Daily Deposit 2.20.2023

GM. This is the Daily Deposit. The newsletter that helps bankers get better, not worse, everyday

consider us the Andre Giant of banking… we’re bringing a keg’s worth of that liquid gold this morning

celebrating President’s Day with one too many like #14 Franklin Pierce, our drunkest president! “What can and ex-president of the United States do except get drunk?” -Franklin Pierce

Today in Banking

Check it:

ModernFi, a deposit marketplace for banks, raised a $4.5 million seed round.

Sandbox Banking, a low-code integration platform for banking, raised $4.3 million in seed funding.

The Future of Payments (Fintech Brainfood)

Banking 101

What is GLBA? Sure, it is another acronym, surprise surprise… But it's much more than that. It's the Gramm-Leach-Bliley Act! Let's dive in and MRFA, Make Regulation Fun Again!

GLBA, aka the Financial Services Modernization Act, was enacted in 1999 and made significant implications for Fis and how they handle sensitive personal information of their customers. The objective is protect financial privacy, and this applies to all FI's including: banks, credit unions, securities firms, insurance companies, and other financial service providers.

3 pieces FI's must comply with:

1. Privacy rule: You gotta notify customers with an explanation on you (FI) collect, use, and share personal information. And you gotta do this at the time the relationship is established.

2. Safeguards rule: FI's need to have a legit formalized information security program. And it needs to meet the specific needs of your institution, accounting for the size and complexity of operations, whatever that means… Make this robust unless you've got a Santa Claus regulator.

3. Pretexting Provisions: These make it illegal for anyone to obtain personal info through false pretenses, including false or fraudulent means to obtain info from the institution or the consumer. Not gonna lie… Pretexting provisions and false pretenses makes my head spin. I needed it explained like I'm 5, so I'll do the same for you

Imagine that you have a secret toy and you don't want anyone else to know about it. Now, imagine that a stranger comes up to you and asks you what your secret toy is. You don't know this person, and you don't want to tell them your secret.

Pretexting is when someone tries to get your secret toy or other secret things by pretending to be someone they're not. They might pretend to be your friend, your teacher, or even your mom or dad, just so they can trick you into telling them your secret. This is not nice, and it's against the rules.

The GLBA has a rule that makes it illegal for someone to get your secret toy or other secret things by pretending to be someone they're not. This is to protect you and other people from mean or dishonest people who might try to trick you into giving away your secrets. So, if someone tries to get your secret toy by pretending to be someone they're not, you can tell them that it's not okay and that they are breaking the rules.

What's resulted since the GLBA of '99?

A few things, i) increased competition, ii) compliance costs, iii) consolidation, iv) outsourcing, v) innovation. Roman numerals are fun (emoji)

i) Competition: companies now had to compete, and that made it harder on smaller institutions

ii) Costs: small banks follow new rules, and this can be expensive, hurting profit

iii) Consolidation: because of new competition and rules, many small banks joined bigger banks

iv) Outsourcing: some small banks paid other companies to help follow the rules, but it's risky putting compliance in someone else's hands

v) Innovation: the best way for the little guy to compete is innovate. Focus has been on niche markets and personalized services.

LULZ

reply with a Cold Stone bowl score… did you:

a) like it

b) love it

c) gotta have it