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U.S. Fintech & Payments Crash Course

fintechgtm.substack.com

U.S. Fintech & Payments Crash Course

If you’re new to the world of fintech and payments, or you’re hiring people who are new to the industry, this post will help with onboarding.

Eduardo Lopez
Jul 19, 2022
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U.S. Fintech & Payments Crash Course

fintechgtm.substack.com

The learning curve is steep for new hires at fintech and payments startups. It can feel like your coworkers are talking in code, constantly using terms you might have never heard before like FBO, DDA, VBANs, Durbin-Exempt, etc.

Even googling these terms can be a pain because you need to understand 3-5 other concepts just to fully grasp the definitions.

This is a common problem and the reason why so many job posts say “experience in fintech or financial services preferred.”

But the best person for the job doesn’t always have a fintech background. That’s why many startups now have internal glossaries and some even send their new hires copies of “Payment Systems in the U.S.” or “The Anatomy of the Swipe”.

In this post, I share the reading list I send to new hires to help them get up to speed on the industry. While the list can seem long, it should be easy to knock out during the first week of onboarding.

I recommend taking notes and writing down questions as you go. You can send these Qs to your internal subject matter experts and speed up your learning.

Books that explain the basics

Field Guide to Global Payments by Sophia Goldberg. This book will give you a solid foundation of the payments space. It’s a super easy read that’s written like a series of blog posts. I think Sophia actually considered writing a blog/newsletter at first and instead opted to self-publish a book.

Sophia used to be a product manager at Adyen and has recently founded a fintech startup. She really knows her stuff. Lithic's general counsel Matt Janiga (former Stripe, Square, Capital One) wrote the chapter on compliance.

The Anatomy of the Swipe by Ahmed Siddiqui. This is another easy read that’s packed with a ton of illustrations. It’s practically a graphic novel. When Ahmed joined Marqeta, he didn’t have any experience in the space and found learning about cards difficult. Anatomy of the Swipe is the book he wish he had when he first got started.

Ahmed was previously the VP of product management at Marqeta and is now a product leader at Branch.

Payments Systems in the U.S. by Carol Coye Benson. This book is like the US payments encyclopedia. It’s extremely informational and a great resource, but I won’t sugar coat it. This book is as boring as watching paint dry lol. Sorry, Carol.

Banking-as-a-Service

BaaS providers partner with banks to make their products available to tech companies over an API. This allows companies to easily embed bank accounts, cards, and loans directly into their software.

You can also use the APIs to manage and customize these products (e.g. creating authorization rules, setting spending limits, checking balances).

If you want to understand most fintech use cases today, you need to learn a bit about BaaS and API banking.

  • Introduction to Banking-as-a-Service by Stripe

  • Making sense of banking infrastructure by Unit

  • What is Banking-as-a-Service? by Treasury Prime

  • The New Nomenclature Behind the BaaS Partnership Boom by Alloy Labs

  • Every Company Will Be a Fintech Company by a16z

  • What is Embedded Finance? by Treasury Prime

  • How API Banking Is Changing How People Pay by Privacy.com

  • Revenues in Financial Features by Unit

  • Buyers Guide to Banking as a Service by Tearsheet

  • How Fintech Scales Vertical SaaS businesses by a16z

  • Fintech dictionary by Moov

Cards

Cards are pretty complex. There are several different card constructs (debit, prepaid, unsecured/secured credit, and charge) and card types (physical, virtual, tokenized).

Each of these function differently and have their own rules, regulations, fees, and limitations. And that’s not even getting into the long list of parties that are involved in making these product function or the various use cases.

My Payment Cards Deep Dive will help you get up to speed quickly. Lithic, Unit and Treasury Prime also have some great content on this topic, which I feature below.

