In this episode
Clayton Mitchell, from Crowe, a public accounting, consulting, and technology firm, chats with Rory about the role of accounting and consulting in the fintech industry. He explains how he got into the world of fintech and shares his experience working with payments and remittance companies. Clayton also discusses the challenges of applying outdated regulatory compliance frameworks to new and innovative business models. He emphasizes the importance of trust in the financial system and the need for collaboration and understanding between regulators, compliance teams, and businesses. Clayton also highlights the value of listening to clients, providing actionable recommendations, and leaving organizations in a better place than when they started.
Key takeaways
- Accounting and consulting firms like Crowe play a crucial role in the fintech industry by helping organizations navigate regulatory challenges and improve risk management and compliance.
- Applying outdated regulatory frameworks to new and innovative business models is a significant challenge in the industry.
- Building trust in the financial system requires collaboration and understanding between regulators, compliance teams, and businesses.
- Creating value in the financial services industry involves enabling innovation, understanding customer needs, and challenging traditional approaches.
- Listening to clients, providing actionable recommendations, and leaving organizations in a better place are key principles for accounting and consulting firms.
Transcript
Rory Holland
Clayton Mitchell, welcome to Austin, Texas. Good to have you here.
Clayton Mitchell
Thank you. Nice to be here.
Rory Holland
Clayton’s with Crowe. And what does Crowe do?
Clayton Mitchell
Crowe is an accounting and consulting and advisory firm. And we provide services to companies throughout the US and the world.
Rory Holland
Awesome. Well, welcome. And where’s home for you? I think Indianapolis.
Clayton Mitchell
I am in Indianapolis.
Rory Holland
OK. Is that home for you?
Clayton Mitchell
It is home.
Rory Holland
OK. Born and raised?
Clayton Mitchell
Yes.
Rory Holland
Really?
Clayton Mitchell
I did a two-year stint in London from 2014 to 2016, and I’d done a little bit of payments work here before then and worked with payment companies in the remittance space and then, went to London during that time when fintech was popping, and there were a lot of companies that had direct licenses with the FCA and the regulators in the UK. They were challenger brands to the big banks, and we were a challenger brand there. I started that journey with one employee and 10 chairs in an office in the theater district, and we had to grow. So I said, hey, you guys are challengers, we’re challengers, let’s grow together.
Rory Holland
Yeah, nice. And so that’s been how many years ago?
Clayton Mitchell
It would have been 10 years ago.
Rory Holland
Okay, awesome.
Clayton Mitchell
It was the spring of 2014.
Rory Holland
And what brings you to South By?
Clayton Mitchell
Fintech House. I think hanging out with a group of people who sort of see the world the same and recognize that the world of financial services is changing as well as doing it in a responsible and ethical way and kind of hang out in the backyard like you’re at a barbecue is not as good as it gets.
Rory Holland
Yeah. Isn’t it, though? I knew you can’t see but over our shoulder, right? You’ve got the outside. People are eating barbecue, having a good time. Well, they’re eating the actually Mexican food tacos today. Tomorrow will be barbecue. Well, so good to have you here. Indies. I’m a Midwestern guy, too. I grew up in Detroit. And did you go you where’d you go to school?
Clayton Mitchell
I went to Butler.
Rory Holland
You went to Butler. Okay, I went to a big stent in school, but let’s cover most of the family. So how did you get here? Like how did you get into Fintech? One doesn’t just fall into, you know, the years of experience like you’ve had how’d you get there?
Clayton Mitchell
Yeah, I really think it was the early to mid 2000s we got involved with a number of payments and remittance companies doing either remediation type work for regulatory considerations or we’re doing Bank Secrecy Act, anti-money laundering audits. And so sort of saw the way that money moved. And, you know, you look at that space, and if you’re not in it, you sort of see, gosh, that’s a shady world. And if I’m doing anti-money laundering and financial crime, we really should be focused there. It’s similar to, you know, from the outside looking into buy now, pay later. Gosh, that’s a predatory business model. When you get inside and actually see it, it’s not. And so the eye-opening moment for me was, there’s legitimate reasons to have alternative business models to your bank and for your banks to partner with these alternative business models to bring financial services to underserved communities, to bring new and emerging products and services. And I got enamored with it.
