This is a massive opportunity in the US, but it’s an even bigger opportunity worldwide. Regulation and payment systems differ around the world. In some cases, the financial services stack is entirely different. For example, a country like Mexico, where 80 percent of payments are in cash, needs a layer that incorporates cash payments into the online system. What’s so unique about this disruption is that, with most large industry changes, oftentimes there’s one winner and many losers. But in this case, everyone has the opportunity to participate and improve significantly. For startups, we’ve seen some of the examples of the new infrastructure companies that are being built, and there are many more opportunities. But there are even more opportunities in the thousands of experiments that are going be unleashed on top of this infrastructure.

This is also the case with fraudsters. Many of us think of fraud as stolen identities, but there’s actually a much more pernicious type of fraud: completely fabricated or synthetic identities. Here’s what the data scientists at a lending company discovered. While looking through the database one day, they noticed a rather obscure name linked to 13 different social security numbers. So they checked which of the name/SSN pairs had a credit profile. Turns out, all 13 of them had credit profiles! This is easier to do than you might think. You can pick almost any nine-digit number that doesn’t start with nine at random and it could be a legitimate social security number. Say you then go apply for a loan. The first time, the lender will ping the credit bureau who will return “No, we’ve never seen this person.” But the next time you apply for a loan, the lender will ping the credit bureau, and the credit bureau will recognize that yes, there’s been an inquiry. Chances are, you can find a lender that, for a high enough cost and a low enough dollar rate, will give you a loan. These synthetic, made-up people pay back the loan, ladder up, and borrow more and more money until they bust out. This is a very difficult type of fraud to catch. But now we have a company like Sentilink, which does it as a service. Turns out that fake people take out loans at much different rates than real people. And if you’re focused on it, you can stop this kind of fraud much more effectively. Sentilink has been able to significantly reduce fraud across all categories, from auto to personal to small businesses. These are just a few examples of how new infrastructure companies are completely remaking the financial stack—and providing it to all of us as a service.

Combating fraud and money laundering with fintech Many industries are regulated—typically, if you don’t comply, you’ll get fined. But if you don’t comply with regulation in the financial services industry, you’ll go to jail. (Anyone who’s seen Ozark on Netflix knows the lengths criminals go to move illegal money, for instance, from the drug trade into the legal system.) Banks are required to comply with a set of laws that’s intended to prevent money laundering. They monitor hundreds of sanctions and terrorists lists around the world——as well as all of our transactions. As you might imagine, this results in many false positives (legitimate customers getting blocked), as well as a ton of manual reviews. It’s a cumbersome process: At one of the large banks, 30,000 of 210,000 employees work solely in compliance. The vast majority of those workers are assessing suspicious activity and filing suspicious activity reports as a result of anti- money laundering regulations. More surprising, then, is the fact that less than 3 percent of that laundered money is actually caught. This presents a big opportunity for technology to provide this function as a service. Comply Advantage, for example, does all of these sanction/terrorist watch list integrations for companies, whittling hundreds of integrations down to one. It provides more granular risk controls, so banks can spend less time monitoring transactions and more time focusing on detecting money laundering. This yields a better customer experience, lower costs, and, over time, hopefully a higher success rate. One of the big challenges in this market is that once a bank gets good at catching money launderers, the perpetrators often move to a weaker point in the system.

There are multiple regulatory agencies that you need to comply with, likely driving more partnerships for KYC (know your customer) and AML (anti money laundering). And because we’re dealing with money, you need to guard against fraud, which requires more software. So now we’re looking at over a dozen partnerships. Even after the two years it typically takes to ink those deals, you still haven’t built the new product that you wanted to bring to market! But what if, similar to what Amazon did to compute and storage, companies focused on each layer of this complex stack and provided that step as a service? That’s exactly what’s happening.

As convergence is also fuelling licensing activity and giving rise to more disputes, those that can play a strong hand in prosecution, transactions and litigation are also advantageously situated.

Meanwhile, the Big Four accountancy firms are flexing their muscles in the legal services market and ramping up their IP activities

My experience with Voip-Pal has made it painfully clear that the deck has been stacked against companies who own IP being used without license by large tech companies. The America Invents Act (AIA), orchestrated by Silicon Valley, was designed to destroy the very ladder they climbed to ascend to their lofty perch, and make certain that they could not be challenged.