know if you have that in Canada, probably Canada is like way better than we are in general about like sustainability, like good choices, but it, it means that we subscribe to a certain ethos.

So, it's around you know, what type of office supplies or packaging or stuff do we have? Is it sustainable? Is it recyclable? Are we trying to. Use stuffing glasses or reusing plastic cups. Like it's, it's environmental. It's also about like where we give back and it's kind of like holistic to the, the principles of you know, prioritizing people and planet in addition to profit.

So some people enjoy those values and they might be a little bit more inclined to bank with us.

Stephen: I think a lot of people are moving towards that. Everyone's very careful how they're spending their money now, especially with so much unrest around the world and wars and invasions. People are really conscious now of where they're investing and who they want to hold their money, much less who they want to bank with.

And that leads us to banking as a service. And I don't know in the U. S., but in like Canada, Europe, all around the world You can't say you're a bank unless you're as a bank. So that's always like a very touchy word, using the word bank. So tell me about what is banking as a service or a bath and like, how did it come about?

Is this something that's like kind of matured from the FinTech era or are these the, you know, services that are banking these FinTechs and allowing them to continue to innovate with access to things like capital? Use of bank accounts without having to use like shady underground payment service providers.

Dana: So, I will say that banking as a service, it means slightly different things to different people. Like I don't feel like yet has a great entry for banking as a service. it could be defined differently, but how I think about it is the ecosystem where you have a bank and the bank is the one that has a regulator.

has a banking charter and has a ton of really strict obligations, but they can offer banking and have access to the financial systems. Then you have a fintech. So that could be like, as an example, like Venmo or PayPal or any of the cool FinTech products where they're creating something regarding financial services.

They probably have a really nice technology stack, probably have a great user interface. Maybe they're doing some sort of unique marketing and they're really connecting with new populations of customers that A traditional bank might not be attractive to. And the partnership of those is what is banking as a service.

The fintech can't exist and offer those services unless it has a bank partner. So sometimes they, I'm like talking with my hands now.

Stephen: It's all right. This is a video podcast. You're good.

Dana: Yeah, but I'm really in need of a manicure, so I'm just going to keep, keep the hands down. Yes, yes. So. Sometimes the fintech connects directly to the bank if the technology is available.

And then sometimes there will be a technology middleware provider. And those are some of the companies like called Sinterra, UNIT, Treasury Prime Synapse is one that has recently been bankrupt, but those are examples of companies that provide that middleware technology. And When I was at Simple, we had a bank partner, which was at one point the Bancorp Bank, which is still in business.

And they really were an early leader in the banking as a service space. They've been going through exams since, you know, forever. They had a consent order, like maybe 2010. And then our bank partner was BBVA. So we had, you know, we were going through exams way back when. And really my early learning there was.

Even though I was on the fintech side, we still had regulators come and talk to us about what we were doing. And the expectation was, it didn't really matter if you were a fintech, if you are in this ecosystem, you still need to treat customers. The same as a bank would. You still, you know, your AML, you can't you can't just not monitor that.

All the same things that is required of a bank, it needs to be applied to the fintech. So that's kind of my early start in it. And I'd say maybe over the last three or four years, With the introduction of these BaaS middleware technology providers, it's allowed more community banks to get in the game.

And a lot of community banks are struggling to compete with the large banks and really need to like, focus on something like, Do we want to bank cannabis? Some credit unions are killing it. Like they have super good risk management programs and they're banking cannabis successfully. Or maybe they want to have a mortgage branch or trust, but to be in business and to continue to, to grow your revenue and grow your deposits.

I think a lot of smaller banks are having to pick a niche and figure it out. So there's definitely been an explosion over the last couple of years.

Stephen: And what was there before? What I used to think before is especially in Canada cannabis, crypto, fintech, small bank, small MSB you're just not gonna get banked.

You're not getting debased, you're not getting bank accounts. Is that what was happening before? And this has kind of opened up access to a lot of these You know, legitimate players, but they didn't have a proper market because they were all being balked into Oh, this is too high risk. We don't want to accept this risk.