Rory Holland
And that had been 20 years ago then. Give or take.
Clayton Mitchell
About 15.
Rory Holland
When did Crowe come into play?
Clayton Mitchell
Yeah, so I’ve been with Crowe my entire career. So 20 years in the firm, all focused in risk and regulatory compliance work and financial services. And so we got involved in that stuff back in probably 2005.
Rory Holland
Oh, so it’s been a long time. You’ve seen a lot of evolution.
Clayton Mitchell
It scared me when you said 20 years that I’ve been doing this.
Rory Holland
Sorry, like, put the number on there.
Clayton Mitchell
Yeah, no, but it is. It’s been a long time.
Rory Holland
I know when you count the years like, whoa, OK.
Clayton Mitchell
And then you count hours and you’re like, OK, I must have to be pretty good at this. I’ve done more than 10,000 hours. I’ve been doing it for a long time.
Rory Holland
Yeah. So who are your customers then?
Clayton Mitchell
We have clients across the spectrum. So we have organizations who are sponsor banks. So a lot of community banks who are offering banking as a service and other and other services. We have lenders. So marketplace lenders, lenders who are out doing buy now pay later, credit card as a service, all the things that you would expect their payments. So, a wide variety. And I would say anything from startups; I wouldn’t say startups, it’s companies that have been in business for a couple of years, probably in that series A moving to a series B really want to get risk and compliance or understand their accounting. We do tax services, too. You don’t really need to do taxes until you’re profitable. So that tells you got to be a little bit later stage in the game. But yeah, I mean, our clients are everywhere, from that to some of the world’s largest privately held Fintech companies. So we kind of run the gamut.
Rory Holland
Is it in, or are you guys using technology or like Fintech? Or are you more? Fintech is your category like you specialize in?
Clayton Mitchell
Yeah, mostly that we specialize in. So we do offer certain products and services from a firm perspective, some enabling technologies that we sell to financial institutions on, say, the dealership side. We do a lot of work around floor plan lending and that kind of thing. We have a huge market there that we actually provide the software and the services to do that. Quite a bit around. We do some technologies, but I would say largely when we look at our Fintech market and what that is, is it is customer facing Fintech working with those companies who have a distribution model to provide financial products to businesses and to consumers.
Rory Holland
Got it. Okay. And how are you like, how are you solving, how is Crowe solving problems more efficiently as you guys have evolved and learned a lot. And obviously, the industry is changing. There’s new tech come out all the time. Compliance and regulatory challenges are, yeah, there’s no shortage of that. Like how are you, how are you guys improving on solving those problems? I guess, and like, are really serving your customers as this market changes and grows.
Clayton Mitchell
Yeah, I think, I think our general thesis gets to, we look to identify what is, what we call minimal acceptable maturity. And so we help, especially in the Fintech or in the partnership model, we help the organizations coming together to set and define what good looks like. So instead of offering a product or being at a launch stage versus being at growth or being a pre-IPO company where you need to have very rigorous controls, processes, technology, your data governance needs to be perfect. When you’re a mid-stage company and you’re looking to grow, and you’re in your third or fourth partnership, you’re still figuring out your business, let alone figuring out the compliance to enable your business. So what we do is work with them on a continuum to say, at these different stages of growth and these different inflection points within the growth, this is how I’m going to show up. And we’re going to show up this way on offense. We’re not being reactive in showing up this way. We’re intentionally showing up this way and we’re allowed to then tell the story to our partners. We’re allowed to tell the story to our regulators that this is what we’re going to do, how, and why. And it generally works out fairly well.
Rory Holland
And so do you look at it that way in your service offering? Do you guys categorize your clientele based on early or their stage of business?
Clayton Mitchell
We do. We will. We’ll look at, you know, what is fit for purpose for an organization that’s growing versus an organization in formation or an organization that’s at scale.
Rory Holland
Yeah, that’s at scale. Okay. And what would you say are like some of the biggest challenges you guys face in what you do?
