Siva Narendra: The Future of Community Financial Institutions Is Bright

Siva: [00:00:00] The digital impact for financial services that FedNow is gonna bring is gonna be dramatic. You can actually be more efficient. You don’t need to open lots and lots of branches, not that branches are not important, they are, but an institution doesn’t have to purely rely on that choice.

You can bring true efficiencies. 

[00:01:00] ​

Josh: [00:02:00] Welcome to another episode of the digital banking podcast. My guest today is Dr. Siva Narendra, the CEO and co-founder of Tyfone. Let me start by saying that in close to a hundred episodes of the Digital Banking Podcast, I’ve never had a guest from my own company on, and this was intentional. Our focus has been to shine a light on the amazing work and unique perspectives of guests from financial institutions of all sizes, fintechs, thought leaders, industry consultants, and more. But the time has finally come where it is my honor to bring on a very special guest, the biggest fan and supporter of this podcast, the leader of the amazing organization I call home and my friend — Siva. I’ve had the pleasure of knowing Siva for almost a decade, and I can honestly say with conviction that Siva is one of the most intelligent and thoughtful people I have ever met. 

Siva holds a PhD from MIT [00:03:00] and says of himself, “I’m a pocket protector wearing geek who learned how to wear pocket squares.” One of the things that makes Siva so special is his incredible ability to very clearly articulate complex thoughts and solutions to an audience who may have either very significant or very little understanding of the subject matter. I’ve had many late night conversations with Siva about topics way outside of my league of understanding, yet he’s always been able to help me learn and gain knowledge without making me feel inferior, which probably stems from Siva’s own underlying desire to learn. Not only is Siva extremely technically intelligent, he’s also extremely emotionally intelligent. He’s one of the simplest and most humble people in my life. Siva can very easily go from authoring a patent on miniaturizing battery-powered electrical components to spending his time in his urban farm garden. His ability to humanize things and look out for people and the greater good is nothing short of admirable. [00:04:00] He is incredible, he’s an incredible husband and father and treats everyone he comes into contact with like family. I’ve been looking forward to the day where I would have Siva on as a guest — since the day we launched this podcast. And I cannot begin to tell you how much I’m looking forward to our conversation today. We’ll be recapping some of the most important things that have happened in our industry this year and Siva’s predictions for our industry’s future. So without further ado, I want to introduce you to my leader, my teacher, my inspiration, and my friend Siva. Siva, welcome to the podcast finally.

Siva: Hey, Josh, that was a very flattering introduction. I’m glad I heard a little bit of it before we started, so I wouldn’t be quiet for the first five minutes. So I really appreciate it. Obviously a long-time listener, not a first-time caller. we’ve talked multiple, multiple times over, or you would be drinking water and I would be drinking coffee.

Uh, you drink coffee too, most of the time, but, really appreciate, uh, [00:05:00] being on. Yeah, being on the podcast. I guess it’s a videocast now.

Josh: I know. Yeah. Well, you know, maybe we were kind of saving this for, uh, waiting for you to join too. I don’t know.

Siva: No, I’m just saying, I enjoy listening to the podcast. There are a few podcasts that I listen to. And it’s one of those things when when email piles up, you feel all about it — you gotta go clear up the email. So there are a few podcasts like that for me, and yours is one of them, not because Tyfone is sort of peripherally involved, but it’s a great way to learn things when, especially during the pandemic when none of us traveled, it allowed us to be in touch with the ecosystem and experts in the industry. So, it was very, very informative.

Josh: Well, it’s funny. You know, one of the first things that always runs through my mind, anytime a new episode releases on Friday afternoon is always, ‘How long is it going to take before I hear from Siva what he thought of it?’ And, and I always love getting your feedback on it. [00:06:00] And so it is, it’s really cool to actually be able to bring you on as a guest finally. And give others an opportunity to even just hear the conversations that you and I get to have, about the things that we’re paying attention to. And so, you know, just for our listeners today, this is really not a Tyfone perspective. You know, one of the things that we’ve been really, really adamant about since we started this podcast is that it not be a sales tool, is that it really, and truly, be a tool to make a platform where people can bring open-minded conversation in forms of thought leadership to our industry. and so that’s really gonna be, you know, the genesis of the conversation today. Siva has a really, you know, cool perspective in being somebody that’s listened to all the different episodes and seeing the other things that folks have talked about, but he’s also somebody that I really personally look up to, that’s looking out for the state of our industry. And, and I know, you know, you’re somebody who is unequivocally passionate about community financial institutions. So Siva, I think [00:07:00] that’s actually one of the things I’d love to start with is, you know, you talk a lot about the importance of community financial institutions and why their place in, you know, American lives is so important to their success and their financial health and stability. Do you want to talk a little bit about why you believe that and what are some of the data points behind why you get so excited about community financial institutions?

Siva: Yeah, absolutely. So, you know, this does not mean big banks don’t have a place, right. So I want to make sure I say that up front, but just like everything else. Scale has interesting meaning, scales focus like that of big banks and big tech has certain objectives. that doesn’t always serve everybody equally, right? 

So with that disclaimer upfront, if you were to look at community financial institutions, just the data indicates why [00:08:00] they have an important role to play, right? So it’s not just about a trend or a feeling that feels good to say it. From a purpose perspective, it actually has a collective opportunity.

So it’s a sustainable purpose for community financial institutions because first of all, the majority of American households, given the choice, would bank with community financial institutions. Because community, as you know, just as a general concept, has gotten a lot more critical, especially as we’ve gone through the pandemic.

Josh: Hmm.

Siva: One critical roadblock to all of that has been digital tools. So, there are tons of technology companies all the way from big tech to startups working on it — belongs somewhere in that lineage. The data is not only the majority, we were talking about three quarters of households would prefer doing banking with [00:09:00] community financial institutions, but if you ask why that might be, it’s never been realized, right?

Consistently, we hear that it’s an increasing number as it turns out, but they don’t. But you might ask, what’s the motivation that they want to, but they don’t. They don’t seem to be digital tools and the convenience of digital tools, but then why is the number still increasing is because it was a Wall Street Journal study that basically reported.

Over the last 10 years, American households have basically forfeited about 600, I think the exact number is 603 billion — 603 billion with a B — dollars of interest income by leaving money outside of community financial institutions. Now it doesn’t compute well, and it doesn’t have the — it’s sort of odd that that happens where 63% [00:10:00] or 65%, I forget the exact number, of American households live paycheck to paycheck.

Josh: Yeah.

Siva: So, those two data points right there tell the value community financial institutions bring. And the responsibility that they have in the marketplace and how consumers and account holders believe that value could be important for their living. That’s the fundamental thesis of why community financial institutions, of course, community financial institutes come in two different flavors, right?

Community banks and credit unions, you know, there are other CDFIs,or another example — each have their own mission driven value add, and it’s important for the ecosystem to recognize and support it.

Josh: I want to touch on that actually. One of the things you talk a lot about is, you know, the value of having both a for profit and a not for profit competitor in a specific space, and that’s not unique to financial [00:11:00] services, right? But why specifically in financial services do you think there’s value in having, say, community banks that are for profit and credit unions that are not for profit, both similarly attempting to solve, you know, the communities that they serve financial needs?

Siva: Yeah. So, you know, community banks, obviously, as you said, they’re for profit. They’re often, at least in the current environment, lean more towards business banking and provide business banking services. It’s not that retail is not important. For them it is, and the not-for-profit member-owned credit unions bring a very different flavor.

There are pluses and minuses from a business model for each of them, right? Community financial institutions that are for-profit can go raise equity so they could make strategic investments and don’t have to bootstrap their business. And while not-for-profit credit unions really cannot raise equity, right, their [00:12:00] return on assets will have to be leveraged for their growth.

So by design, it brings very different disciplines. Right. So

I didn’t realize my phone Bluetooth is connected to my computer. The world of technology

Josh: Too connected.