Or like they can't afford the premium that some of these banks were levying on them. Oh, you want a bank account? Sure. Yours will be a 25 percent fee versus, you know, the, the two and a half percent everyone else's pay. Yeah.

Dana: Like the high risk, high risk premium.

Stephen: Premium. Yeah. Is that what was happening before?

Is this kind of where BaaS came in and said, okay, we can find one big bank And then we'll have all these intermediaries that can facilitate and meet these requirements for that big bank and maybe, you know, mitigate some of the risks that that big bank is taking on.

Dana: So you bring up a really good point. I feel like the early, and again, Neobank and FinTech is all, everyone has their own definition. FinTech could mean Like a debit card. Fintech could mean like the old fashioned core operating systems. Yes, that's financial services and technology. So when I'm saying fintech on this podcast, I'm thinking of it more as like a fintech slash neobank and neobank.

Sorry, we need a little like cheat sheet, a little like glossary. I think of it as a non bank that's providing financial services. For instance I don't want to get this too often in crypto, but like maybe Coinbase, I consider a fintech. I literally should have prepped like more examples of fintechs, but like any SoFi is an example of a fintech betterment for investing.

There's tons of them. I would say the wave of that kind of kicked off in 2012, 2013, 2014 was simple. And then when people saw that There was a huge demand for digital products and especially during COVID, no one wanted to be out like touching anything. No one wanted to be going, leaving their home for any reason.

So a lot of things move digitally. At the same time, venture capital was It's pouring money into fintech anything. If you were fintech, fintech startup, like here, have, have 2 million, Stephen. So I think the explosion of digital and fintech products kind of matched that rise in more banks wanting to offer those services.

So it's kind of like complimentary.

Stephen: That's awesome. And what are the biggest benefits that you can see in BaaS? Is it more for the bank to now being able to offer a wider spectrum of, you know, products, services, and technologies to some of these companies that weren't getting properly served by some of the larger banking institutions?

Or is the benefit for hey, I'm a fintech. I finally have a place I can go to and get proper and customized services from somebody that's actually dealt with another fintech versus these big banks that, you know, don't even know what crypto is and, you know, how transactions are monitored, etc.

Dana: So it's it's definitely, there's definitely benefits and then also challenges for both parties.

The benefits for a bank are that when you're partnered with a fintech in this relationship, the fintech is getting customers That are onboarded through their platform, but they're actually bank accounts owned or that are maintained at the bank. So, let's just say Pacific West Bank, for example, if I have a FinTech, all the customers that those FinTechs collect are actually Pacific West Bank customers.

So what that does is it adds deposits to the bank. And now that I'm back on the banking side, I'm learning more about like deposits and liquidity and it's, it's, it's intense. Like it is not my wheelhouse. But you really need to manage deposits. The, the people on our finance side are constantly evaluating and I don't know if you have a banking background, but they're constantly evaluating that stuff, the interest rate, like impacts if a bank can make money, but getting the deposits is good.

Getting any like fees or revenue to that we get from the FinTech, because we're taking on the compliance risk. If we have a hundred thousand customers from the FinTech. And they complain. The complaint goes to the FDIC. And to us, and we're responsible for if that customer is harmed. So we're taking on a lot of compliance risk and we expect to be compensated.

That's how the model works. Also from a bank, it just allows you to continue to grow your footprint and continue to grow your bank. So those are some of the bank benefits. On the fintech side, you can't really offer your product or service without having that licensed bank. So it really enables a FinTech to be able to do it.

Otherwise, the FinTech would have to go out and get MTLs and or a bank charter, which is

Stephen: which is not something that they want to do.

Dana: Like a hundred Stephen Sargeants, so much cash, so much time. And it's, it's, it's almost easier. And Quicker To Market to partner with an existing bank.

Stephen: That's so interesting. So what are some of these challenges that you talk about? I'm assuming you're, you have a bunch of cannabis businesses under your portfolio. I'm going to assume that you're going to need a lot more risk compliance measures, and then also like industry experts, right? Cause you can't just rely on the word of the cannabis operator to tell you, well, this is the way it works.

