How Forward-Thinking Policy Shapes the Future of Financial Innovation

In this episode, Adrienne Harris, former Superintendent of the New York State Department of Financial Services, and Jo Ann Barefoot, CEO of AIR and a leading voice in regulatory innovation, come together to share complementary perspectives on how policy can drive responsible progress in finance. Harris highlights how thoughtful regulation can make the financial system work better for people and businesses while safeguarding trust, drawing on DFS’s role as the only U.S. financial regulator with a formal innovation mandate. Barefoot brings a global viewpoint on how regulators and innovators can collaborate earlier, more openly, and more effectively. Together, they explore what it takes to balance supervisory rigor with forward-looking policy and how innovation-minded regulation can shape the future of finance.

 Guests: Adrienne Harris (Superintendent, New York State Department of Financial Services) & Jo Ann Barefoot (CEO & Co-founder, Alliance for Innovative Regulation)

 Hosts: Kabir Kumar & Julie VerHage-Greenberg

Flourish Ventures is an $850M global early-stage venture firm that backs entrepreneurs transforming financial systems for the better. Its portfolio spans more than 100 companies across the U.S. and emerging markets. The firm also supports innovators shaping policy, media, and research to accelerate lasting change in financial services.

This Week in Fintech (TWIF) is the largest fintech community in the world, presenting news, podcasts and newsletters from around the world.  Subscribe to our newsletter to stay up to date on the latest in news opinions, and all things financial technology.

Transcript

Vision: Protection And Growth Aligned

Adrienne Harris 0:00

Well I think everything I tried to do at DFS was informed by my bigger vision, which is that you can protect consumers and markets and be good for business at the same time. These are not mutually exclusive objectives, but in fact mutually reinforcing. And so everything we did, whether it was policy or regulatory or enforcement or operational, was meant to help prove out that thesis. I think you know the one thing that I learned, or maybe that I knew going in, but it's really cemented for me during the tenure, was that it's it's definitely harder to do all of those things at the same time than to just serve one set of objectives or the other. But if you're data-driven, if you're engaging with all your stakeholders, if you're transparent and sharing the data and facts with your stakeholders, that really hard job becomes that much easier in getting everybody sort of rowing in the same direction.

Series Intro And Guest Backgrounds

Julie Verhage-Greenberg 0:59

Welcome back to the podcast, you guys. In this special series, we co-created with Flourish Ventures, where it's spotlighting the people and ideas reshaping the U.S. financial system.

Kabir Kumar 1:08

Today we are joined by two extraordinary leaders who are proving that policy and innovation don't have to be at odds, in fact, can reinforce one another.

Julie Verhage-Greenberg 1:17

And Adrienne Harris is the former superintendent of the New York State Department of Financial Service. During her tenure, DFS became a model for balancing consumer protection with forward-looking policy demonstrating how thoughtful regulation can shape a safer, more dynamic financial system.

DFS Wins: Restitution, Crypto, And Modernization

Kabir Kumar 1:34

And joining her is Jo Ann Barefoot, CEO and co-founder of Alliance for Innovative Regulation, or AIR. Jo Ann has been a driving force in bringing regulators and innovators closer together, helping governments around the world build the capacity to understand, supervise, and safely enable emerging technologies. And Jo Ann has been at the forefront in terms of helping regulators really adopt technology solutions themselves and has been a pioneer of that, has been the first port of call for regulators all over the world on that front.

Julie Verhage-Greenberg 2:06

So as you as you can see, we have two women that are highly qualified to talk about today's topic, which is how forward-thinking policy shapes the future of financial innovation. So with that, let's jump in.

Kabir Kumar 2:17

So Adrienne, I want to start with you. Um, during your tenure, DFS, uh you had a highly successful tenure as a superintendent. It was an inspiration for many regulators all over the world, not just in the US. And DFS underwent a very significant, I think, historic modernization effort. You expanded supervisory tools, you strengthened digital capabilities, there was a lot of experimentation that took place. I'm wondering looking back, you know, what accomplishments? I'm sure there were there have been many, and we've all been sort of privy to it at events over the last year and so on when you've spoken to it. But from your perspective, which ones are you most proud of? And uh a kind of a quick um question related to that. What perspectives have you formed about what it really means for a regulator to innovate?

Julie Verhage-Greenberg 3:09

I feel like this is asking someone to pick their favorite child. It is someone asking that.