Siva: You’re connected. So let me, uh, let me figure out how to turn my Bluetooth off. So I think the objective of each of those bring very different flavors, right? Now, this may not be specifically talking about a specific institution, but if you were to think about an equity owned institution that has got a return value to the shareholders.

By design, they have to think about, ‘Hey, what do I do differently that’s dramatically influencing the shareholder value?’ Now, that might come at the expense of the account holder value, potentially, but then you could say that won’t be a good business decision to return value [00:13:00] to shareholders. So that’s sort of coming from one side of the equation.

The other side of the equation, you know, is a cooperative institution. By design, it doesn’t really care what Wall Street thinks or shouldn’t care about what Wall Street thinks. So it brings a very different discipline. You know, optimization is always done coming from different angles, and this allows for that optimization.

And even the regulatory framework, you don’t have the exact same regulator, right? Always good to have a regulatory framework that comes from two different places. So, that’s why I believe that these two business models bring optimizations very differently to the marketplace. And, you know, as they say, two heads are better than one.

Josh: So this is probably a grotesque, understatement of what you just said or an oversimplification of it, but it’s really almost kind of looking at the heart side of things and the [00:14:00] machinery side of things. In the for-profit model, we’re really focused on trying to do things like cost optimization and innovation to drive revenues. And on the other side of things, you know, we’re trying to do things with a heart and have an impact for people. And both of those need to bleed over into each other and having both coexist at the same time means that there’s competition from both, right? It means the people with the heart are also, you know, having some competition to try and go have things like good technology, but then the good technology companies are also being, you know, competed against, you know. Hey, you got to have a heart as you do your business.

So I mean, is that kind of what you’re

Siva: Yeah, I think that’s a good way to think about it, you know, as an ecosystem. It’s good to have both, right? and, not that credit unions are not innovative, but a shareholder-owned institution that drives shareholder value comes with a very different perspective than an [00:15:00] account holder-owned institution, right?

You know, there is this view that you have to build tools that users want, but then sometimes there are innovations that users don’t know that could exist. So these two approaches blending together allows us to accomplish both, right? We see that in our business. I’m sure that is true of our peers.

The input that you get is very account-holder-focused. And account holder value add to credit union members, comes from a very different, as you call it, heart and a for-profit community bank, I mean, they do invest in the community. They’re actually required by law to invest in the community.

They come from a shareholder value creation, [00:16:00] innovation. Again, not that a credit union member-focused institution can’t innovate, but a shareholder-focused institution’s innovation sometimes comes at it from a very different perspective, not necessarily limited to what does my account holder want, right? 

Because what, what my account holder wants, they may not know what they want, right? So, these two approaches to innovation, for us to sit in the middle of it, it is very fascinating to see, because each comes with a very different perspective, and you combine them. You almost always come with a very different outcome and an example of that is FedNow, and I’m sure we’ll talk about it in a little bit, but so, yeah, I see the community institutions for a non-profit play important, important roles.

Josh: So given all of that, we very specifically are recording and releasing this episode as the very last episode [00:17:00] of 2023. So when you look back on this last year, Siva, I guess my first question to you is, kind of given that unique dynamic that we have in this industry, the opportunity and the challenges specifically, what kind of surprised you this last year? What made you go, ‘Huh? I didn’t necessarily see that one coming.’

Siva: Well, so, I mean, it’s close to what we already just started talking about and what I’ve been focusing my energies on in the past couple of years. What surprised me, in one way, pleasantly, is pleasantly being the sort of expected, but I wasn’t sure if it’ll really happen, was the launch of FedNow.

It was coming, it was coming. And then it was here. And, it was actually exciting to be the very first transaction on the network making history — that was also a pleasant surprise. So all of those were — I was not expecting any of [00:18:00] that. I wasn’t expecting the network to be launched on time.

It was a challenge. It’s a challenge, right? I think we have to, one of the challenges in a, in a, even though the Federal Reserve is not a cooperative movement, it does, it does get input from multiple stakeholders, unlike a traditional central bank. You know, the Federal, the Federal Reserve does have, you know, by design take input from various stakeholders.

And, this is not an easy thing to do for the Federal Reserve. And, not because they don’t have the executional capability or the mission-focused understanding, but the stakeholders involved come from various segments. You know, we just talked about two of them, community banks and credit unions.

There’s, of course, the mega banks, right? Ultimately, they do have significant influence on the direction of the industry. And therefore, one of the [00:19:00] important cogs in the wheel, which is the Federal Reserve. So I was very pleasantly surprised that they not only were able to launch it on time, but increasingly, the naysayers — original naysayers — are beginning to be part of that ecosystem.

So, I think every one of those steps, even though, if you ask my technical brain and logical brain, I’m like, of course, it’s going to happen. But, when it actually happens, it’s, it was really satisfying to see it. So that’s why I said it was a surprise, but it was a pleasant surprise.

Josh: Well, it’s funny. You know, I feel like I set you up for this one because my next question, we’re not going to get to it just yet. So don’t answer it just yet, but my next question was going to be, you know, what didn’t surprise you? What were you like? Yeah, I saw that coming. Like, I hope everybody else did.

Like, that was pretty obvious. And I feel like FedNow falls into both those camps for you, right? It surprised you [00:20:00] by, Oh gosh, like it really actually went live when they said it was going to, like, that’s actually pretty impressive. And at the same time, that’s one of those things that, I mean, I can remember years ago having a conversation with you where you, I’m pretty sure we actually have written down somewhere, even. A bet with money on it, where you saw this one coming, right? So I find that that one specific example is really interesting and that it was both a shock and not a shock. But before we move off of the not a shocks, what other things kind of surprised you? Was there anything else that happened this year that you were like, ‘Oh, wow, didn’t see that one coming’?

Siva: So, you know, this is not in our industry, but it’s in a related industry where it’s in everybody’s everybody’s minds the OpenAI-related, sort of the structural change. It was a very interesting business model to have a not-for-profit, be the primary governance model for open AI, [00:21:00] which, which actually gives a level of comfort, right?

Again, there’s nothing against for-profit, but not-for-profit brings. So, if a not-for-profit institution builds capabilities that uses data and content generated by the entire world, it’s one thing. But if it’s a for-profit entity, you don’t know what the future holds, right? So, that surprised me a little bit.

I suppose I shouldn’t have been surprised, but that certainly surprised me. I’m sure it surprised, probably, most stakeholders in OpenAI itself, I would think, for the swing one way and swing back dramatically the other way for the institution. And, you know, obviously, that institutional structure is going to impact every one of us in some fashion.

Good and bad. So that was a little bit of a surprise. At that scale, there was so much chaos, and that certainly gives me pause and discomfort [00:22:00] to what might happen, with all of the data we are providing to these tools day in and day out.

Josh: Yeah, it’s interesting you bring up that topic, you know, funny enough, we’ll be releasing a blog post here on our website here shortly where actually I took some input from Siva this morning and, you know, we were talking about just some of the, the potential negative ramifications of this technology and things like, you know, the bad actors of ChatGPT, and I think, you know, FraudGPT is probably not too far away, right?

And, what kind of impact is that going to have to our society? So, you know, what are some of the things that, you know, along those lines have, have kind of piqued your interest, just this last year and kind of the rapid evolution of, of use of OpenAI.

Siva: Yeah. So, well, talking about FraudGPT, there is a tool called WormGPT that [00:23:00] does, that does just that. It’s, it’s sort of no guardrails. In fact, I believe their marketing — I don’t know if their website is still up and running or not — their marketing basically was, you know, enterprise email compromises, right?

And, and the way they positioned it is, ‘Oh, you can not only use it for it but, you know, you could use it to know what somebody could use it for. So, this is an interesting space, even though we believe we understand the model behind how this whole system works. It’s sort of gone beyond our capability to understand, right? The complexity is deep enough within the language models that we actually, I think, it’s reasonable to say experts will admit they don’t know why it works, right? So if you don’t know… sorry, go ahead. 