Clayton Mitchell
I would say the biggest challenge we have now is that we are applying 30 year old regulatory frameworks to 30 month old and 30 day old businesses who have who and you’re what you’re looking at and what you’re seeing is, gosh, we’ve solved for some of these really hard things. We’ve got elegant tech and we’re able to we’ve got great data and we’re able to demonstrate this. But it’s you’re trying to prove compliance or prove risk management or prove that your accounting is good to people who are generally used to seeing and to supervisors and regulators who are generally used to seeing that much differently. They’re used to seeing it on. Legacy core technologies. I mean, there’s some green screens in organizations and things like that. And so I think a legacy framework that you’re trying to then fit into is the most challenging thing we’re working on today.
Rory Holland
Does that legacy framework? I can’t see in my head how that gets rebuilt. Like, is it almost like on the fly? It feels like it looked like a Frankenstein almost with all the new it’s happening so fast. You can’t really stop the car to rebuild the engine. So what is that experience like working with regulators and compliance and trying to figure this stuff out on the fly, really?
Clayton Mitchell
Yeah. And your analogy I use all the time. So Frankenstein’s monster is very relevant and prevalent in the work that we do. And you never stop doing anything is what I would say is part of the huge problem with the regulatory framework. It’s like, OK, well, you did this, but you should really do that as well to be able to then prove that you’re complying or prove that you’re managing your risk in a reasonable way. But you never stop doing it.
Rory Holland
So you might have layers of different things that you’re doing that don’t seem to be; you’re not eliminating one.
Clayton Mitchell
There’s no risk rationalization is the way I would put it. You’re not stripping it back to the point that you made to say, why are we doing this? How are we doing this? And so what we try to do really is work with our clients to say, why are we doing this? So looking, at Truth in Lending Act was implemented in 1978. 45 years later on that, if not longer. How are we going to apply it? How do we apply this to new and novel business models, products, and services that would have never been dreamt of when that was in place? So why are we doing it? How can we comply? We are not in the business of regulatory arbitrage. We’re here to help our clients comply with the laws and regulations that are there for them, but we help them do it in a meaningful way and try to get value out of it on the other side. So, if you’re going to do this, what else can you learn from that? Data or that information and how do you then drive that to move your business forward?
Rory Holland
I was going to ask you that statement about value, so you’re not just repeating the process all the time or it does get repetitive, there’s no value. How does that value get expressed? In what way?
Clayton Mitchell
Most of it’s in business enablement. So, we look at a lot of the work we do on a continuum of protecting value to creating value. And there are different protecting value and protecting your franchise that you’ve got to do, you’ve mentally have to do this, or you have to remediate something that went wrong. But when you start to get to innovation and value creation, you’re really starting to say, how do I enable this data? How do I enable this technology? How do I actually say, we’re below our risk appetite. We’re not offering enough products and services. We don’t have enough of these types of customers to bring in, use credit as a great example. You as a Chief Credit Officer do not get disincentivized for having a 99.99% rate of return or rate of payment on the credits that you make. But is that really what’s best for your organization and your shareholders would 99.98% be good enough? So, looking at that and saying, you know, where can we take a little bit of additional risk? Where can we offer a new product or service? So trying to work with organizations to do that. And it’s, it’s, I would say it’s an uphill battle to do it from the risk and compliance seat because business is business driven. Business is driven by products. Business is driven by customer needs. All of that. The way that I look at that is we always want to be, we always want to be at least thoughtful about what’s possible. I always talk about we are the indicator light. In your side view mirror of your car. A lot of people use the analogy of brakes, it’s overdone, so we’ll not use that one. But it’s, we really want to allow the organization to move quickly, to move fastly, to change lanes in a meaningful way, and you can’t do that without proper risk management and compliance.
Rory Holland
Yeah, and who are you working with in these organizations, like typically?
Clayton Mitchell
Chief Risk Officers, Chief Compliance Officers.
Rory Holland
Okay. And all signs of organization, all sizes of organizations. Some don’t have risk officers.
Clayton Mitchell
Some don’t. Yeah, right. So it’s, it depends. In some organizations we end up working with the product teams and write directly with the business. I love that because you’re able to have some meaningful conversation. We talk a lot about compliance induced operating friction and there’s both positive and negative connotations to that. The positive connotations are you stop, you think, and you make really good decisions.
