Accend (YC S23)

In honor of YC’s new fall batch, I wanted to share our most vulnerable moment as founders. The biggest ‘oh, shit’ moment we had as a company happened during Y Combinator. Not many people know this, but we started Accend (YC S23) as an invoice financing product for small businesses. During our first week at Y Combinator, we quickly realized our product wasn’t sustainable because the cost of capital was ridiculously high. So we went back to the whiteboard. It was a real moment of panic for us. Around that time, our YC group partner, Aaron Epstein, told us to focus on our experience at Brex and to build a solution around that. The problem is - when you’re too close to problems in your day-to-day job, they become blurry. Everydayness has a way of obscuring critical issues and making them fade into the background. To get around this, we had to really take a step back and look at the bigger picture of our workflows at Brex. Only then were we able to see how the onboarding due diligence process for fintechs could be faster, easier, and to a large extent, more accurate with AI. This problem stared at us in the face every day at Brex. It still surprises me that we didn’t see it straight away. We went and spoke to a bunch of other individuals, fintechs and financial institutions who all validated the same problem, which led to Accend as we know it today. Now, we have an internal rule as a company: whenever we feel stuck, we think back to how Aaron told us to zoom out. It almost always gives us the perspective we need to get unstuck.

☕ — CFSB is shrinking itself after aggressively growing through banking-as-a-service partnerships. Here’s the background: CFSB is a tiny lender that grew its assets by 438% from 2018 to 2024 through nearly 40 fintech partnerships —  including in higher risk categories like cross-border payments and crypto. At the time, banks across the world were cutting off risky fintechs. ‘Leaning into the void’ was a great strategy for asset growth… but growth at any cost can backfire. Some of CFSB’s fintech partners have faced serious legal issues, including sanctions violations and links to fraud schemes. Now, it looks like CFSB is pulling back from some of those partnerships: - Wise ceased offering new USD account credentials or debit cards through CFSB - Revolut abandoned plans to partner with CFSB, opting for Lead Bank instead - CFSB withdrew its application to open a Delaware branch right after filing it The takeaway: whether we want to admit it or not, there’s always going to be tension between rapid growth and regulatory compliance in banking. It’s a cautionary tale for banks and their fintech partners about the risks of aggressive growth in highly regulated industries without having robust risk management and compliance frameworks in place. S/O to Jason Mikula for covering this in Fintech Business Weekly! Highly recommend reading the full article by Jason linked in the comments here 👇

One thing not discussed enough: compliance professionals don’t WANT to come in at the end of a good sales cycle and put a halt on things. It’s really not a fun rep to have. But unfortunately, the narrative is often “business vs. compliance.” Pitting both against each other completely overlooks just how useful the compliance function can be beyond the risk proposition, to the actual the business itself. For example, compliance has the most insight into your customers than anyone else in the company. It’s literally their job to Know Your Customer. Compliance can feed back certain insights into how you manage your relationships with those customers. A piece of information discovered in the KYC/KYB process can be a signal that your customer might need an additional service - and thus a trigger for providing that service. Obviously this is just an example and there’s data privacy to take into account, but it proves the point. Business and compliance functions can collaborate to achieve compliance by design but ALSO to genuinely help your company evolve by using insights that are as close to the customer as you can get.

I’ve had years of experience in Risk and Compliance. If you’re a bank, here’s the bad news: sophisticated criminals are really hard to outsmart. Traditional AML systems - while necessary - are tripped up by inefficiencies and false positives that distract from genuine threats. They're struggling to keep up with criminals who are constantly evolving their tactics. And it shows! A staggering $2.17 to $3.61 trillion is laundered every year. That's 3-5% of the world's GDP. Let that sink in. To combat this, we need more than just rule-based systems. We need intelligent, adaptive solutions that can outthink the criminals. Enter AI and machine learning. Here's how AI is changing the game in AML: 👉 Dramatic reduction in false positives, allowing compliance teams to focus on real threats 👉 Enhanced pattern recognition, spotting complex money laundering schemes that traditional systems miss 👉 Real-time transaction monitoring, catching suspicious activities as they happen 👉 Improved client profile monitoring, analyzing behavior to detect risk indicators 👉 Integration of deep learning and NLP, processing vast amounts of structured and unstructured data The future of AML is here, and it's powered by AI. Financial institutions that embrace these technologies will be much better equipped to protect themselves from the threat of money laundering.

An interesting stat I came across: 60% of commercial banks spend over 33% of their compliance budgets on KYC. For 20% of banks, this number jumps up to 50%. Fintechs and banks are spending HUGE portions of their compliance budgets on doing due diligence on businesses and customers. This just goes to show that: 1/ Due diligence is extremely important. 2/ It’s a huge cost center. At Accend (YC S23), our job is to streamline business onboarding and enhance compliance — and so for us, it makes sense to focus on the most important and fundamental task at hand: due diligence. This is existential to a financial institution’s presence. Because if you onboard customers without doing due diligence, guess what happens? You get into trouble, your customers will lose trust, and you'll have less revenue. And nobody wants that.