I'm sure you need some outside consultants to explain the industry. Is that where some of the challenges are? Are there any other challenges, especially since it's customers in the bank, the banks can upsell them and you know, they have, they hold the customer versus technically the customers.

Dana: I got to go update my risk assessment. Thanks, Stephen. I'm like, Oh, I hadn't been worrying about that. So, I just need to clarify the company I work for does not. support cannabis. I, there are some credit unions that do an excellent job. I did a panel with a gentleman from East Bay Credit Union. They do a fantastic job of that and highly specialized risk management.

So what are the challenges of banking as service? And I think at least in the U S right now, I want to say maybe 25% of consent orders from the regulators and consent order means. You didn't have a good exam with your regulator. You really, you really didn't. And it's to the level of seriousness that now it's public.

and I probably can't say more than that, but there are, there have been a lot of banks recently and recently within the last 18 months that have had public consent orders, meaning their failures during their exam process are public and the final audit report is out there for the public.

And the regulators have been calling out failures around BSA AML. So let's say you have a fintech. Steph, I love an example. So, Stephen Sargeant fintech and who's your customer base? Like what's, what's your products, Stephen?

Stephen: Entrepreneurs, entrepreneurs, creators.

Dana: Okay. A fintech for creators. And it turns out, oopsie, when we were onboarding these people, we didn't do the right KYC checks.

Me, if I was your partner bank, I'm responsible for any. Control breakdowns. So BSA AML has been a big call out failing to have an appropriate third party risk management program. So that means if I was going to partner with your FinTech, Stephen Sargeant, creator of FinTech or you can come up with a better name, I would need to do a full background check on you, your business, your policies, procedures, really understand like what risk our company's taking on by going into business with you. There's also been Regulatory scrutiny around the board of directors not fully understanding like what they've gotten themselves into. A lot of smaller community banks have been participating in making us a service yet they might not have that compliance staff on hand that really understands fintech risk, crypto risk, etc.

It's, it's different. So those are some of the key. Callouts, and honestly, reading some of the consent orders is a must read for anyone in this space because even though it's tough no one wants to be, have to, you know, go through that experience. It's really good learning for you to be like, okay, are we doing everything that we need to, like, how would we fare if we went through this exam?

So I think regulatory scrutiny is probably like the headline for challenges with. And if your partner bank gets in trouble, the impact to the fintech is that your business can be damaged. So it, you might not be able to onboard any more new users. You might have more expense. You might have to hire more compliance resources.

They're like totally interconnected. So the other challenge that I've seen is I spent 10 years working for fintech startups, partnered with a bank. And I noticed that the culture between people who work at tech startups and banks is very different. Like I see you smiling can you, you know, you can imagine, right? And it's not that like anyone's better or worse than it's just, it's completely different So a lot of times a tech company is Like a month matters.

A quarter is like a lifetime. If you can't get something done quickly, you ha you're going to go out of business. You are completely fixated on growing. Your pace is just rapid. There's no there's no excuse. You just have to get stuff done. Whereas a bank, the focus is maybe more on stability. And so there's that pace discrepancy.

I don't think. A bank is ever going to understand how much pressure a fintech is under to ship and deliver. And then on the other hand, I don't think someone at a fintech ever understands how precious that bank charter is and how much you're going to fight to not have compliance problems. Because once you have compliance problems, your, your whole business is going to, is going to be slowed down and potentially destroyed.

I also think that Yeah, those are kind of the primary things, but I think the the communication can break down between the two parties and it can lead to outcomes that are not productive. And one thing I've really focused on with my current program is, you Having really healthy and transparent lines of communication with the fintech.

Now that I'm on the bank side, I want them to understand why I'm asking for something. Give a really specific example. You know, I know marketing compliance review can kind of be a drag, but this is why we're doing it. We want your customers to be well informed. We don't want them to be confused.

Here's a specific example of what happened to another fintech. Here's how it impacted them. Here's how it impacted their bank partner. Trying to be really transparent because there were, there's a lot of kind of compliance stuff they're going to need to do, but also when they want to move quickly, I try and give them a response quickly.

Even if the answer is no I give them clear and transparent feedback. Timely, so they can at least move forward.