Josh: Sorry, before you go on, what do you mean by that?

Siva: So, let me see if I can explain it. So let me ask this. [00:24:00] This is not exactly related. So you know how to count to 10?

Josh: Yeah. 

Siva: You know how to count to a million?

Josh: I mean, yeah. Same way.

Siva: Yeah, yeah. Do you know how to count to a million, making sure, I mean, you understand decimals, right? Like, you know, 10.1. Can you count from 1 to 10, including all of the decimals?

Like how many 

Josh: But I don’t know how would need to go, yeah.

Siva: So, meaning we understand it, again, this is not an exact equivalent. I’m trying to bring some discomfort to a known thing in your head, right. So experts will admit, I think, that some of them have, but they don’t know why it works,

Josh: Hmm.

Siva: they built the tool, so like, for example, if you talk to a neuroscientist, my wife is one of them, so if I ask her, ‘Hey, isn’t this how the brain works?’ she’d be like, ‘Yeah, but not really,’ right? So [00:25:00] there is just the complexity in our system, you know, like in a brain type, network is reasonably complicated.

We think we understand it, but not really. Like, we don’t understand it to a level where I think we can dis we can guarantee something by design. Like, today, all the computational systems, if you, because it’s defined states, you can sort of work towards formally verifying something, even though formal verification is a space, but there is no 100% guarantee of anything even in a deterministic system because determining systems themselves have become complex enough where it’s sometimes difficult to guarantee formal verification.

And we see that in digital banking, right? We can’t always guarantee that things work, because you can never test everything. No, but that’s a determining system. The engineering team writes a well-defined system. That itself can’t be guaranteed. [00:26:00] So now you can imagine a black box that’s got network structures that can change with time because you’re not programming to get an output for a given input.

You’re training the network for millions of inputs and expected millions of outputs and letting the network evolve itself. So the millionth and first input gives the millionth and first output, which it hopefully is correct.

And this network evolves where we have no control of understanding beyond certain level why or how it’s evolving, even though we might have. Maybe another way to think about it is when your kid is young — I know you’ve got two, two young kids — at some point they become smarter, different. You can’t understand them, right? And I think that’s what’s happening overnight in the AI network, right? So hopefully that explains. 

Josh: I [00:27:00] never thought about it that way until just now, Siva, but I literally sent a video to my brother-in-law yesterday of, uh, somebody asking one of the AI image generation platforms to make a visual expression of the ultimate espresso dad. And then they just keep asking it, ‘No, make him more espresso Dad.’ And by the end, he’s like this Marvel Thanos with lasers and 300, you know, espresso machines in front of him. And the kids are flying in the background. And, and at the same time you’re talking about, you know, we have young kids, so Jack’s now two and a half, and he’s entered the why phase. And I feel like now I’m, I’m the AI where he’s just like, ‘Why?’

Siva: You have the problem. 

Josh: Because you know, ‘Dad, is the sky blue?’ ‘Yes.’ ‘Why?’ ‘Well, because of this.’ ‘Well, why?’ ‘Well, because of this.’ It gets to the point where I run out of — I’m like, ‘I don’t know, buddy.’ Like we’ve exhausted the why’s I’m able to actually [00:28:00] articulate. But anyway, that’s a side note. So, Siva, kind of going back to the lines of like what surprised you. Was there anything that surprised you this year out of kind of the AI space and, and how it was maybe being utilized or thought about? Was there anything that surprised you there?

Siva: You know, apart from the organizational structural surprise. I would say I was pleasantly surprised in some ways and not in others how useful the tool is — because we don’t. I mean, there is not a day goes by where… I think you know one of my favorite tools to use is Tactic for meetings.

It’s just so incredible that even though the transcription in meetings are never accurate, I mean, Google models are probably just as bad. Just as well as anybody else’s, but even then, you know, when you go beyond a text message length, you’re not going to have perfect capture, [00:29:00] right? So let alone a two-hour meeting with 25 people. The transcription is terrible, right?

It’s not perfect, and when you, when it’s not perfect for two hours, even if the error rate is tiny, it just becomes unusable. But you just overlay that with OpenAI or any of the AI language models when you query your transcript. It has another level of correction sitting on top. I tested several different, meeting software.

It surprises me every time how this AI language model works with meeting software tools to just make your life. I’m sure there are other tools now, but I’m sort of stuck on Tactic. That was a very, very… I didn’t expect it to be that good because the rest of them weren’t, earlier this year.

Josh: Hmm. you know, it makes me think a favorite quote from someone in a totally [00:30:00] different space, but I was talking to somebody who specializes in self defense training, and they made a comment. When you’re in a self defense situation, if you’re not cheating, you’re not trying. And they said, you should be cheating when your life is on the line. And, you know, it’s funny. I used that recently when I was telling somebody about how we’ve leveraged tactic for some of our meeting notes and things. And, and I was like, man, if you’re not cheating, you’re not trying. I mean, look, we’ve got these tools that help us with our productivity to help make sure that we’re in sync and that we’ve got good action items and follow ups.

And if this tool exists, then sure, you might call it cheating, but if you’re not cheating, you’re not trying.

Siva: Yeah, that, you know, that’s the other thing. You know, I will admit I use OpenAI. I actually use, um, a combination of, ChatGPT, OpenAI API, Anthropic, Bing. When I need to, the Bing Chat. That has made my life really productive. I know people that use it, [00:31:00] but will never admit it. Right. I think, I think, you know, it’s like, why would you not admit, you know. Yes, you don’t want to let the machine create stuff by itself, that could lead to hallucinations and you might communicate something that you didn’t want to communicate.

It’s sort of like the autofill of an entire paragraph, right? But, you know, there are tools to use it, right? Why hide it? I mean, nobody, you don’t go to the library to search your search on your search tool, right? You know, physically look for books or you can short, circuit that. 

Josh: Have to give a shout-out to, uh, Jeffry Pilcher and the crew at The Financial Brand. So I was recently filling out their form to submit to speak at their Financial Brand Forum coming up in May in Vegas. And I get to the section where they put, you know, ‘Hey, tell us a little bit about what you’re going to be speaking about on stage.’ And when you go to click into the box, it has an overlay text that says, ‘Oh, and by the way, don’t [00:32:00] use ChatGPT to write this. We’re writers; we’re marketers; we can spot it. And we want to know that you can actually talk intelligently on the stage about something that wasn’t generated by AI and is your own genuine and authentic speech.’ I thought that was hilarious. They’re like, we know you were about to try and cheat a little bit and save yourself some time when you were submitting this long form to us, but we’re watching.

Siva: Yeah, it’s interesting. My brother calls these tools his sidekick. It’s a very useful sidekick. I mean, he’s a lot more user of it than I am. He’s built agents. He’s got engineers talking to each other in multiple agent forms and come up with solutions. So, it is a toolset that’s very valuable if you can determine as an expert that uses the tool whether what it says is right or wrong, right?

[00:33:00] So using it as a tool shouldn’t be really seen as, for the lack of a better word, cheating. It is, I don’t mean to use the word cheating, but really, it’s a productivity tool. Like, you know, is automated gears in a car cheating or not? Is a car cheating compared to a horse or not?

Right? It’s, it’s a set of tools that the world is going to use. So the question is, are you going to use it to keep up with it or not? But, but I agree with you. You don’t want really a one-sentence prompt for generating 20 paragraphs, right? That would — it needs to be sort of interactive back and forth.

So contextually, you agree with the content that’s being generated, and it might be something that even surprises you. So, I see the pluses; I also see the minuses, there’s no question. Right, like if, I’m sure kids that went to school in the [00:34:00] ‘60s, if you gave them three-digit numbers to multiply each other, they probably have a higher likelihood of answering without needing a calculator.