Adrienne Harris 3:15

Um, first, yes for having me. I'm so happy to be here with all of you. Um it is really hard to pick, and I really think about my time both from the regulatory and policy accomplishments, and then there were sort of the operational accomplishments, and of course they they're mutually reinforcing on a policy and regulatory side. During my tenure, and I was the longest serving superintendent of DFS, we got $725 million in restitution back to consumers. So it's not penalties, that's just money back in people's pockets. We made insulin free in New York. We reformed the way tech cashing fees are charged in New York. We brought the first cryptocurrency uh enforcement action to New York. So it is hard to pick a favorite child on the policy and regulatory side. On the operational side, we got the agency fully funded for the first time in its history. It's now the largest the agency has ever been at over 1,400 people. Uh we did a $15 million tech transformation. We shortened the feedback loop from exams uh to reports and feedback to our regulated institutions. So you know, hired the first ever CTO, hired the first ever CRO. Lots of incredible operational accomplishments that the team was able to achieve.

Kabir Kumar 4:39

And you know, I mean it's clearly historic. That's why I really wanted to, Jo Ann, Julie, and I really wanted to have this conversation with you because it is unprecedented. But I'm wondering, in doing this, which is a huge lift, both the external accomplishments, the enforcement actions and so on, but also the internal operational chefs. Any quick lessons on sort of what it means for a regulator to lean in this way and try to innovate, any things that you walked away that were, you know, lessons for life and words of wisdom for others that want to engage on this?

Adrienne Harris 5:14

Well, I think everything I tried to do at DFS was informed by my bigger vision, which is that you can protect consumers and markets and be good for business at the same time. These are not mutually exclusive objectives, but in fact, mutually reinforcing. And so everything we did, whether it was policy or regulatory or enforcement or operational, was meant to help prove out that thesis. I think, you know, the one thing that I learned, or maybe that I knew going in, but was really cemented for me during the tenure, was that it's it's definitely harder to do all of those things at the same time than to just serve one set of objectives or the other. But if you're data-driven, if you're engaging with all your stakeholders, if you're transparent and sharing the data and facts with your stakeholders, that really hard job becomes that much easier in getting everybody sort of rowing in the same direction.

What It Takes For Regulators To Innovate

Julie Verhage-Greenberg 6:10

Jo Ann, when you founded AIR, the idea of regulators adopting tech forward approaches was still very unconventional. So what gap did you see, you know, a decade plus ago, and how has that posture of regulators toward innovation changed? Because I feel like, you know, especially with the current administration, there's been a big swing from what some other ones have done too, especially on the crypto side. But talk me through a little bit what you have seen from your seat and your point of view.

Jo Ann Barefoot 6:38

Yeah. First, let me say how happy I am to be here, Adrienne. I've always been such an admirer of your work. And Kabir, I appreciate so much what you and Flourish Ventures have done to try to bring forward the pro-consumer innovators.

Kabir Kumar 6:54

I'm not your inspiration to all of us, as you know.

Jo Ann Barefoot 6:58

Thank you. Um I started my career decades ago trying to solve the consumer financial problems, because financial inclusion, consumer protection through regulation. I worked for the U.S. Senate, I was a bank regulator, I was deputy controller of the currency. And uh we need regulation. Obviously, Adrienne, you just gave a bunch of good examples of things that uh require regulatory treatment. But I will tell you that a little over a decade ago, I found myself grappling with the limitations of regulatory and compliant solutions as problem solvers for consumers. You know, we need the protections, although, frankly, I think some of the laws and rules that we have now are arguably under uh underperforming, but that it doesn't get you there. And around the same time, I began to see the technology innovation sprouting up in the fintech space and realizing that some of this new technology could solve problems that consumers have that we cannot solve with regulatory type solutions or with the older business models. So more affordability, more access, more transparency, easier ability to qualify for financial services through having more data and many more. And uh Kabir, you know this story well, but I I ended up uh spending two years at Harvard as a senior fellow researching the question of how is new technology changing consumer finance and how should we regulate it? And in that process, I had an epiphany one day, uh, realizing that there was so much high potential to do better for consumers with technology, and that we would probably regulate it wrong. Not because we aren't trying to do the right thing, not because our regulators are not talented and highly capable, they are, but just because our regulatory system is not built to deal with rapid change, mold-breaking change. So I sort of appointed myself to work on that problem. And uh the the gap that I could see was both that the regulators didn't have the knowledge to understand a lot of the tech transformation underway in the marketplace, didn't have the tools to get the information. I don't we'll talk more about this later. And also that they weren't using good technology themselves. Most of them are using very, very outdated technology. So that's what we at AR are working on is how to regulators.