  • The Anatomy of the Swipe (Blog version)

  • How card transactions work by Privacy.com

  • Children of Durbin by Ayokunle Omojola

  • Fintech and Regulatory Arbitrage by Tanay Jaipuria

  • Interchange Guide: How Fintechs Earn Revenue from Cards by Lithic

  • Interchange in 1,000 Words by Matt Brown

  • Guide to Interchange Revenue by Unit

  • How do virtual cards work? by Treasury Prime

  • Guide to Digital Wallets and Tokenized Cards by Lithic

  • Credit Card as a Service: Part 1 Part 2 Part 3 by Cokie Hasiotis

  • BNPL: The Unbundling of Credit Cards by Lithic

  • BNPL Research Guide by Fingerprint

Payments

I included the best resources on payments up top in the books section. The blogs below help provide additional context, but payments is a really huge topic that’s constantly evolving.

I’m going to write explainers for this section, but I recommend reading Sophia’s book if you’re looking for a primer on payments.

  • The innovation of the Payment Facilitator (PayFac) model by Jonathan Ching

  • What is a Payment Gateway? by Bansi Shah

  • Guide to online payments by GoCardless

  • What is an EFT Payment? by Authorize.net

  • What is ACH? by Plaid

  • An introduction to ACH for builders by Sardine

  • What is a Wire Transfer? by Modern Treasury

  • What is Bill Pay? by Lendingtree

  • What is an eCheck? by GoCardless

  • What is a Book Transfer? by Investopedia

Compliance and Fraud

For a long time, compliance content was surface level and there weren’t a ton of in-depth resources for fintech professionals. We’ve been working to change that at Lithic.

We hired some of the best compliance professionals in the business and they’re not shy about sharing their knowledge. Our product counsel Reggie is also the author of the popular Fintech Law TLDR newsletter. You should check it out and subscribe to it.

  • Explainer on Fintech AML requirements by Lithic

  • How are Neobanks Regulated by Treasury Prime

  • TLDR on AML and BSA by Reggie Young

  • TLDR on Payments Laws by Reggie Young

  • Explainer on EFTA and Reg E by Lithic

  • Guide to Payment Card Fraud by Lithic

  • Guide to Building a Compliance Program by Lithic

  • Guide to Building U.S. KYC/KYB Operations by Lithic

  • KYC Guide for better onboarding by Unit

  • Fintech Guide to Chargebacks by Lithic

If you need any legal templates, we published a free open library of standard legal docs for card programs at Lithic.

Banking

In the US, you can’t open up a bank or offer banking products unless you have a bank charter (which aren’t easy to get). Neobanks like Chime aren’t really banks, they are fintechs that are built on top of other banks.

I’m not going to go too deep into banking here, but these terms come up often if you work with or at a BaaS provider. I’ll write some explainers on banking as it relates to fintech in later posts.

  • What is a Core Banking System by SDK.finance

  • What is an FBO account by Modern Treasury

  • What are Virtual Accounts by Modern Treasury

  • What is the Flow of Funds by Modern Treasury

  • What is a Banking API by Modern Treasury

  • What is Remote Deposit Capture by FDIC

Crypto

Crypto is really an industry of its own and I won’t get too deep into cryptocurrencies or web3 in this section. Instead, these articles help you understand how crypto comes up in the fintech space.

  • Crypto and Fintech by Lithic

  • Crypto Partnering with Banks

  • What Are Cryptocurrency On/Off Ramps by Master Ventures

  • How Companies Build a Fiat Onramp and Offramp by Treasury Prime

  • What is a DeFi Platform by Prime Trust

  • How are crypto trades settled? by Prime Trust

  • Custodying digital assets by Prime Trust

Recommend any other resources?

Feel free to share any links you think I should add to this list in the comments section.

Cheers,

Eduardo


About me

👋🏽 Hey, my name is Eduardo and I lead product marketing at Lithic. I’ve spent the last few years helping fintech startups nail their GTM strategy and marketing.

Connect with me on LinkedIn and Twitter.

Subscribe to my newsletter to receive more explainers and fintech resources.

And if you found this post useful, please share it on social and tag me 😎

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Share this post

U.S. Fintech & Payments Crash Course

fintechgtm.substack.com
11 Comments
Bruno Werneck de Almeida
Jan 28·edited Jan 28Liked by Eduardo Lopez

We need more of this Eduardo.

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Parth Batra
Jul 20, 2022·edited Jul 20, 2022Liked by Eduardo Lopez

Hey Eduardo,

Thank you for curating this. Any good reads on cross border payments as well?

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