I was at lunch yesterday with somebody that I know, and there were three of us that were technical people. And we’re just trying to compute the tip percentage. It requires your brain machinery to get restarted to compute it, right? Anyway, so, it is good and bad.

Josh: Yeah, I mean, I wish people could see how many times I have been in meetings with you or for whatever reason we’re like on the whiteboard throwing up numbers and it’s some ridiculous figure and Siva’s like, ‘Oh, it’s this’, and then I’m sitting over here on my calculator. I’m like, yeah, no, son of a gun. He was right.

Oh, that was it.

Siva: Yeah, but that’s a frame of reference you need to be in. Yeah, but, but I hear you. Yeah, it’s, uh, 

Josh: Now, you know, I’ve referenced it a few times in this podcast, Siva, but I think it’s good to bring up again. I think one of [00:35:00] my favorite memes about ChatGPT is the one you posted in our #general forever ago, and it was something to the effect of, you know, this person sitting in front of their computer showing all their coworkers, ‘Check it out, I’m going to use ChatGPT to turn these three bullet points into a nice long email that, you know, perfectly discusses all of my points.’ And then it’s, you know, the other side of the cartoon is the person receiving the email, and they’ve got a bunch of coworkers standing around them, and they’re like, ‘Check this out. I’m going to use ChatGPT to take this long email and distill it down to three bullet points.’

Siva: Exactly. And yeah, that’s productivity, right? So at some point, you just let these agents talk to each other, and we can do farming.

Josh: And then we can do farming. Exactly. See, there you go. Before we lose track of it too much, was there anything else this year that kind of surprised you? So we talked a little bit about FedNow. I want to touch on that as a not-shot here in a second too, but let’s talk a little bit about FedNow, a little bit about AI. [00:36:00] Anything else that kind of surprised you this year?

Siva: So I’m going to get out of my comfort zone a bit.

The pace at which biological innovation that’s happening, especially with the CRISPR tool that does gene editing. Obviously, it’s a very important tool for research. Somebody like my wife’s lab, they do it all the time. But it’s, it’s, it was interesting to see this year. It’s already moved into experimental treatment for genetic disorders, and high cholesterol is one example, but I think that’s the pace at which the technology has gone from the, as the science folks call it, from bench to bedside.

That was, at least for me, given that I’m not in that space. I, I, I didn’t think that it could happen this quickly. I’m sure people that are experts at it would say it did not happen [00:37:00] quickly because we’ve been working on it for 30 years, but for me, it was a good surprise that it’s already moving to treatments.

Josh: That’s another interesting example you bring up because I think a lot of times the, you know, the financial services industry gets kind of shoehorned into a slow-moving industry, right? I would also classify, you know, medical advancements in the same category. And so you’re kind of talking about how we’re seeing medical advancements, at least from, you know, your outsider’s perspective being like, wow, that pace of innovation has increased significantly. Right?

So if you think about that example and apply it to our industry, what kind of impacts do you think that has on financial services?

Siva: Yeah. So I don’t exactly know whether the technology itself will have direct impact on financial services. You know, there is this thesis that the economic viability of the planet relies on [00:38:00] continued increase in population, right, and there are all these predictions on, oh, we could support a trillion people on planet Earth. So that obviously will have significant financial impact, right?

The growth in an economic impact ecosystem, simply said, is obviously a lot more complicated than that. Simply said, it’s either because there are more people to serve or people are getting more productive with the same set of people; so, you can do more with less. Right? One or the other drives the economic growth.

And, of course, tools and so on. But fundamentally it comes to can I make you more productive? Can a group of people be more productive? So, you can do more with lesser growth of people. Or do you grow more with more people? So in that sense, I suppose, medical innovation will bring better quality of life, which could lead to productivity. It could also [00:39:00] lead to more people living longer, which is the equivalent of having more people at any given time, right? So in that sense, it has potential to impact financial services and, you know, the health and the quality of life really drives economic viability of, of regions, right?

If people are healthy and can sustain their life with good food and good health, it then changes the entire outcome. You know, for us these days, food is sometimes taken for granted, but it isn’t, it isn’t always taken for granted for a lot of our peers. So I know I veered away from the CRISPR technology.

Josh: Yeah, but I think, yeah, cause I mean the CRISPR technology, like you said, doesn’t have a direct implication to our industry, but you know, that really got me thinking, Siva. And again, [00:40:00] the older I get, the more I see myself turn into my own dad, I guess at this point. And he’s just, he’s an eternal optimist and, you know, he’s the guy that literally just wants to be a hippie sitting around the fire, making s’mores, singing Kumbaya with everybody. And, you know, like I said, the older I get, the more I’m like, you know what, that actually sounds really good.

Siva: That was really good. 

Josh: Really good. Just happy, healthy people looking out for each other, enjoying their existence on this, you know, rock hurtling around in space. And you kind of put that into perspective for me when you were talking about it because you think about some of the major areas of the quality of life that we have. And especially if we look at, you know, developed countries, like what we live in here in the U.S., and two major pillars of that are money and health.

Siva: Yeah, absolutely.

Josh: And they’re actually really tightly linked, right? If you have more money, you have better access to the things that will probably give you better health, longer [00:41:00] lifespan. But if we’re implementing technologies that make better health coverage and just better overall health for humans. That’s a good thing, and that means it’s more accessible to people. And so if we can, one, be using technology to, you know, simplify and improve people’s physical health. And then if we can do the same with their financial health, and we’re simultaneously kind of working and striving towards solving both of those problems. I mean, man, if we made it so people were financially healthy and really healthy, all we would have left to do that would be negative, Siva. Just talk crap about each other on Facebook, I guess. Like, I mean, those are two kind of the big things that really are Debbie Downers on people’s lives. And, those are two major areas where I think it’s cool to see technology companies stepping up and staying operationally efficient, right?

Like, we can help simplify these things. We can make people’s [00:42:00] lives more efficient because if your health is in a good place, if your finances are in a good place, you know, the hope is that that puts time back on people’s plates to watch their kids grow up and go to soccer games. Like, you know, spend time connecting with their community and being in the garden.

Siva: Yeah. that’s a good, that’s a good point. You’re right. I think financial health and sort of physical health are two sides of the same equation. One should lead to another. If you have better financial health, you can get, as you said, you can have better access to physical health.

And if you have better physical health, it can lead to better financial outcome, generally speaking. So, how to make sure that that is satisfied. It isn’t always, you know, e=mc2. While it’s universally true, converting energy to mass and converting mass back to energy isn’t very trivial to do.

So, same here, financial health [00:43:00] and physical health are interchangeably influential to each other. But that doesn’t mean it’s easy to accomplish. So, we all have a role to play — not because we’re in the financial industry, but generally as humans.

Josh: Yeah. Yeah. Regrettably, I missed, a very important part of your intro, Siva. You are the king of analogies.

Siva: Yeah. 

Josh: If I were to make it so that you couldn’t use an analogy, I don’t know if you could make it through a day. It’s one of the things I love about you. So, okay, let’s kind of shift gears a little bit.

So what are some of the things that were the dumb moments for you this year? What were some of the things that you’re like, ah, I called that a million miles away?

Siva: So, FedNow is absolutely, as you said earlier, one of those. And I’m glad it happened. So, the first time I heard about — not FedNow — the first time I heard about push payments, I want to say it was at least a decade ago. There is a [00:44:00] mentor friend of mine named Carol Benson. She was a co-founder of a well-known payment consulting firm called Glenbrook Partners.

She wanted to learn about NFC, and I met her, and we were talking about it, and then I was talking about how we plan to use that for building some payment capabilities. And she’s like, ‘You should work on push payments. Why are you working on these payments? It doesn’t make any sense.’ I’m like, wait. I didn’t even know what push payments was. So I said, ‘What is push payments?’ And she sort of walked me through it, and I’m like, ‘Oh, I see.’ And then we got interested in the Fasta payment task force, which then just ended up in a white paper, didn’t really go anywhere, and I’m like, this is a no-brainer, right?