Stephen: How challenging is it for you? Cause a lot of these fintechs are using other vendors, you know, new tech startups to do KYC, AML, every automation. How difficult is that for you as a banking partner to assess?

You know, the quality of the AML and KYC that's coming through. And like making sure that you understand who the customer is. I think with a lot of things that we fail to realize, they want to outsource KYC, but they don't have an understanding of why customers are using their platform. So now the third party vendor has no idea.

And it's hard to catch things if you don't really have a baseline of who the customer is and what they're using your products and services for.

Dana: So you're understanding how Risky. This can get like quite quickly and, and also yeah, like a tech company might be like, oh, well let's just go with the cheapest vendor, you know, or like the highest approval rate , you're just like, what? I am not gonna go into the specifics of how my program works, but I will say that we have a very detailed risk assessment that covers. Every single aspect of, in the United States, we follow the FFIEC's BSA AML examination program. And I have every single little subsection listed out, and that might seem extra, but when you're dealing with multiple partners, multiple programs, multiple vendors, We as a bank need to know how every single thing is managed, who's doing what. What are the documented policies and procedures?

When have we tested the control? If there's issues identified, you know, we update the whole thing, but having it all laid out for us to also be able to show regulators is in my opinion, essential. And I don't know if, if others have used this approach, but the headline would be. You have to manage all of the risks, like everything.

Stephen: Not just the easy ones. It's all. It's not just the glaring ones.

Dana: What's that?

Stephen: Not just the glaring ones. That means all of the, not just the ones that you think the regulators will pick up.

Dana: Yeah. Like it's on a risk basis. Like I always use the example, like there's a risk that someone could steal a paperclip from the office.

That is not material. It's a risk, but it's very low. I'm not going to spend time on that at all. But the risk of. KYC not being performed on customers and bringing those customers on board, you know, that would be catastrophic and totally unacceptable. So we would definitely make sure that was properly controlled, documented, tested, verified, validated you know, everything.

Stephen: Has BaaS become like a buzzword too? Is that why maybe some of these community banks and other even banking partners are getting in troubles? Because they just want to put VAS, just you know, people want to put accepting crypto and now, you know, every company's turned into an AI company. Is that what people are getting in trouble?

It's they're putting the names up there, but they're not really understanding like the full cycle of what it takes to offer these services.

Dana: I think there were a handful of companies who have been doing a form of BaaS since probably the early 2010s. I don't know. Is that how you say it? Yeah. 2010s, the 10s, the teens and have learned some regulatory lessons the hard way.

And then there absolutely has been an explosion of BaaS. And I think it really is dominating the conference headlines, the blogger headlines, the, the, at least the LinkedIn echo chamber I participate in. It's it's just BaaS everything. And Yeah, so it's, it's absolutely a blazing hot topic.

Stephen: Talk to me about the conferences. I believe, you know, you've been to places like ConsenSys, Money2020, just came back from the ACAM's Crypto Symposium. What are the biggest concerns from like regulators around the world? And are people educated about BaaS? Is this something like they can't wait for you to get on stage because they don't have a great understanding of how the ecosystem works?

Dana: I have never shared this publicly, but I literally need to create a BaaS compliance certification because there is not one. We desperately need one, and I think the industry would really benefit from a comprehensive overview. I believe that BaaS. Regulators have provided some reasonable guidance and literally they provide even more updated guidance as of two or three weeks ago. So the short answer is I don't think there's enough common understanding of what the risks are. I think there's a lot of, um, what am I trying to say? Whiplash? Look at this. Oh my gosh, look at this. Look at this. Look at this. Look at this. And there's probably less people sitting down and reading.

The actual regulatory guidance. And that's probably what is needed, you know, when it's easier to just be like, oh, look at this crazy thing that happened, or look at this crazy thing that happened. I think there's a lot of common sense. And if you really sat down and looked at the regulatory guidance, the consent orders, and like literally just did a gap analysis against your program do we have this? Do we need to up level this? And just sit down and do kind of, you know, maybe on a Saturday, go sit outside and, you know, I don't know. That's just like read, read through all that stuff. But yeah, I don't know if I answered your question, but I think that more people are paying attention to it, but I still think like it would benefit us if we all kind of sat down and got some collective understanding.