The negative connotations are your risk and compliance office becomes the office of no in your organization. And I think that’s, I mean, that’s a lot of the reason we work with Jason and Alloy and others in this ecosystem is because we’re not the office of no from a risk and compliance standpoint. We really do see compliance facilitating business. And Jason said that for the 10 years or so that I’ve known him and It makes it really easy to want to work with them when they see the value in the work that you do.
Rory Holland
Well, it’s interesting you say that, because we, similar to Jason, our agency CSTMR compliance is obviously a huge part of what we do, because we’re creating either brands or creating strategies for marketing our clients’ brands. Obviously, what we say, how we say it, where we say it, visually how we describe it. All the actions that the users take or data that we collect. I mean, all of these things, I think a lot of people don’t understand the world like we do. Compliance is such a critical part of what we do. If there’s not that good relationship, it’s not.
Clayton Mitchell
I was talking to a marketer downstairs in the backyard here, and she’s like, we’re both having conversations with these folks on tomorrow morning or something like that. And I don’t know why they would pick a marketing and a compliance person to have a conversation with. We don’t exist without each other.
Rory Holland
No, for sure.
Clayton Mitchell
Neither of us do.
Rory Holland
Yeah. And we want to kind of push the barriers, right? But compliance helps pull us back. But then I think in good relationships that we see with our clients, compliance teams, we’re stretching each other a bit because we’re asking questions and challenging.
Clayton Mitchell
And that’s the compliance induced operating friction I’m talking about.
Rory Holland
And so I see tremendous value created in those moments of a little bit of friction and challenging that help brands and businesses deliver better services and grow. You put your hands together, but it’s iron sharpening iron.
Rory Holland
Ah, perfect. Yes, absolutely. What’s one thing that you’d like other people to know about Crowe that they might not?
Clayton Mitchell
Yeah, I would say, you know, when people who don’t know about Crowe ask me about Crowe, I usually say two things. The first thing I say is we’re probably the largest public accounting and consulting firm that you’ve never heard of. Many times we’re at a 10th largest or somewhere in the neighborhood of the 10th largest accounting firm in the country. But we focus so much on financial services. That’s the other thing that I say is we have a substantial part of our business across our accounting. We audit more SEC traded banks than other any other firm in the country. I would say when you look at the types of work that we do within our consulting practices, we listen to our clients. We’ve had many outside organizations look at us and say, what do you do best? And what they really say is you listen to your client, you understand their business model, which in this space is huge. I mean, there’s not very many Fintech business models that look the same. There’s not very many bank Fintech partnerships that look the same. You have to spend the time understanding what does that relationship look like and what does that value creation angle look like? So we spend a lot of time In the needs assessment process to really understand what’s going on there. The other thing that we really seek to do is to translate that value as we leave an organization. So what we look to do is provide actionable recommendations, actionable advice, safe and sound recommendations, and really help the organization take that over themselves and not be reliant on us forever. Because you can create a situation where they are reliant on you for a really long time, but that doesn’t create that emotional attachment of, gosh, you came in here, you assessed my situation, you helped us address the issue, and you left me in a better place than when I started. It’s like when you walk into a room and the chairs haven’t been put back at a table and you’re like “who was this in this room before”? That’s how I want to look at that is: I want to leave that organization better than they were when we started. And when you do, they call you over and over again.
Rory Holland
Yes, I love that. I mean, that’s the power of good relationships. And I think about our being intentional around delivering good value. And I’m glad that you just described it that way. I have two other questions. I’m actually going to reverse the order of what I was going to do based on some things that you’ve said. You mentioned a lot of what came across to me as a lack of understanding in some of the lenders. Likeyou mentioned the words predatory lending and an understanding once you get into those things, you might see that there might not be like they are serving a purpose and I’m not pointing that out as one category but just that’s what popped in my head at that time. Society has changed so much, as you and I have experienced in the last couple of years and, technology has changed just as much. And when I think, when I say that, I’m thinking about trust in the systems that govern our country and our world and the principles behind those. And when I think about the work that we do in the financial services industry and Fintech, trust in the financial system is critical. Like we have to have, as consumers and as businesses trus,t in the financial system, and if we don’t, really bad things can happen. So how in your mind can you see whether it’s Crowe doing it or just the industry or both, restoring trust and faith in the financial system through the work that we do in a better way to restore that faith along the way?