This needs to happen. And, you know, the rest of the world moved forward, right? UK, India, Brazil, just some examples. And I know we talk about it all the time in India. So if you look at the U.S. [00:45:00] market, when a new payment system was launched, say Visa. Visa took 40+ years to get to 2 trillion in annual processing.

India’s UPI got there in seven years. Brazil’s PICS got there in two, right? It’s all because of the combination of a real-time authorization, which Visa/ MasterCard does real-time settlement, but they don’t, right? All the other payment methods — from checks to ACH and therefore most of Zelle — don’t do real-time settlement with a huge productivity benefit.

So, when it’s a settle bank run system, it’s the equivalent of a cooperative, you know. I don’t want to make it to imply that the Federal Reserve is a cooperative; it’s a central bank function. A central bank function has a very different purpose. It has to have the impact on the citizenry.

So, it just brings a very different flavor. [00:46:00] So it was a no-brainer. So, I was a little surprised when some of the initiatives were sort of defocusing that effort when the rest of the world had moved forward. And I sort of equated that to, you know, at some point, we’ll solve it. I hope we solve it, and I’m glad we solved it.

We still have more work to do, for the Federal Reserve real-time payment system, which the Federal Reserve calls FedNow.

Josh: Hmm.

Siva: Because it’s a no-brainer, really. I mean, why would you want anything else? A real-time payment system that requires no reconciliation or very infinite, infinitesimally small reconciliation cost.

So what do you want?

Josh: Well, okay. I think, a part of the problem when I have podcast guests on that I talk to all the time is that so many times they’re like, ‘I know exactly what you’re thinking in your head, and you’re not saying it because you’ve probably told it to me 6 million times, and you’re like, he doesn’t want to hear this again.’

But I think for the value of our listeners, I think I really want you to talk about [00:47:00] why did you see this one coming like a freight train in terms of, you know, kind of talk me through looking at the other examples of how payments have been done in other countries and then how when you look at kind of your four quadrants of, you know, cost, speed, in the U.S., we were missing the obvious one.

So when you kind of look at global data and what was happening and then you look at the opportunity, why was this such a no-brainer?

Siva: Yeah, that’s a good point, Josh. I assume when I’m talking to Josh, I forgot that we were on a podcast. So, you know, if you were to really look at it, let’s look at the end state, right? we don’t know how we’re going to get there. There are going to be hurdles. The end state is money can move real time and guarantee that the money was present before it moved.

Which basically means people can earn wages for work that they finished. No longer do you need to get a paycheck, whether you’re a contractor or an employee. There is no reason for you to get [00:48:00] a paycheck twice a month. You can get it once a day, right? Who would say, ‘No, I don’t want that.’ Similarly, if you are a consumer that needs to pay somebody for your electric utility, you don’t have to pay that money three days in advance, four days in advance. You can pay it literally. And remember 7, right? That’s the other thing. Today, if you do ACH or wire, you have to be very mindful of is the network even operational, right? Because it may not be. Over the weekends, FedWire is shut down and with FedNow being 24/7/365, you could pay your bills literally the second it’s going to be due. So, who would not want that, right? Talk about efficiency, that is the most efficient thing with the most valuable resource all of us have, from a sort of — I don’t mean other resources are not important — for your day-to-day living, we’ve all agreed that currency of exchange is going to be money and not bartering [00:49:00] system, right?

So, if you were to look at it from that perspective, forget all of the other things we need to build to get there, why wouldn’t an economy want it? It makes no sense. It just increases the velocity of money. I mean, understood that velocity of money alone is not the only contributor of GDP from a direct perspective, but it’s an important aspect that contributes to GDP.

It contributes wellness, financial wellness of every single individual, right? Because if you pay your bills late, you gotta … and your pay paycheck comes. Let’s say paycheck is due to you at a particular date that may have no relationship to when you have to pay your bills, right? That mismatch causes a whole bunch of pain.

You can completely eliminate it. So who would not want that? Right? So if you were to look at it from that perspective. It’s a no-brainer. It has to happen, and in our market, especially, we have way too many payment [00:50:00] instruments that are in that speed versus cost. We have real-time, we have really fast money movement methods, unfortunately not 24/7/365. Like Fedwire, that’s expensive. You can’t really use it for everything. So that’s on that quadrant. It’s fast and expensive. And then you have slow and cheap, like ACH and checks, and then, you know, the card networks are, in my view, they are expensive and slow, right? You have slow and cheap, you have fast and expensive, and then you have slow and expensive.

We don’t have slow and cheap. I don’t mean cheap in a negative way, I mean low cost. 

Josh: Fast and cheap? 

Siva: I’m sorry, fast and cheap, sorry. So when you have that, that’s the only method of payment you’ll need because you can always slow it down if you want, and if you believe it can garner higher fees, increase the cost, right?

So it’s the most versatile [00:51:00] payment solution we can have. And I’m a fan of a central bank run payment solution as opposed to not, because it truly creates a public-private cooperative, right? And I don’t think payment solutions for the future should be purely a private enterprise or purely a public enterprise. It’s one of those things, right? Just like we were talking about credit unions and community banks coming from two sides of the equation, a network that’s got a public-private partnership — like what the rest of the world has proven — will be very successful here.

So in that sense, it’s a no-brainer. Why would you not want to do it? So in that, I’m so excited that it has happened now.

Josh: So, you kind of touched on this a little bit earlier, Siva, but will you touch back on, one of the other reasons why, you know, this kind of seemed like a no-brainer on the way it’s actually been implemented here [00:52:00] is that we had some examples and some use cases from across the globe. So do you want to maybe talk about some of the examples of how other payments systems, modern payments systems have been implemented in other — kind of what the pluses and minuses were and what were the learnings on how.

Siva: Yeah, so I can’t speak about all of the pluses and minuses. You know, if you take a market like India and Brazil, It was almost like they leapfrogged the other settlement instruments that we had to build here, right? They went from mostly cash economy to, literally overnight, mostly digital economy.

And they certainly solved it very differently than, than we did. Again, I can’t speak for all implementations, but I can certainly speak for Brazil and India. Their needs were different. Their starting points were different. And they were, both of them were quite strategic in [00:53:00] executing towards an identity-focused solution.

So by design, it had some of the benefits of security pre-built in. Now, one thing that should be said about push versus pull payments, if it’s truly a push payment, unlike a pull payment like checks or ACH that’s both push and pull, or the card networks, which is primarily pull. Pull equates to, hey, I need your money. So I’m the merchant, Josh walks in, you have to give me your identity so I can pull money from you.

So the source of funds identity is disclosed, and then therefore you need a lot of security around it, right? But in the case of a push system, it’s the destination of funds identity that’s disclosed, right? I tell you, George, this is my account, send me money. I don’t care if this account needs that level of protection.

I [00:54:00] still need to protect it, but I don’t need that level of protection. So, that was a very important leapfrog for these geographies. Now, take that and apply it to the U.S. Most people that you talk to would think that they already have it. Well, I can send money. I have Zelle. I can send money, but the underlying machinery is a pretend machinery, right?

It’s not the actual machinery that these other geographies have built. So, in that sense, our starting points are different. Right? We really haven’t solved the identity problem, even though we still gain from the benefit of push payment where one of the important frauds have to worry about is account takeover fraud.

So our learnings are going to be quite different because our starting points are different. End state for all of us is exactly the same. And I think, I don’t know how accurate this is, so I’ll state that disclaimer before saying it, because it’s [00:55:00] second-hand information. There is sufficient indication that Google’s experience in India — by building a wallet service as a private industry on the central bank run rails through a cooperative that the central bank helped start — really was an important learning experience for an important player in our marketplace, even though they’re not a financial institution.