Julie Verhage-Greenberg 9:46

That's still true that they're using outdated. Is it like any better than it was a decade ago in terms of what technology they're using, or no?

Jo Ann Barefoot 9:53

It's getting better uh in a very uneven pattern. There are some regulatory bodies that have been out in front for a long time, um, and others that have lagged behind, and some that lack uh we do a lot of work in emerging markets, some that lack resources to do what they need to do. But the thing that has changed to the positive is just about all of them now know they need to do it, which was not the case when we founded Aaron nearly eight years ago, when a lot of them had no idea what we were talking about.

Kabir Kumar 10:27

And Jo Ann, you've used part of this is just getting them to walk down the path, you know. And um a big part of it is of course leadership, you know, as Adrienne demonstrated at DFS. If you have someone who's motivated at the very top, it's a lot easier. But the other part of it is just finding a way to get them to walk down the path. And one of the ways you've done that is using these text prints and these tools that you developed. By the way, did uh Air work with DFS at all in the tenure that Adrienne was there? I I should I should know this, so forgive me for asking. But I believe there was a partnership and there were some efforts to work together, if I'm not mistaken.

Jo Ann Barefoot 11:10

We've had an opportunity to collaborate with Adrienne and her team on various things, um, including a project we did last year or this year on Bank FinTech partnerships and arrangements. Uh, but then we did uh uh another bigger project uh back in the day before AdWind arrived with DFS, which was very, very interesting as well.

Techsprints: Regulators Meet Builders

Kabir Kumar 11:33

And I think one of the tools is these text friends. I'm wondering if you can, you know, speak maybe not exclusively text friends, but it is a very effective way in which uh regulators can actually touch and feel technology, experiment with technology. It's sort of a public sector type hackathon in a way.

Jo Ann Barefoot 11:49

Yeah, exactly.

Kabir Kumar 11:50

Can we say more about that?

Jo Ann Barefoot 11:52

Happy to. So one of my colleagues at AIR is Nick Cook. He is our chief innovation officer, and he was the head of innovation at the UK Financial Conduct Authority as they were building up both their fintech sandbox programs and then their regtech uh work. And his team there invented this format of the regulatory text print, which, as you say, is like a hackathon. The idea of it is you take a difficult problem, something that regulators care about and find hard to solve, and uh form it into a problem statement, and then you bring together diverse skill sets, regulators and technology people at the same table, learning from each other, uh, and also domain experts and advocates and others interested in the problem. And that is magic. Just putting there's so little opportunity for interaction between real tech innovators and regulators. And when you create that space and you put it put them together on something that they care about, uh great things happen. We've done more than two dozen of them on all different topics from money laundering and uh using crypto to purchase child sexual abuse material online to um how to modernize regulatory reporting and many, many other topics.

Building Diverse Teams And Crypto Supervision

Adrienne Harris 13:23

I think this point that Jo Ann raises about diverse talent coming together is important in the context of these events, but something we we model in community. You talked about what an inspiration Jo Ann has been to so many of us in the regulatory community in the fintech space. When I was thinking about building our human capital at DFS, when I thought about my many, many talks with Jo Ann and all the opportunities that I've had to work with her over the years, and we were able to bring into DFS people from other regulators, technologists, people from the private sector. Every time I had to go out and talk about crypto because we built a 60-person crypto team, which I think is still the largest crypto regulatory unit in the world. And I always joke, I'm like, we got some real crypto bros on that DFS team. And the first time I made that joke in public, I came back into the office and and one of those young people was like, You mean me? I'm one of the crypto bros. And I was like, Yeah, no, you are. You definitely are. But having that diversity of backgrounds, thought, experiences in any form you can get it, but certainly every day in the regulator makes such a big difference for outcomes for consumers, for uh, for financial stability, all of that.

Kabir Kumar 14:41

Adrienne, how did you draw folks to DFS? You know, how do you get these technologists and these folks to work for a regulator? You know, and assuming that's not the you know sexiest job they could get.

Adrienne Harris 14:54

And what certainly not the most well paid. We know that.

Kabir Kumar 14:57

Exactly, exactly.