Clayton Mitchell
Yeah, I mean, you could have asked an easier question. I really look at this as we all have to be in it together. You have to understand what your customer needs are and, what customers are in the system and what customers are on the fringe of our system. I think if we got more consumers who are on the fringe of financial services and the regulated, the federally regulated financial services system, that you start to build more trust. But the reality is, is that trust isn’t there in certain communities be that based on hundreds of years of old cultural values in African countries or South American countries. So they’re typically used to working through different networks. And so it’s about pulling the ecosystem together and making it tighter and building regulatory frameworks that are fit for purpose for the new and novel things that are happening in our industry. And I think the regulators frankly understand and know that. But it’s a big hill to climb and there’s so much societal pressures, there’s so many political pressures, there’s so many economic pressures that changing that on a dime as fast as society is changing and as fast as technology is changing isn’t going to happen. So we have to recognize that we’re always going to be lagging and we’re always going to be pushing a boulder up a hill a little bit. Yeah. But it’s worth it.
Rory Holland
It is. No, I agree. Yeah, totally. It is a very challenging. It’s a tough question. I get it. And I think the unification, like you talked about, the unifying of maybe whether it’s systems or just unifying around certain common values and goals, right? The ethics of it. And helping people understand the other thing you said about understanding once you get inside, a lot of people accept what they read or see as truth and it’s not always is, so taking that extra step to understand.
Clayton Mitchell
My personal situation with Buy Now Pay Later. I don’t personally have a use for it. I don’t see a purpose. If I want to buy something, I buy it. I put it on my credit card. I pay my credit card every month. I’m very lucky to be able to do that. And my mental model, going in and looking at that product and saying, gosh, why would anybody ever need this? It’s because I didn’t put that lens on it. And when I heard founders of these companies talking about, this is why they’re passionate about it, and this is why they felt like they had a problem to solve. Let’s let very passionate, creative, and talented people create new products and services that pull that together as well. We’ve got to build a framework that doesn’t impede that. It enables it.
Rory Holland
Yeah, that’s great. Okay, last question. This one’s easier.
Clayton Mitchell
Alright.
Rory Holland
All the years of experience you had, you’ve been doing this, we mentioned, I won’t say the number again, but for a long time, and you’ve learned a lot; what might you tell other people who want to get into the financial or Fintech space based on what you’ve learned? What advice would you give them?
Clayton Mitchell
I think there’s a couple of things. I think learning it from the ground up is really important, and understanding the why, like getting to why are these products and services offered. Why is there a regulatory framework? Why do we need to move money? And being really curious and digging in and being open to not knowing everything and asking good questions as well. But I think it’s the system and the regulatory environment and the products and services. Products and services, people say that they’re simple and they’re commoditized and gosh, every bank offers the same thing as another bank. I don’t believe that. And so I think it’s about understanding what are those things and being intellectually curious about the why and the how. And I think then applying your passion. What are you passionate about? And saying, all right, what angle? I was never going to be someone who would sit and focus on the numbers and be an accountant. Even though half my family think I’m an accountant because I work for an accounting firm. Not a CPA. But I think finding your passion and understanding and mine through luck or or another way was risk management. And I am incredibly passionate about it. And I wouldn’t be sitting here having a conversation with you or I definitely would not have been doing this work for 20 years if it didn’t didn’t get me going. So, it’s find your passion. Use your individual skill sets to really drive what you do.
Rory Holland
It’s been great, man. Thank you. So fun.
Clayton Mitchell
Yeah.
Rory Holland
Thanks for coming and sitting down with us.
Clayton Mitchell
Yeah. Thanks for not giving me the questions in advance. It’s much more fun this way.
Rory Holland
Well, I hope you enjoy South By. Are you here for any particular food? What’s your favorite food when you come to Austin?
Clayton Mitchell
Oh, gosh. Tacos were great at lunch, but barbecue tomorrow, I think I’m looking forward to barbecue more than tacos. And everybody who comes to Austin needs a little bit of queso and a margarita.
Rory Holland
Awesome. Well, good, man. Well, thanks so much.
Clayton Mitchell
Alright. Thank you. Appreciate it.
Rory Holland
Thank you.