So, not that our ecosystem did not know the value, but I think finally there is acknowledgement of it. It’s no different than where we started with mobile phones. Right? Here, there was no necessity for mobile phones as a tool to call somebody was never viewed that way because the landline infrastructure in the U.S. was top-notch. Like, you could order a phone, and you could get a phone number assigned to you and a phone delivered and operational no matter where you were, literally within hours. That wasn’t the case in the rest of the world. You could wait for years [00:56:00] to get a phone line, right? So mobile technology sort of leapfrogged that need and then that ended up becoming The Star Trek tricorder, if you will, for us today.

Right? So I think I feel like the starting points and therefore the steps that rest of the geography took to for massive scale is going to be different from — is different from our starting point and the steps we’re going to have to take, but the end state is the same. End state is all the benefits of push payments. That’s real-time, both for authorization and settlement, virtually no reconciliation, ultra-low cost, 24/7/365. I mean, I don’t know what else a payment system will need.

Josh: I want to be careful of, I don’t want folks to think this is just a FedNow sales pitch podcast, but it’s arguably the biggest [00:57:00] piece of news that happened in our industry this year. So it’s one of the big reasons why we’re talking about it. And I, I want to actually talk about, coming back to some of the use cases you were talking about Siva and, again, kind of going back to where we started with this whole thing about that ideal state of kind of a Kumbaya world where we’re less focused on some of these ancillary problems in our lives, like managing our finances and cashflow and being able to focus on the things that really matter, like making breakfast with the family. And so I want to touch on some of the things like earned wage access that you were talking about earlier, but just a quick kind of detour. So what else happened in the industry this year that you felt like was something that, you know, we kind of should have seen coming or, like, you know, was a really big impact on our industry this year that needed to happen?

Siva: Well, we know what happened at Silicon Valley Bank. It’s an interesting learning, right, when all [00:58:00] cogs of the wheel or all legs of the stool do their function, and you don’t take things for granted, because that can happen, right, like the trivial things you take it for granted, you know. Obviously, hindsight is easy to say sitting here, but the concentration risk. I mean, the biggest thing most institutions are worried about — whether you’re a private company in financial services, outside financial services, public company — the biggest question you ask yourself is what is my concentration risk and what’s going to happen if that risk gets manifested, and I can’t believe everybody really didn’t pay attention to it at Silicon Valley, right?

They had a significant concentration risk. And, you know, of course, now we understand why it wasn’t getting the attention that it did. Well, maybe not understand the steps that led to it more so than understand why the steps led [00:59:00] to it. It shouldn’t have. So that was a, it’s not a. In some ways, I suppose it was a learning, therefore, positive for the future.

Right? Every failure is unique. And taking things for granted is almost always your number one problem you can avoid, right? I remember in my prior life when I was in Intel, building systems. It was a research system, so it was not commercial systems. And during my Ph.D. thesis work, when we would debug systems in the lab, I would say 90% of the time, the issue was the power supply, in one way or another.

I mean, I don’t want to trivialize power supply because supplying power to silicon isn’t a trivial thing. However, the point is it’s not that we didn’t know it, we knew it. We knew it’s a problem, but [01:00:00] sometimes you take things for granted that somebody solved it, and I think, in financial services, that’s got serious impact to people’s lives. Right?

So, being able to — you can never avoid everything, but being able to react to it. Understood that nobody expected interest rates to go up this much, right? But it did.

Josh: You know, that’s something else I wanted to pick your brain on and give people an opportunity to watch your brain think through. And I’m going to preface this by saying, no, Siva, I’m not going to end this by asking for like stock tips or anything. And I’m not holding you to any of this, but, you know, this last year has absolutely been wild to watch the pendulum swing of, you know, you went from being able to get a first-time homebuyer’s mortgage, with very little down at sub 3% for a 30-year fixed mortgage to now, you’re hard pressed to find something under 7%. [01:01:00] You know, at the same time, we’ve got a massive margin squeeze specifically on, you know, community financial institutions in that cost of capital is extremely high, but deposits are also very low.

So we’re trying to get deposits while meeting razor-thin margins. So talk to me a little bit about just the state of the economy. What’s happened in these pendulum swings and in your humble opinion, you know, what are some of the impacts and ramifications that are going to happen across our industry? 

Siva: Institutions that are outliers on all of these parameters. So, I would say it’s a pretty choppy marketplace, and it will be for some time to come. I think economists really predict everything possible and usually are higher percent accurate after it has [01:02:00] happened.

So, I think what we, what we really need to do as an ecosystem is to make sure that, under the current environment, if it were to last longer, you have a strategy to come out positive on the other side, or at least neutral on the other side. I don’t think there is anything else we could do at the moment.

I remember seeing that for the first time, or maybe it has happened in the past, but my understanding is, for the first time, if you really look at the survey of all of the Federal Reserve predictions of asking people that are within the Federal Reserve community what that prediction of interest rates would be, often, the prediction of interest — it’s difficult to predict the future, right, way out in the future. So, the farther you go, the more the disagreement used to be, and the near-term interest speculations were, or predictions were more [01:03:00] tightly coupled, but in the recent past it has been the opposite.

Like there is a lot of consensus on where, where everything would be in the future, but it’s noisy getting there, right? One would think that future is difficult to predict, present is easier to predict. Like six months versus 12 months versus 36 months. There was a lot more consensus on what will be 36 months from now rather than what will be six months from now.

So basically, if you’re a financial institution or a company that serves financial institutions, even an individual that’s thinking about finances, I think it would probably be ideal to just make sure that you can live through the choppy cycles because steady state is coming. It has to come. I know, I know that was not a stock tip.

Josh: No, it is because when you start thinking about just, you know, preservation of ability to do business and then couple that with a lot of the topic of what comes up on this podcast so much, which [01:04:00] is innovation and evolution and, you know, being able to meet consumers expectations. Those are really two hard budding forces right now.

So this is a really big problem that our industry is facing to solve, and I want to come back to that, Siva, and talk about kind of use case-specific disruption and specifically, for good. And you know where I’m going with that. But, before I do, I want to kind of give you open forum. Is there anything else that, maybe has happened this year or is just top of mind for you? Like what’s interesting to you? What’s keeping you up at night? What are you thinking about? Is there something that we’ve missed?

Siva: So maybe I’ll talk about what I think is going to be very narrowly focused on sort of the day-to-day work that we do in our little industry, which is to build digital tools for consumers. I think what’s exciting is really, and I mentioned about[01:05:00] Atomic Habits book by a gentleman named James Clear.

It was published, I think, about a decade ago. Oh, no, not a decade ago. Last, last decade, talks about, you know, the way you build good habits is to create friction for bad habits and make it easier for good habits, right? Or, you know, don’t really think about major habit changes, just tiny improvements towards your end state, right?

The only reason I’m saying that is if you were to think about the few topics that we discussed, AI, the natural language impact of it, and the financial services. You know, our CTO Nizar has an interesting way of sort of outlining. You know, we still go to a branch, right? A phone is in your pocket.

Instead of going to the branch, you still have to take the phone, open it up, and interact, right? You’re clicking a bunch of things. And so, it’s really sort of seen as I’m visiting a digital branch, but [01:06:00] why? Why should it be that way? Shouldn’t it be the device is always in my pocket? I need to be able to nudge you towards those gaps that we explained earlier in the beginning of our discussion.

600 billion dollars in interest income has been lost by American households. and 60+% live paycheck to paycheck. Why can’t I nudge habits? Because I have this tool in my pocket to help you get to a better place. Rather than me having to click through seven things to do something, maybe it’s something as simple as saying yes or no.