Adrienne Harris 15:00

I think you know, some of it is for some number of people, right? The mission will just be purpose is important, yes, exactly. Right. Um despite having to take the the pay cut and make that that sacrifice. Um, but I also learned over time that success begets success, right? So when you start to do innovative things, whether it's regulatory guidance or you talk about bringing on new technological tools and people go, ah, they get it, then they want to be a part of that team. And so there's a very fast snowball effect, I think, that happens when you start to bring talented people either into a single agency or organization, or when you start to bring them together around tables as Jo Ann and Aaron Air people.

Founders’ Mindset: Engage Regulators Early

Jo Ann Barefoot 15:49

Just a quick comment on that is that uh it it is an uphill climb for sure to attract uh tech people into the regulatory realm. But if if we have a lot of tech people listening now, the regulatory world is full of interesting, difficult tech challenges. And I did I had one uh uh fintech person say to me one time, you know, I'd rather come and try to solve a problem like money laundering and uh financial fraud and scams that are harming people than like tweak an algorithm to get somebody to, you know, buy some fraction of a percent more of a product, you know. It people should come. It's really a worthwhile environment.

Julie Verhage-Greenberg 16:35

Yeah. And I mean, part of the crew that you're competing against obviously would be other startups. And yeah, I I do find that many founders, while it's improving, still frame regulation as something they need to work around rather than engage with. A lot of it depends on which industry and whatnot that they're in as well. But um I I have seen more that want to try to partner from that earlier stage with regulators to move faster and more safely, probably most importantly. Um, so how can builders kind of shift towards that mindset? And what does good engagement actually look like from a regulatory agency?

Adrienne Harris 17:12

I think it's you know, you're right. I think the attitude is shifting, but it's certainly not the default position, and it's such a mistake. And I, you know, I spent time, I was employee number three or four in a fintech startup in San Francisco. We had to get regulatory approval all around the tendering. It's such a mistake to think that this is just this burdensome hurdle. It certainly can be, but to your point, I think what we saw at DFS when people would get a license or a charter from us. I think this is particularly true in the crypto space, right? But it's true in other spaces as well. It was then this good housekeeping sale of approval that they could use to market to investors, to market to consumers, to market to other regulators around the world, and that would accelerate their growth. So I really do think it's short-sighted to think of it just as this onerous hurdle to be overcome or circumvented rather than as an important step in their development as a company. I would say good engagement with a regulator is frequent, it's early on, it's transparent, and it's not just, I think people make the mistake of waiting until something goes wrong or they need something, they need an approval, or there's a force match, and then they want to come in and have all these conversations. But I think people misunderstand that the their business objectives are often pretty well aligned with the regulators' objectives because they come in early and frequently and they're laying out the business plan or talking about where they want to be five years from now. I think a lot of companies, early stage and more established companies, will be pleasantly surprised that there's more alignment than they might expect. Um, and then it's just easier for everybody in the end.

Julie Verhage-Greenberg 18:58

Which which so I mentioned that it's it varies based on which segment of FinTech that you're in. Which segment would you say is the most proactive when it comes to doing those relationships earlier rather than later?

Adrienne Harris 19:10

Yeah, I mean, I think it really A, it's changed. Even in my four plus years at DFS, we saw lots of change in that. You know, I think the folks in the crypto space were really reluctant to come in and then they warm to it, and as more traditional finance was engaged in the crypto ecosystem, right? They realized they really needed that regulatory stamp of approval. But I would say more than industry, it's it's very much a company culture thing. Like I can, you know, sit here and think about those companies in the crypto space that we dealt with that were always really sort of difficult uh to deal with, and those that I would say got it, right? And were much easier to deal with. And I think the same is true in any innovative space, but it's true in traditional financial services as well.

Using The Full Regulatory Toolkit

Kabir Kumar 19:56

Yeah, I think the mindset piece is super important. I appreciate it. Go ahead, George.