So, yeah. Watch for the Dana Lawrence BaaS Compliance training

Stephen: I can whip that up in two minutes. We just did a whole FinTech course training. We can whip that bad boy up in two minutes. We got you, Dana. Whenever you're ready, we got you. Awesome. We covered your background a little bit, but you had some interesting things on your LinkedIn bio.

Purpose built, your adventure partner there. Why don't you just give us like a synopsis of what that is. Because these are like pre idea entrepreneurs. It just seems like you could call that everybody's a pre idea entrepreneur. I feel like everyone's got ideas. What are you doing there? You're kind of walking them through the entrepreneurial journey with others.

Give us a little synopsis there.

Dana: So PurposeBuilt is a venture capital company that, as you mentioned, works with entrepreneurs and they tend to invest in entrepreneurs that have, it needs to make sense. You know. It needs to make sense. Like Stephen, if you were going to do a startup in like compliance, that would make sense.

They're looking for founders with reasonable experience and then founders that have a scalable business idea. And they create kind of like an incubator environment where they will invest in you. So you don't have to do a day job. You can focus on this. Potentially find a co founder, do a little bit of testing to see if, if your product, you know, has product market fit.

And my role with them is I would say kind of like a referral partner. I, one of the things I absolutely geek out on doing is a very curious person. So when I meet people, I I kind of like to understand like what excites them, like what genuinely motivates them, what fuels them, what causes that spark for them.

And if I come across someone who potentially has an idea and really has a desire to create a startup, then I will make an introduction to the VC. And I actually have had some of them be successful and get funded. And that honestly, to me. is have been some of the coolest experiences ever to be like, to see that promise in someone and then connect it to actually get funded.

And, and just watch kind of that magic happen. And I think there is no limit on who can invent things, who can create things like Stephen, I look at you and. Like you have just created so much and it's just so organically unfolded. Like literally all of us have that creative ability. It's just kind of like how we tap into it and, and what kind of fuels and fosters it and what access to opportunities we have.

So it's like literally my favorite thing ever is to like connect people and see what magic is created.

Stephen: And we have a big entrepreneurial listenership. I'm curious what were the, some of the factors you can think of that made people successful? Like, Hey, we passed them on. They love them.

And what things are like, Oh, we passed them on. And maybe they're for us. Right. For what they were looking for. What were some of those, what did you notice? Oh, I'm noticing a trend here, maybe industry expertise or just like the amount of money they think would be required to make this business successful.

Can you give us some insights there?

Dana: Okay, so the boring answer is Purpose Built has really specific criteria on their website and it's literally like a checklist and that's kind of the boring answer. The, the fun answer is people who have Identified some problem or frustration that is common to a ton of other people.

It's kind of like the post it note. You know, it's just like, how would we live without a post it note? But who even knew that was the thing? It's like people who have stumbled across this and it's usually like very personal to them. And They probably will not stop until this thing is a thing.

So it's not oh, I want to start a company because it's like, you know, it's cool. It's no, it's I've identified this like itch I cannot scratch. And I am not stopping. And it's so relatable. And especially for like purpose built it, you know, it's usually like a scalable FinTech or future of work type of idea because they're investing money, but also even though they want to make the world a better place, they also need to

Stephen: make money to make money to make that world better for them so they can help others

Dana: and kind of like some, maybe more specific guidance to the community would be.

Spend time for, or for purpose built. They're okay with very early stage, but for other kind of pitching your idea, if you want to get support or funding, if you have a nice professional pitch deck that is free of spelling errors you know, it just is a nice quality. It be long, but it could be like 10 slides and just Share a story that makes sense.

It doesn't need to be detailed. It could just be such as my name is Dana Lawrence. I've been in compliance for 20 years. I have a passion for compliance and banking as a service, and I'm going to create a training course that provides needed education. To the world to prevent consent orders and stress and heartache and graying of hair for everyone involved.