A simple example, I’m driving in the car, my phone knows I’m in the car. Why can’t my financial agent just call me and say, ‘Hey Josh, your paycheck came. Can I put 1% in your savings account? Right? It’s a perfect time to do it. I’m using that as an example. I don’t know if that’s the right example, wrong example.

So, I think that, that is an area where there could be some, [01:07:00] some change in the marketplace, some innovation in the marketplace.

Josh: That kind of brings me back to what I just wanted to talk to you about. Right. Which is, if I look back on the last almost a hundred episodes of this podcast, I would say one of the number one things that we have talked about is transformation and disruption. And, you know, when you look at transformation and disruption, there’s disruption for bad, there’s disruption for good, there’s disruption just for the sake of disruption. So what are the things that are going to provide positive disruption to our industry? And, you know, sometimes that takes almost a cannibalism of your own business, right? I mean, how many times have we used the whole, like Blockbuster and Netflix example, right? And mark my words, one day, I am going to get a guest from Domino’s Pizza on this podcast. Talk about how they disrupted their own business, found a beautiful blend of physical and digital, [01:08:00] and learned to connect with their consumers, and radically changed their profitability because they disrupted themselves. So when we look at kind of our industry, and we look at some of the things that are disrupting it, I mean, I hate to say it, but it does bring me back to the conversation we were having about FedNow.

Right?

Like this is very specific use case-based positive disruption. We’re making money movement that’s fast, cheap, easy to reconcile, high-security levels, right? And tons of different use cases. And I really do think it’s important because I feel like I’ve had so many conversations around this topic — internally, externally, you name it, with personal friend. And one of the big things that I think really gets people to perk up is understanding what the actual real-world implications of some of these use cases are and why this is not just some new-fangled payment reel, right? Like the underlying impact to real humans is [01:09:00] actually the bigger story here and you use the example of earned wage access, right? I mean, we know the stats, we know them and we talk about them ad nauseam and I don’t think we’ve done everything in our power to solve for the things that were actually solvable when we talk about how many Americans live paycheck to paycheck and how the fact that I get paid on the first, but my electric bill is due on the 30th is a problem when I live paycheck to paycheck, right? 

So being able to say, well, I get paid on the 1st, the 2nd, the 3rd, the 4th, the 5th, the 6th, the 7th, and I can make my 30th electric payment at 11:59 PM on the 30th. And I’m good. That’s actual, that has an impact. That does impact my family, my friends, the people that I know that live paycheck to paycheck. So I think it’s, it’d be really valuable for you to kind of talk through how [01:10:00] use case-based positive disruption and, you know, how technology is really facilitating that and, you know, using this as a specific example, can actually have real-world positive impacts for people and why these things are so important. It’s literally not just about trying to make a buck, like if we really and truly want to rest our head on our pillows for the very last time, when we take our last breath on this earth, and we want to look back and say, I did some good. Like, this is a clear example of how you can do that.

Yeah.

Siva: I live in Portland, but here we are on a digital call, right? Digital just makes everything productive. Not that there aren’t any disadvantages with the digital, you know, we know all the social media impact, bad impact, among the good.

So, I don’t want to make it sound like digital is everything, ’cause we can’t eat ones and [01:11:00] zeros. but, but the digital impact for financial services that FedNow is gonna bring is gonna be dramatic, right? You can actually be more efficient. You don’t need to open lots and lots of branches — not that branches are not important, they are — but an institution doesn’t have to purely rely on that choice.

You can bring true efficiencies. You can make choices to move ACH payment instruments. If you choose check payment instruments, although there are some, the Reg J versus Reg E stuff, we’ll talk about that at a later time. If you can solve, you can get past those. You can eliminate paper, you don’t have to show up at a branch to fill out a form or drop off a check.

I mean, yeah, you don’t have to drop off a check even today, you can take a picture, but that doesn’t apply to everybody, right? If you cross a threshold or your business is still taking your checks. So, FedNow will just fundamentally change all of [01:12:00] it, right? You’re right, earned wages, it’s got meaningful impact in everybody’s life.

Being able to pay just in time has meaningful impact in everybody’s lives. But this would be even larger than that in collapsing all of these various payment methods that we have into one. Now, you could say, doesn’t that cause concentration risk? One of the things that we talked about, but I mean, we’re talking about, a central currency like the U.S. dollar.

So, for our geography, within the influence of the dollar and therefore a dollar-based settlement system, will bring stability for the marketplace because of the productivity that it’s going to bring. And our economic growth, not just for the United States, but the rest of the world, really truly is driven through productivity.

Right? And, [01:13:00] money is the most common denominator for every business. So it’s gonna bring the scale of productivity very similar to what computers brought. I may be overselling it, but, you know, money exchanging between the center and the recipient is a very important aspect for the computer industry too.

So I would almost think that this got an impact across the board and has the potential to bring the kind of scale and productivity that, not only from a financial institution point of view, but from an account holder perspective, their businesses, their families, it’s going to have universal. Well, I was, I was told by one of my thesis advisors, be careful when you use the word universal, because the universe is a lot bigger than what each of us think.

So it’ll certainly have important impact in most of our lives for lots of good things. Now, I should, I should add though, this is going to take money off the table for incumbents. There [01:14:00] are some incumbents where money is going to come off the table. Unlike in the other geographies where they’re doing cash replacement more so than moving one form of digital tool to a better form of digital tool.

And there is just a lot of noise and incorrect information like, Oh, I don’t have a real-time core to be able to do it. You don’t need anything. Your system as-is can participate in FedNow, and you can get real-time payments. All you really need is to have a master account of the Federal Reserve, which as a financial institution you have.

And you need to talk to the Federal Reserve to sign up to be on the FedNow network on FedWire. I’m sorry, FedNow network on the Fed connection that you already have, right? It’s not the same as FedWire. So it’s the same, it’s through the same Fed line connection. Financial institutions will know what I mean by those terms if you listen to it and it doesn’t make sense.

But I mean, it’s going to be, if you don’t have it in two years, you’re going to be left [01:15:00] behind.

Josh: these are, I mean, this is one of the reasons why I wanted to talk to you about, about this in specific, right? I mean, this is, like I said, probably arguably the biggest piece of advancement in news in our industry in 2023, was the successful launch of FedNow. And it really is because of the impacts that it’s going to have to, you know, real people and the people who serve those people and want to see them be financially successful and healthy and stable and efficient.

And it’s a very delicate, careful balance, right? And even just kind of how we talk about it on this podcast. Look, there’s going to be some people that aren’t going to be too terribly happy about that.

Siva: Yeah. Yeah. 

Josh: People’s margin, but, you know, arguably it’s the right thing to do. But there’s going to be challenges that are different than other geographies have faced.

Siva: Right. Yeah, it’s the right thing to do if you just look at the end state. How we get there might be challenging. [01:16:00] And, you know, I don’t think there is any landline phone manufacturer that makes mobile phones. So, I mean, some of them do provide technologies, underlying technology behind it. But, there’ll be winners and losers.

Don’t end up with a duopoly, and I think the movement was primarily championed by community banks. You know, here’s one thing, right? The congressional hearing, you know. Not that credit unions are not excited about FedNow. In fact, the very first payment on the FedNow network was a credit union, star one credit union, that we worked with.

But if you go look at the congressional hearing, the primary, one of the primary participants was a community bank, alongside Carol Benson from Glenbrook Partners who lives in Portland.

Josh: Siva, I’d be remiss if I didn’t ask you, what are your predictions for 2024? We’re about to, uh, [01:17:00] finish this circle around the sun. So, what do we have kind of on the horizon for next year? What kind of things are you looking out for? What are you excited for? What are you nervous about?