Constraints: Priorities, Mandates, And Missed Wishes

Jo Ann Barefoot 21:53

I agree. And I would add that technology innovation always has a kind of a life cycle or an arc. And in the beginning, we don't regulate it too much because it's small and you don't really know how to regulate it. My uh great uncle was an early pioneer in the uh automobile industry and uh was building things when there was no rules of the road, hardly. Uh, and then we had to create all that to as we learned. But finance is and will always be highly, highly regulated. And it is such, I agree with Adrienne, it is such a mistake to found a financial services company of some sort and think that somehow you're going to fly under the radar or whatever. Because if you're successful, you're going to encounter regulators because you're affecting people's lives. And if you have built in a responsible pro-consumer type environment, you'll reduce your regulatory uh pain and difficulty ahead. And you'll also uh help build trust. And some of these uh innovators in fields where the public isn't sure whether to trust them. Um, you know, we can all remember when crypto was synonymous in a lot of people's minds with financial crime or you know, unsavory transactions. And if you want to mainstream what you're doing, you have to be responsible. One of the things we recommend to innovators is that you're probably going to be out in front of some of the regulatory rules a bit, because the regulators do naturally lag behind and should it to some extent. Uh and so it's smart to have what we could call safety by design, uh, or privacy by design, you know, just build it in. What could go wrong with my product? How could it be misused in the wrong hands? How could the data I'm using be abused in the wrong hands? And even if my intentions are good, how do I guard against problems? And if you do that, you'll have both stronger innovation and way fewer headaches with the regulators.

Julie Verhage-Greenberg 24:17

Even before even before regulators in some cases, like banks and other businesses aren't going to want to work with you if they know that you're not abiding by the rules and regulators might be coming after you.

Jo Ann Barefoot 24:27

Exactly.

Kabir Kumar 24:28

Yeah, and I I also think there's a learning uh benefit here. You know, if you're doing something truly pioneering, you know, uh regulators are, I mean, DFS, Adrienne, under your leadership is very open. You're interested, you want to learn, you know, and you could jointly shape the regulation that emerges. And maybe shape is a too insidious kind of word, but it's sort of like you can play a role in informing the regulator and how the regulator is thinking about it.

Regulators’ Tech Debt: Cloud, Data, Hiring, Procurement

Adrienne Harris 24:59

Well, and and Jo Ann touched on this as well. You know, one of the things we tried really hard to do at DFS was to use all of our regulatory tools. So, of course, we saw, we see with innovation, some regulators sort of default to regulation by enforcement, which is really not effective, I would say, in accomplishing many objectives, most objectives.

Kabir Kumar 25:20

Um we especially if it's the sole uh tool, if that's all you're doing.

Adrienne Harris 25:25

It's just not getting maybe you're getting headlines, but that's the only accomplishing. Um we really thought about when is it right to use rulemaking? When should we be doing guidance or FAQs or all these tools that we have at our disposal at varying points along the spectrum of formality to help guide and shape and and we would really engage with our stakeholders because to Jo Ann's point, sometimes things are too early for the regulator to weigh in, but you have to be willing to take cues from academia, from industry, from other regulators, when is the right time to say something, and then you're trying to strike a balance between rules-based and principles based. We used a lot of guidance in a fast in fast-moving spaces because it just enabled us to say something more quickly and and be able to revise or amend it more easily as well. And then even though the law didn't require us to subject guidance to notice and comment, we often did. When we did our our AI and insurance underwriting and pricing guidance, we subjected that to a comment process. One of the things we did there was we wanted to we required insurers to test their algorithms for for unfair discrimination. And the industry came back and said, Well, how can we possibly test, right, if we can't collect this data and for unfair algorithms? And on the one hand, you know, we were able to sort of push back on that feedback because I said, Look, I started an insurtech company that used AI. We were able to test, but the feedback was also well taken. And we said, okay, we need to be, we need to give people a little bit more guidance here. Um, and so we enumerated some acceptable testing methodologies. So that that give and take and that comment period is so useful when you're willing to use your full suite of regulatory tools.

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Kabir Kumar 28:01

I wanted to pick up, uh Adrienne, what you were saying about you know, the uh the common period and so the important part of engaging with that and your broader point of using sort of the full menu of tools. Um I really appreciate the leadership DFS has taken on that front, and I'm hoping you know that becomes the gold standard uh across the US regulatory landscape. Do you were there things that you wish you could have done that you couldn't do in terms of the engagement with innovators? Either engagement with innovators, I know this was not in our original set of questions, but as I'm listening to it, it comes to my mind. Either engaging with regulators, uh with innovators, all in terms of how you adopted technology, what were there elements to the extent you're comfortable sharing that you wanted to do, but you weren't able to really engage with the question.