And, you know, this is my passion and I'm going to make it happen. Would you like to be involved? You know, it's tell that story, bring people along. And having genuine excitement is the it factor. There are people I've talked to where it sounds like they're bored about what they're trying to get money for, and you're like, Oh

Stephen: we can't get excited, but either can we. And I think You make such an interesting point. I was listening to an actual podcast yesterday. Alex Ramosi talking about you, speaking to a woman, it's this woman sounds like she's going to do this regardless of what, you know, the outcome is. And he's any other person, I would tell them to quit right now.

But unless this person is willing to like sacrifice next 10 to 15 years to potentially make it happen and that seems like that's the person you're describing. They're going to do it without, with or without this money. We want to make sure we're on the, you know, picking the jockey, kind of not the horse. And that's super interesting.

Dana: And that decision criteria might be subject to bias, but when you are, when you've heard many people talk about their idea, there are ones that have an it factor where you are just thinking about for days. And then there are ones, like I've heard so many, you know, Pitches for AI startups.

And I don't, I just am not accepting them anymore. Cause I can't do this. Anyways, sorry, anyone I talked to.

Stephen: No, they know that too. Ain't nobody accepting anymore. . They, it's a, it's a common theme. Now we don't wanna talk to you about your chat, GPT extension. I know.

Dana: Anyways, that, that was, I'm just like cracking myself up that's not even funny, but it's, oh, sorry, .

Stephen: But speak to me about AI, because obviously AI is at a cross section of a lot of that you're doing in the banking as a as a service. Do you see a lot of implementation in banking? Do you see maybe the influx of AI companies now needing bank accounts? With your thoughts on how AI is impacting what, what you see organizations within your ecosystem doing.

Dana: Even though I just made that sassy comment about AI, I actually think that there's so much that we are going to benefit from AI, especially as a risk and compliance person. The work is just going to continue to increase. So I literally want AI robots or however, whatever they're doing. I want AI robots.

Any work that can be passed off to a computer, I'd rather have that happen. And then have my team be more responsible for quality control, kind of, you know, performing AI governance and that type of thing. And I think from a banking perspective, the, my regulator, the FDIC has still been pretty clear that anything that you're using is still going to be subject to all laws and regulations, including model governance, fair lending.

And model risk management. So you're going to have to make sure that you have appropriate governance in your AI.

Stephen: As banking as a service expands, you know, someone listening to this is Oh, this is interesting. I've been in traditional banking. I kind of need to spice it up a little bit. I'm a little too scared to go directly into a fintech, but it seems like we kind of have a medium here where you can still play on both sides.

You can be part of the banking partner that, you know, facilitates the services to these fintechs and neobanks. What are your thoughts about the industry expanding from like a career perspective and just maybe even some of your own like guidance and advice that you've given to people that have probably come to you about how BaaS can help them?

Dana: I feel like. BaaS banks are actively hiring and a lot of them are remote friendly. So if you're a compliance person, a risk management, internal audit person, or you're just entering the workforce or wanting to pivot, I do think there's a lot of hiring happening. And. I would say that you would be really successful if you have an appreciation for some of the banking basics or the compliance basics, and you're the type of person that likes to be challenged in their thinking.

This isn't going to be necessarily the type of thing where you're doing something that's been done for the last 50 years. It's, you might be confronted with How do we apply compliance rules against this new thing? How do we work with people who are culturally different from a banker? So if, I feel like if you're up for a challenge it's a super, super great thing. And I would say the BaaS banks are definitely hiring.

Stephen: That's awesome. Talk to me a little bit, you know, you're talking to VCs all day. You're, you know, you're working at an organization. That is, you know, leveraging the fact that they can benefit, you know, not for profits. How do you define success? We've had a couple people on the podcast that, you know, they've kind of reached that financial success.

I'm curious who inspires them. We had Robert Fruin, you know, like drives a sports car, he's jacked up, model girlfriend. How do you define success to you? And, you know, whether it's career, whether it's personal. And then how do you make sure that you maintain that? Because I think a lot of people, especially through the pandemic, Felt the burnout, you know, kids beside them.

They're trying to work. Everyone's on top of each other. How are you balancing everything?

