Want to hear stories from banking and fintech leaders making moves in the industry? Want to stay up-to-date on the latest news and trends in the space? We are proud to announce our brand new Common Cents podcast, where we take the complex and make it simple.
Our first episode is a rapid-fire roundup of five fascinating news stories in banking and fintech, where we dive into the biggest deal so far this year, whether or not credit score “grade inflation” is myth or fact, Jamie Dimon on AI, the wild stats behind Klarna’s Open-AI-powered chatbot, and more. Check it out!
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Read the full episode transcript below:
Welcome in to the Common Cents Podcast by Kinective, where we connect you to the future of banking. Join us as we dive into the latest news and trends in banking and fintech, learn from leaders in the space, and make the complex simple. It’s common sense!
For our very first episode, we’re kicking it off with a rapid-fire roundup of 5 fascinating news stories, so buckle up. I’m your host, Ben Halbrooks. Let’s do this!
First up: What’s in your wallet?
Capital One announced that it plans to buy rival card firm Discover in a $35B all-stock deal to combine the two major U.S. credit card issuers into a payments giant. How big are we talking? The merger would form the largest US credit card company by loan volume and the sixth largest bank in the US. Capital One would get its own credit card network to directly process customer transactions, allowing it to compete with the Visa and Mastercard duopoly.
You can hear that loud and clear in the statement from Richard Fairbank, Chairman and CEO of Capital One. Here’s what he had to say: “Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies.”
The transaction is expected to close in late 2024 or early 2025, as long as it can get the green light from both regulators and shareholders. Will it get approved? Hard to say. Initial reactions have been mixed, and antitrust opposition is already forming. There’s no way this deal doesn’t receive close attention from regulators, so stay tuned. Time will tell. Just don’t mess with Samuel L. Jackson.
Score is a new dating app for people with good to excellent credit.
Neon Money Club, a creative studio focusing on fintech products, just launched the app, and users must have at least a 675 credit score to join. The Score app aims to raise awareness about financial health in relationships, which a topic that’s often overlooked. I mean, finances can be a really important part of relationships for a lot of people.
Luke Bailey, co-founder and CEO of Neon Money Club, believes that discussing finances in unconventional settings, like dating, is crucial for education. The app is available for a limited time, requires an application for access, and conducts a soft credit check. If approved, users can match with financially like-minded people.
Some have criticized the idea as exclusionary and classist, but Bailey defends it, stating that good credit is aspirational and the app offers resources to improve financial literacy: ““Before you can educate people, you need to get their attention. With Score, we’re bringing the conversation to dating.” Bailey hopes that Score and Neon Money Club will encourage more diverse voices in the finance industry and open doors for others like them.
Here’s another story on the credit score beat: Is credit score “grade inflation” myth or fact?
During the pandemic, government assistance and credit policy changes led to a broad increase in credit scores. Should banks adjust lending behaviors?
Short answer: It’s complicated. Some argue that this inflation doesn’t necessarily reflect reduced default risk, but others, like Capital One’s CEO, have expressed concerns about granting credit based on potentially inflated scores. Factors like pausing mortgage payments and federal student loan forbearance played a big role in the trend – but now that those have resumed, there’s real worry about getting credit risk right. The data says that while some consumers moved to higher credit score ranges, delinquencies also increased in those groups. We are seeing some adjustments in lending behaviors, with some lenders reducing nonprime card issuances. A recent Federal Reserve study found that many consumers moved out of subprime categories, but delinquency analysis was muddled due to these shifts, which just goes to show the complexity of interpreting credit trends during and after the pandemic.
Here’s what Rikard Bandebo, EVP and chief product officer at VantageScore, had to say about the trend: “It’s erroneous to conflate the changes in median or average scores with the relationship between scores and the risk of default. The risk of default for a given score will decrease during strong economic cycles and increase during weaker economic cycles.”
Translation? Don’t overreact.
Speaking of reactions, here’s a notable one:
When asked about AI in a recent interview with CNBC, JPMorgan CEO Jamie Dimon said it’s the real deal, and he’s a big optimist about it.
“This is not hype. This is real. When we had the internet bubble the first time around … that was hype. This is not hype. It’s real.” He predicts that AI will pervade nearly every job and cited JPMorgan’s own internal AI efforts, including 200 people researching large language models and creating a new role to handle AI internally. Dimon also expressed optimism about AI’s potential in fields like cybersecurity and pharmaceuticals, envisioning it as a catalyst for medical breakthroughs like – you guessed it – finding a cure for cancer.
If curing cancer sounds a little “out there,” how about an example of AI implementation that’s more definitive? Well, here you go:
Buy Now Pay Later company Klarna just announced that its Open-AI-powered chatbot is doing the equivalent work of 700 full-time human agents.
The AI assistant launched globally last month and has already handled 2.3 million conversations – that’s two-thirds of the company’s customer service chats. Ok, but what about customer satisfaction? Klarna says the bot scores are on par with human agents, with users resolving their issues in less than two minutes, compared to eleven minutes with human agents. They also reported a 25% drop in repeat inquiries since the chatbot’s introduction. I don’t know about you, but that 2 minutes versus 11 minutes stat is the one that really stands out to me. I doubt you like sitting on a human chat waiting for the next message when you know the agent is servicing a handful of other customers. Bot or not, am I right? Anyway, I digress.
Here’s what Sebastian Siemiatkowski, co-founder and CEO of Klarna, had to say: “Klarna’s AI breakthrough in customer interaction means superior experiences for our customers at better prices, more interesting challenges for our employees, and better returns for our investors.”
Klarna anticipates a $40 million dollar increase in profit due to the bot’s efficiency, which is a big deal, since the fintech has been in talks with investment banks for an IPO that could happen later this year.
And that’s a wrap for today. Thanks for listening!
Common Cents is brought to you by Kinective, the leading provider of connectivity, workflow, and analytics software for the banking sector. Check us out at kinective.io and connect to the future of banking.
Until then, we’ll catch you on the next episode. It’s Common Cents!