Culture Change And Leadership For Innovation

Adrienne Harris 28:48

Okay, well, one thing I will say, right? So I I used to do 360 reviews with my team. Um, and this will come around to answering your question, right? And one piece of feedback that I would get every year from the team is not everything can be a priority, right? And I say that to say because I always wanted to like engage and do guidance on this and guidance on that, and update our own technology, and have you know an office hours like DFS exchange program, and and and so I don't, you know, there are always things you wish you couldn't could have done or could do, but you have the same 24 hours in a day as everybody else, and then the other limitations in terms of financial resources and human capital resources. But you know, I think from from where DFS was when I came in to where it is, now I feel incredibly proud of the things the team was able to accomplish.

Kabir Kumar 29:46

You know, the other thing that comes to our mind is that uh you mentioned Nick Cook in the UK, Jo Ann. Part of the reason UK was pioneering in terms of how they adopted technology was, you know, in part because of this and engaged with innovation, in part because of this competition mandate. And I think at DFS, you didn't you don't have exactly a competition mandate, Adrienne, but you had a had something that other regulators don't have, is my understanding. Can you say a bit more about that and how that played a role as well?

Adrienne Harris 30:19

Yeah, I mean, I think so. When I came in, the mission statement of DFS was very much rooted in the financial crisis and preventing another financial crisis, which is obviously a very important objective, but it's limited. And so we did this big exercise to rewrite and reinvigorate the mission statement and create a core set of values, and we relied mostly on the team at DFS, but also other stakeholders to craft a new mission statement that built in the economic development and innovation imperatives. So I think to your point, right? The UK now has sort of the formal secondary mandate around competition. But even before that came in, and Javier and Jo Ann, I mean when coming out of the financial crisis, the UK had innovate finance.

Kabir Kumar 31:11

And all the stuff that's exactly it was different over here. It went very differently, exactly.

Adrienne Harris 31:17

Um and that was at that time I was at Treasury and the Obama administration, and then a special assistant to President Obama at the NEC running a financial services portfolio and drew a lot of inspiration from what the UK was doing in those years.

Kabir Kumar 31:33

Yeah, exactly. Exactly. Go ahead, John.

Funding The Tech Transformation And ROI

Jo Ann Barefoot 31:36

Can I jump in on the question you asked of what regulators might wish they would have? And definitely not speaking for Adrienne. She's been able to do huge things. But we talk to regulators all the time, and I'll just share what we hear because sometimes they don't feel they can be direct in talking about it. Practically all of them need they need better technology themselves. Regulators are in the process of moving to the cloud. Most are not there yet. Um, that's of in itself a big, difficult project. Uh, takes money and other things. They need way better data, they need more timely data, they need more complete data, they need better quality data. Our bank regulators are still relying, in particular, on small samples of data and on call reports from the industry which come in quarterly, which makes no sense in today's world. So they need those things. They need to find easier ways to hire tech people. It's not just the pay scales, although that's part of it, but there are protocols. And uh, I mean, if we had the time, I could tell you stories that are just incredible about the difficulty that agencies have in trying to hire somebody from a background that's uh not what you would usually expect. Tell us one story. We'll take one story.

Kabir Kumar 33:04

Yeah, tell us the case.

Jo Ann Barefoot 33:06

I will tell you one story. It was a US regulator who told me that he had identified an amazingly he said like if if he was running a basketball team, this person would have been the, you know, name your favorite basketball player.

Kabir Kumar 33:22

Steph Curry.

Jo Ann Barefoot 33:23

Steph, the Steph Curry that he would want. And that candidate didn't pass the screening test and he wasn't allowed to hire him.

Julie Verhage-Greenberg 33:33

What would have been something like what were the screening tests like that would have been?

Jo Ann Barefoot 33:37

There was a there was a panel uh and you know, the agencies are all different, but they have they have HR groups that are you know looking at criteria and everything. There's a good reason for all these things. I'm not saying that it's it's crazy, but we need to take a look at those things. Another issue actually is uh, and I know it's controversial to say it, but the the rule that in the US federal agencies that regulators uh in most cases should not own any crypto. Uh, you know, people say, well, it's kind of like saying if you're going to work for the FAA, you should never fly on an airplane or something. I mean, it really helps to have some experience uh with these innovations. Another area that really needs work is procurement, tech procurement. It's very, very difficult. It's very long. I once sat across the table from a regulator, this was some years back, talking about some of the things you could do with reg tech or supervisory tech, soup tech. And uh one of the people from the agency said to me, if we decided today that we wanted to have that technology, we would have it in seven years. By which time it would be obsolete. So Adrienne, maybe you've been able, you know, you've been able to estimate things.