Dana: Awesome. I absolutely love that question. I feel like just society should talk about that. Like, how do we classify what success is? And I used to think once I achieved X job title and X salary, I would feel so good about myself and I would just.

I have made it. I, you know, I'm, I'm good enough. And maybe that's like an unpersonal thing, but I finally got that role that I had always wanted. Once I get this it's just, I made it. And it was absolutely miserable. It was. a good experience because every single day I was learning, it was like, sometimes learning is really painful.

It usually is. But every day I just choose to accept like the learning and the growth. And eventually I determined this is not the best use of my skills and energy. And it does not matter. What title I have or don't have, I could always have this title again or a higher title or lower title. I'm no longer going to choose to have that define my success.

And that was kind of a turning point for me because I had really thought that way for about the first 20 years of my career. And what I realized was I want to be. Investing my time and energy in a way that maximizes the gifts and skills I have. We literally all have super, super powers, but I think it's understanding like what those are that are unique to you.

Stephen, you, I feel are so tapped into your super powers of connecting people. Being yourself, sharing compliance knowledge, and when people find that it's just electric, like just life becomes so different. And I made a conscious decision to be more active in like creating opportunities for myself and only accepting things that really align with my best gifts and skills and also prioritize my own well being.

During my 20 years where I consider that kind of I actually had a conversation with a fintech a couple months ago, and he was like, you know, why are you doing what you're doing now? You know, kind of implying like I could be at like a Google or, you know, Coinbase or something. And I was like, I was like, I, and he's I think you've completed your first mountain and you're on your second mountain.

And I was like, that's it. Like I did what I feel like society, what I thought society wanted of me. And now I'm all about what do I uniquely want to create in this lifetime on this planet? That is unique to me. And. I turned down a couple opportunities and then I feel like I just out of complete chance found this bank that totally aligns with my values.

Totally incredible opportunity to grow a program really help FinTechs, really do a great job from a compliance perspective. And I also have time to do speaking and training and events. And I mean, that just I just love it. I just absolutely love it. It's like that inner nerd. I just get to nerd out constantly on like compliance things and hang out with people.

And there's still extremely stressful components to my job, but I feel like I'm just like every day I'm like literally living a dream. Even when I'm working on the weekends, you know,

Stephen: I think it doesn't go away, right? It just seems like less like work. Like I know people say Oh, it's not work. If you love what you're doing, it's no, some of it's still work.

Some of it's we have to do an invoice and then you have to follow up. That's still work. I don't think it was by chance, though. I think what we do in our life is we create room to receive. You can't create room to receive if you're working overtime, killing yourself, and you're frustrated.

Whereas you said, Hey, I know what I want. I just think a lot of people don't say Hey, what is it that I want? We kind of go with oh, this will look better on my resume, this will get me that, you know, great title, this will get me further along, this will get me a big payday, but nobody ever stops and says is that what I want?

I remember the advice I used to get a lot is oh, do QA, quality assurance on that. And I hated it. I hated QC word. I hate QA. But it'll look good on your resume. But what is my resume? My resume is trying to get me a job to do more of the things that are on my resume. So you're literally telling me to do something I hate, so I can get more of what I hate.

And it's that was the common advice. So it's oh, a lot of people are doing what looks good, even though they don't like it, to get more of what they don't like. And then they're shocked. When they're sitting there in a job that they don't like, well, this is what you've been kind of breeding yourself for all these years.

So I love your strategy of just kind of like, And this is why I've built this business, is I'm going to show people, everyone's seen me from scratch, know nothing about AML or crypto or media, and I'm going to show them how I was able to do this and build this and create a blueprint for other people to be like, yeah, I don't have to quit my job, but I can do this on the side until I find the time that it might make sense to kind of start my own thing.

And these are all the pitfalls that Stephen went through, so these are the things that I should probably worry about.

Dana: Yeah. Have you ever seen, I think it's Japanese, like it's called like Ikagi, I'm butchering it. Okay. So I've been having some of those moments lately and I don't want to sound all corny.