Siva: So I’m nervous about the outside the financial ecosystem, what AI influence for the adversaries are going to be, and what AI itself going to do to itself because I think there is a reasonable thing to say that we don’t understand how it works. So that’s concerning the…

Josh: Sorry, before you go off of that, have you listened to — love them or hate them, both of them — Joe Rogan and Elon Musk talk about AI and if it gets to the point where it finally realizes these humans are a bunch of idiots, and they kind of do a bunch of damage to themselves. Honestly, if we want to save humans, we need to get rid of a lot of the humans. And that it’ll evolve to realize it needs to just slim us down so that we realize [01:18:00] we should all just be happy together.

Siva: Yeah, I love-hate both of them. So I, yeah. Well, it’s easy to say when you sit in the ivory tower, you can predict those. So, I, I don’t, yeah, I, I don’t know how to react to it. I need to think about it. For next year, I mean, both structural issues at OpenAI as an important player, what Google reacts and takes their technology forward, it remains to be seen.

That’s, that’s both scary to exciting, that entire spectrum. In terms of, certainly very positive on FedNow for all of the reasons we talked about, and my prediction is four digit number of institutions will be live on FedNow by next year. And in two years time, whoever is not not live on FedNow probably won’t have a business in five years because it’ll be just too late. 

Now, I’m being extreme, obviously,[01:19:00] but, you know, just remember. This system scaled at 20 times faster as a payment system that moves slow when you compare card networks to push networks. So think of anything in your industry and accelerate it 20 times, and you decide what you need to do.

Right? So that’s predominantly exciting, maybe scary for some. So I would say I expect if somebody says, by next year this time, they’re going to wait and see what happens in FedNow, you can assume they’re irrelevant. So I would say those two things, and of course, there is overlap of how natural language impacts financial services.

Sometimes it’s easy to get carried away and assume a lot of things in the hype cycle might happen, but taking baby steps is probably a good approach, especially in a regulated industry. [01:20:00] We don’t want hallucinations in recommendations as a financial institution.

Josh: So outside of those two things, Siva, is there anything else that kind of has you excited for the potential of next year or that you’re really looking forward to?

Siva: Well, I’m hoping the, you know, there is macroeconomic issues of the interest rate volatility for our geography. And then, of course, globally, I’m hoping that two wars get to, I mean, I hope resolution happens overnight, but clearly, these are challenging geopolitical issues that we need a solution and we need to provide, we need. You know, I don’t exactly know, that’s not my space, but it certainly concerns me that it could have lasting impact if it’s not resolved.

Josh: Yeah, you know, that’s one of the, I think that’s also, if you just take our industry out of it, right? I mean, I’m [01:21:00] fairly young for this planet, and I haven’t been through any of the world wars, but, you know, we live in a really comfortable time, especially here in America. I mean, let’s be honest here, folks. We don’t face a lot of adversity in America compared to the rest of the world. And I think a lot of times we, we get a little sheltered in the thought that, holy crap, like war is a real thing. This really happens. And, you know, we’re over here talking about the impacts of, you know, being able to help people paycheck to paycheck. And for some, that’s even their last concern. They’re just wondering if their house is going to get bombed at night, right?

Like, that’s a very different mindset. And if we’re bringing this all the way back to the human level, I mean, that’s the most horrific thing that we can ever think about on our, on a human level is that people are afraid for their lives. And just the thought that in my lifetime, I would see this type of, you know, war at scale in 2023, where you think we’d have enough history to look [01:22:00] back on and go, man, we should probably just be good to each other. Like, it’s really and truly not that hard, but apparently, it is that hard. And like you said, there’s some really complex issues at play, but just looking back and thinking that we would see this, at this magnitude and in my lifetime, is just heartbreaking. And I think it does really kind of set the stage for, for what’s important. And I think things like this are, are great examples of how, you know, those have very direct impacts for the people involved. Obviously, they also have trickle impacts across the entire globe, but I think it’s a reminder of why. You know, I don’t have the ability to necessarily control what’s happening in those two wars, but man, it sure makes me a heck of a lot more motivated to try and at least be a good person in my circle and, and try and do things in an industry that’s going to have an impact, in whatever small way I can.

So I think, again, that kind of brings us back to what we’ve been talking a lot about is just I think there’s a lot of opportunities to do some good in real people’s lives in this industry. And I think that’s a really [01:23:00] powerful thing.

Siva: Yeah, absolutely.

Josh: Well, so I can’t believe, you know, I let it go this long without having you as a guest.

Siva: Now, that was the mission, right? This is not talking business. 

Josh: Yeah, but, I mean, like I said, you’re one of my favorite humans to talk to. And I always feel like I walk away with such a profound and unique, just look at you. Any topic we touch on. So I appreciate you being on the podcast finally.

Siva: Well, I have to say this, doing a podcast isn’t very trivial, right? Because it needs to be entertaining, genuine, and it needs to be true to its mission because it’s relatively easy, as you probably found out through these many episodes, it’s easy to get incentives to do something else.

So I really appreciate you and the way you’ve built the podcast and attracted people to come talk in the [01:24:00] community that we have some influence in. So, I can’t be more thankful enough. And when you did the first ad, which was a not-for-profit ad, that just the professionalism of how the ad was done was awesome, right?

So it’s, yeah, I mean, this is one of those podcasts for me. It’s on my list. I have to listen to it. It gets me. It gives me alerts. It’s exciting to see you grow through it. So, yeah, thanks for having me.

Josh: Well, that reminds me, Siva, actually, I should call out, you know, for the folks that have stuck with us to the very end of this. Hey, by the time you listen to this, the holidays will probably be over, but if there’s somebody on your list, you forgot to get something for, you probably should send them a bag of coffee and donate five bucks to credit unions for kids to go to javaforkids.org and buy some coffee and do some good while you’re at it. But Siva, before I let you go, I have two final questions for you. And we’ll have a little fun with the second one. Uh, since this is the first time I’ve actually had somebody from Tyfone on, but [01:25:00] the first one is just, if people want to connect with you and interact with you, where can they find you?

How can they get ahold of you? 

Siva: Well, I think 95% of your guests say this. LinkedIn is the best way for you to get a hold of me, and I usually respond within a few days on LinkedIn. I can’t always say I respond instantly. So just be patient if you reach out to me on LinkedIn. I will get to you.

Josh: And then the last one that I always ask everybody is if people want to learn a little bit more about your company and what you do, how would they do that, Siva?

Yeah, I think if you found this podcast, you probably know how to find us, but,

Siva: Yeah, it’s, you know, tyfone.com. Just to be, just to answer the question because the one I was told answers the question that has been [01:26:00] asked. So, that’s spelled tyfone.com. And if you still can’t find it, reach out to me on LinkedIn. I’ll tell you where it is.

Josh: But, in all seriousness, you know, I think, the opportunity that this podcast has given me to personally grow, learn, connect. I say it a million times, but it’s one of my favorite things in life is just to see other people’s unique perspectives. What this podcast has given me in terms of that, and then, you know, obviously what it’s been able to, hopefully, do for others by sharing that has just been beautiful.

So, not that necessarily it needs to be said, but so that it is said, I just want to thank you and this company for giving me the platform to be able to do this. So, I waited almost a hundred episodes to give you a chance to actually come on. But you really and truly have been the biggest fan and supporter of this, and it’s because I know where your heart is, Siva. And I think that’s something that’s really important to me [01:27:00] personally, and I think that’s something that’s really throughout our entire organization is that, you know, the heart matters.

And we really and truly do want to see this industry evolve and grow to serve people and to take care of people and to look out for the greater good. And so I think this podcast and, you know, kind of the way it has been done here at Tyfone is a prime example of that. So just thank you for giving me this opportunity to do this.

And, you know, I’m sure the rest of the company just thinks I goof off and do podcasts all the time for fun. And, uh, somehow I get a job out of the deal, but it really and truly is something that I absolutely love to do.

Siva: Well, podcast is just one of the things that you do and you do a great job of it. Thank you, Josh. 

Josh: thanks for finally being a guest, Siva. Always a pleasure.

Siva: Same here.

​[01:28:00]