Julie Verhage-Greenberg 34:57

But with AI, like something's outdated in like six months, if not something. So how do you kind of how do you plan for that in a regulatory perspective?

Jo Ann Barefoot 35:08

You you develop the capability to use AI to oversee AI activities in the industry. And you have, and there's a lot of work to be done by the regulatory community writ large, the community around the regulators. Public, we're going to need more public-private partnering and all these things to move faster and get both sides of the coin, the public and private sectors, adopting sound practices, governance standards, and all that. And that work is going on, but it's not fast enough. We need just much more agile models and again, much more opportunity for regulators themselves to be hands-on with good new tech instead of old tech.

Adrienne Harris 35:51

I think to Jo Ann's point, I mean, there are these systemic obstacles in the procurement processes, I think, are a fantastic example. We didn't have seven-year processes, thankfully, but you know, still they're they're challenging to work through. But I found at DFS, I mean, I there was so much work that the team and I had to do to sort of get us back to zero, like just to a place where we could be had basic technology. Like we had to do a bunch of work to get rid of Lotus Notes. Right and do that before you can start talking about how you do cloud and AI. And and we were able to do that.

Kabir Kumar 36:26

Julie, do you know what Lotus Notes is?

Adrienne Harris 36:29

No. Well, yeah. That's depressing. Exactly. And in that, we'll come back to that later. That's the other, you know, it's it's a GBT what it is. Yeah. Um, it's a psychological obstacle too, right? If you're a regulator, you say, like, I gotta do all this work just to get back to zero. Like, I can't even think about what getting to 10 or 20 or 100 looks like because I gotta dig out and get to zero, you know. And I was I had wonderful support from the governor and from the legislature in doing that. And so we were able to do a lot of that work and start to implement AI and do lots of pilots on the supervisory side and um and put in place a CRM. And but when I came in, because DFS had been separate agencies that were were pieced together, like we would collect assessments from agencies via five different payments systems. It was just, you know, things like that that had to be worked through before you could even really start talking about innovation.

Julie Verhage-Greenberg 37:35

Uh Chad GBT says Lotus Notes is an old school but once very popular workplace software made by Lotus slash IBM, not now called HCL Notes. It's basically an email plus calendar plus database plus collaboration app all in one. Think of it as Outlet plus Google Drive plus Slack in a custom app platform.

Kabir Kumar 37:55

Exactly. Yeah, it's very charitable.

Jo Ann Barefoot 38:00

One of the US agencies calculated a few years ago that their examiners spend 400,000 hours a year just entering data into spreadsheets, you know, basically uh Google Sheets are the equivalent thereof. And um just for data entry, not not to understand what the data is telling you, but just to take it from a bank record and put it into their tool. Um I know we're gonna run short on time, but I have a question for Adrienne. Go for it. Adrienne, what is the secret to enabling a financial regulatory agency to embrace a culture of innovation?

Adrienne Harris 38:47

Yeah. This is it's a hard thing, right? Because I think they're regulators, as you know, Joey, you're right, right? You get you get blamed when things go wrong, but you don't get credit when things go well. And I think culturally that creates so much risk aversion. And you know, when I got to DFS, there was also just internally a culture that was, you know, not conducive to just inventive, creative thinking. And it it you know didn't really benefit a lot of staff to have ideas or to raise their heads and think outside the box. So it does take a long time to change that that culture. So I think there's the culture of the agency itself, and and I did a lot of work with the team to say, look, I want you to bring ideas, I want you to bring problems, bring solutions, so potential solutions when you bring the problems, but like you will never be penalized for speaking up and and workshopping things internally. And it took a little while for the team to start believing it, but once they did, and we were sort of off to the races. But then there's the broader culture of we have to give regulators credit when things are going well and not just blame when they're not. Yeah.

Lightning Round And Closing Reflections

Kabir Kumar 39:59

You know, you know, uh frankly, looking at the experience of DFS under your leadership, I think the leadership matters. You know, we need folks who are willing to stick their neck out and invest and kind of, you know, looks like DFS is now on a new trajectory. Yeah, who knows whether it will stay that way. But there's a strong foundation and a new trajectory. Um I feel the leadership is very important. Partly, I think that's part of I think the work you've done, Jo Ann, over the years is it's not that you have to be that from day one, you can get there. And I think your view has been can I engage with the leadership and can I get them motivated and excited about these things, you know?