People, you know, sometimes people don't like happy, chipper, optimistic people. It's just like too, too much. But the Ikagi is What you're good at what the world needs, what you can get paid to do. And then there's something else. And usually people can get you know, a couple of them. And for most of my life, I was like maybe hitting one of those, but when you can get like that intersection of all of them, it's just, it's just, it's so good.

Stephen: And it's always like a moving target too. Like when you're playing like James Bond, like that, that circle is going to move from one side to the other at some time. You have to keep on. People are thinking, oh, I got it. You know, I said, I wanted to get into crypto. That was my dream job. And now it's Oh, I quit my crypto job to get into, you know, being my own media organization.

So it's that's always going to change it. But that's the beauty of it is you can kind of find it. Before we let you go, what is the future of BaaS? What should people be like? Hey, And I love like new technologies like crypto. This is why I got into crypto because I'm like, Hey, I can't catch up to the people that have 20 years of AML experience, but if I start at crypto AML, we're all going to be starting within the last five or six years.

And that was kind of my strategy for someone that's just entering BaaS. What should they be thinking about? What's the future look like?

Dana: So I think I kind of adopted this mindset about 10 years ago when I entered the startup life. And that is when you're working. In the intersection of financial services and emerging technology, you need to be on your A game.

You need to constantly, you need to enjoy constantly learning, probably being uncomfortable a lot of the time, but really leaning in and listening to stuff like Stephen's podcast, following his content, you know, going to conferences or, you know, reading, but really staying fresh on all the things that are emerging.

I think that all this regulatory enforcement action is. It's tough. It's unfortunate. However, it's providing a lot of feedback from regulators on what their expectations are and how we can more sustainably do this for the long term. So I would say that is a lot of good feedback to be reading up on and to be learning on to, to help have a better program.

Stephen: That's awesome. And because you're so humble, you're not going to mention in FinTech, We Build Trust, which is your LinkedIn live series with Gretchen Keller, where you talk to some of the brightest minds I've ever seen across FinTech, compliance, and crypto. Your recent one was on sanctions. I think it was probably crypto and FinTech space based on the speakers you had.

So people should definitely go check out those. And you can see all of them the live recordings on your LinkedIn. And I think you're building such a huge community there of people that want to learn more, but they want a space where they feel comfortable asking questions. And more importantly, can speak directly to the speakers which is kind of hard to do sometimes if you go to a conference.

Or some of these bougie bougie, bougie events where you can't get in touch with anybody before, during, or after the conference. So, it was great having you on. Thanks for being so transparent. What the audience doesn't know is that you weren't 100 percent today. And you were very, you know, upfront about that before we started pressing record.

And this is what I want people to see. This is what not 100 percent looks like. And many of you going through the whole podcast would be shocked. You look like. One hundred and fifty percent. So I think it'll give a good understanding for people's even when you're not 100%, you can still show up. You can provide value, you can laugh and people would never know the difference.

So I think it's a good, a helpful reminder for those that are not feeling 100 percent is. Just keep on showing up and the magic will still be there.

Dana: And maybe it's just, you know, it's, it's just to show like real you know, I mean, I always get excited to talk to you, Stephen, but you know, it's, it's just, the reality is, you know, I, I post my highlight reel on LinkedIn, but you know, there's a lot of days where I'm sitting in sweatpants at home, like extremely frustrated. But it's just all part of the process.

Stephen: Awesome. And more people should post everything. I don't know. I posted my low lights and my naps on LinkedIn. I get more hate when I post anything about jobs. I posted something about you know, people not looking you know, interviews and like what 800 employers were saying about interviews and man, my, my inbox was full of some, you're this trash and you shouldn't be posting this garbage.

And. You know, neurodivergence and I get it all people, but it's that's why you have your own profile where you can post exactly what you want the world to see. So it's great to have you here, Dana. I'm hoping that people can connect with you. They can see you at a conference. Cause you're always at audit conferences, crypto, fintech, AML.

People seeing you kind of across the board and you always leave people with very thoughtful conversations on LinkedIn when you decide to post the video.

Dana: Awesome. Stephen, I appreciate it. Have a lovely day.

Stephen: Thank you so much.