Jo Ann Barefoot 40:42

Um and and there are some win-wins available in that every both the government and the industry benefit if we can use technology to make these processes more efficient. You can reduce the burden on the industry at the same time that you're getting better regulatory results. If you can find problems earlier, do it with data in a way that isn't manual and time consuming. And I think there's a lot of interest among regulators going in that direction.

Adrienne Harris 41:12

We were able to get this $50 million addition to our appropriation for a tech transformation. Because to your point, do I think industry saw the value in having a better platform to in which to engage with DFS? And then I could also make the case to the legislature, even though we're assessment funded, I still needed the legislature to give us the appropriations to say, hey, this is you know gonna make New York a better place to do business. That means for jobs, that means better service. But also I could make the ROI argument in terms of dollars and cents, right? You put this 50 million in, it's gonna free up X amount of hours for my team, right? And they can see, and that means that much more. Time devoted to getting restitution for consumers. That much more time, right, to going through filings until you have a more hospitable business environment, right? But you have to put in the work, I think, to compile that data and make the case to your various constituencies.

Julie Verhage-Greenberg 42:08

Well, hopefully, if we come back and redo this in 2030 or 2035, the environment looks a little bit different and it's easier for them to adopt some of these technologies as well.

Kabir Kumar 42:19

Um It will be my AI avatar though.

Julie Verhage-Greenberg 42:22

Yeah, exactly. We won't actually be able to do that.

Kabir Kumar 42:23

I just want to be very clear.

Julie Verhage-Greenberg 42:26

Uh so we have a quick fun fire round um for you guys. So um, first question is if you could pick anyone to have dinner with, dead, alive, past, present, who would it be and why? Jo Ann, we could start with you.

Jo Ann Barefoot 42:39

So you forewarned me about this question, and I gave it a little thought. And I landed on Marie Curie, Madame Curie, the scientist. Um she was innovating in science. She won two Nobel Prizes in two different fields, uh, and just was a very, very remarkable woman. So I would be attracted to her uh to understand how how her how her thinking worked.

Adrienne Harris 43:12

More of these like favorite child type questions. But maybe because it's the last weekend in the F1 fees then for 2025, I've always moved a stamps.

Julie Verhage-Greenberg 43:27

I'm based in Austin, so uh the F1 is I can hear it when it's here. We live close enough to the trunk, I can hear them going, yeah, yeah, yeah. Good answer.

Kabir Kumar 43:36

What about uh one personal highlight? Adrienne, this might be an easy one for you from 2025.

Adrienne Harris 43:43

Oh gosh. I mean, I just sort of started to get my life back in October.

Kabir Kumar 43:48

So you finally have a personal. I was exactly nice.

Julie Verhage-Greenberg 43:57

Yeah, the highlight is that you actually have a personal life now. There you go. Jo Ann, what's yours?

Jo Ann Barefoot 44:03

So my personal highlights uh pretty much always have to be about the fact that I have grandchildren. And uh probably the highlight of my year was having three of them uh with me at my home in New Mexico this year and uh seeing them learning the amazing uh experiences that are available there. And also to tie it back to our other conversation, thinking about young children today and the world they're gonna be living in. Um, you know, it's just miraculous to watch them learning and think about how are we gonna shape all this to do our best for them and their lives.

Julie Verhage-Greenberg 44:45

Totally. Yeah, I'm really curious what it's gonna. I have a three daughter that turns three this weekend, and I'm curious what it's gonna look like by the time she's, you know, a teenager and going into college or starting her career and stuff like that. Too, I think it'll be very different. Well, thank you so much, you guys. Kabir, this is the last episode that we're recording too. I don't think it's the last one that will air. I we've changed a number of times, but it's the last one we have to record. It's like the end of an era. They told me that this morning, and I was like, really?

Adrienne Harris 45:13

Well, we have to do it again. Thank you.

Julie Verhage-Greenberg 45:15

I'm gonna I'm gonna miss these episodes. And uh, I'm excited for people to tune in.

Kabir Kumar 45:21

Well, Adrienne and Jo Ann, it's always a delight to talk to you. I'm very privileged that I get to talk to you, and um I think what you shared will be very, very interesting for folks to hear. We don't get to talk about these things in the public realm as often as we should, frankly. So, that's why we have this podcast series.