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[music plays]

Niki: I’m Niki Christoff, and welcome to Tech’ed Up! On today’s episode, we’re doing something I’ve wanted to do ever since I started recording the pod: two guests and a coffee klatch.

Penny Lee, the CEO and President of the Financial Tech Association, and Amena Ross, Head of Global Policy at CashApp, sat down in the studio to talk with me to talk about all things fintech in DC.

Hope you enjoy this one - we had a lot of fun recording it, and I think this format might be something we do more often!


Niki: On today's show, we're trying something new. It's our first-ever coffee klatch with two guests. Today, I have Penny Lee and Amena Ross joining.

Thank you for coming into the studio.

Amena: Thank you!

Penny: Thanks for having us, Niki.

Niki: So I'm going to start by just doing quick backgrounds on you. We're going to link to your, both of you have sort of extensive bios, so we'll put those in the show notes.

But I'm going to start by doing an introduction and then we'll just jump right into it. Today, we're talking fintech in DC, open banking, how it impacts consumers.

Okay! So, Penny Lee, you are a campaign veteran. I would describe you as a political animal. Is that fair?

Penny:  [laughs] I don't know quite animal, but yes.

Niki: Somebody who's done presidential, how many governor's races have you done?

Penny: Actually 40.

Niki: Okay, so 40 governor's races. That's a political animal. [Penny: laughs] You worked for Senate Majority Leader Harry Reid. You've been a lobbyist. You're an angel investor. And you're currently the President and CEO of the Financial Technology Association.

Penny: Yes. [Niki: FTA] Yes. Excited about it.

Niki: Yes. Welcome. And so, you're representing companies that people know, like Klarna, PayPal, Intuit, Brex. So, fintech companies, that's who you represent.

Penny: Yeah, we have a wide aperture of how we define financial technology, but they all center around digitally native financial services companies. So some of them are what you would call “emerged” fintech companies, some that are established like PayPal and Intuit. And others that are still, I would say, more in the disruptive phase: thinking through how to disrupt payments. Thinking through how to disrupt investing and other platforms. So, we have kind of, a stage, we're stage agnostic, but we have both, kind of, emerging and emerged already FinTech companies.

Niki: So, I've already learned something! I've never called anything emerged. [Penny: Yes?] And now I'm going to start doing it. [Penny laughs]

So, then our other guest, Amena Ross, you're an attorney, you were Chief of Staff to Congressman Al Green on the House Financial Services Committee. [Amena: mm-hmm] You were a Managing Director of, I'm not even going to say what it is except that you represented securities. [Amena: mm-hmm] Okay, so, money again. [Amena: Yes]

And you're currently the Head of Global Policy at Cash App.[Amena: Yes] You were at Square. And I'm going to ask you to explain what that means [chuckling] because you're - all of this rolls into Block, which is a member of FTA, but I don't think people know what Block is.

Amena: Yes. So, Block is our new name. We used to be called Square and Square is one of several different ecosystems that we have within the Block portfolio.

So, Square is our seller ecosystem, which focuses on products and services for small businesses across the world. Then we have Cash App, which is our consumer-based ecosystem that provides financial services to individuals. Then we have several different Bitcoin-focused businesses, including Spiral, TBD, which focuses on personal data. And then we have Afterpay, which we acquired last year [Niki: Yes] in the BMPL market.

Niki: [interrupts quickly] “Buy Now Pay Later,” which we're going to get to, [Amena: mm-hmm] and all of this rolls into Block, which is again, as you said, I'm just restating exactly what you said, but everything rolls into Block, which is the, the main company.

Fun fact for our listeners: Jack Dorsey is not the CEO of Block. [Amena: No] He's Blockhead. [Amena: Yes]  And he's not just, he doesn't just call himself that. That's actually in his securities and exchange commission filings.  [Amena: Mm-hmm] And I love it because I think those filings could be more interesting.

[Everyone laughs]

Niki: I do! I do!

Amena: A hundred percent. Right. They can get interesting.

Niki: They can get interesting. [Penny laughs]

If you look at the [Amena: Yeah] the footnotes.

Amena: Footnotes is where it's at!

Niki: The footnotes [chuckling] of the SEC filings is where all the interesting

[Everyone laughs]

We're nerds 'cause we're laughing at that. [Amena: Yes] We think it's hysterical. [Penny Yes]


So, speaking of things that are a little dry, but could be more interesting. And I'm not saying that this was dry, but Penny, in another, in a previous podcast, you described [chuckling] open banking as “1033 rulemaking out of the CFPB.”

Penny: [laughs] That just grabbed you, doesn't it?

[Everyone laughs]

Niki: It grabbed me, and I thought, “Y'know what, I'm going to ask Penny to explain that.” What's open banking?

Penny: Open banking, it actually is, is the concept, and I would say the United States is actually behind some other jurisdictions globally about it, but it's the concept that when you go to a bank and you provide them all kinds of information, you actually should have that right to be able to transport that, to own it, to be able to share it. But currently, without a structure in place, there are somem kind of, incumbents that want to protect it, that actually financial institutions that believe it's actually their data versus the consumers.

And so, what we have right now is a rulemaking process that is underway by the Consumer Financial Protection Bureau, the CFPB, that will allow for hopefully put the rules on the road about what it means to be consumer permission data, how consumers can share it.

So, y'know, when you're in a, y'know, an institution right now, a banking institution that might be offering 0.004 percent interest rate [chuckling] and you want to go into a higher savings yield now that interest rates are a little bit higher. That ability to transfer your data is going to be made a lot easier.

The ability to interact with a financial application or a financial app, a FinTech app, to be able to manage your money, to be able to think through what are investing opportunities, to think through, kind of, how can I create more savings?

All of those interactions right now need to have these rules in place, and that's what the 1033 rule is about.

Niki: Okay, perfect!  Nailed it!


Amena: Yes

Niki: Let's talk about exactly what Penny just said, but how that impacts Gen Z and millennials [Amena: Yes] because they're in a different - I used to be, like, less empathetic about this because I have terrible, I have crippling student loans. [Penny: chuckles]

Amena: We all do!

[Everyone laughs]

Niki: I know. I know. I know! It's true. And, and so I, I have that Gen X sort of cynicism. [Amena: Mm-hmm] And then I realized it's absolutely true that when you're graduating during a catastrophic recession, and you're having, it's just much higher to do anything that, not just my generation, but certainly the boomers who just really hit things at a peak time financially.

Things are really different. So, how does open banking apply to younger generations? Why is it important?

Amena: Yeah, so I think the biggest thing is that there has been a huge paradigm shift between how we used to interact with financial services and how people interact with financial services now. And for previous generations, you banked at one bank. That's where you got your mortgage, that's where you had your savings account, that's where you had your checking account, that's where your direct deposit went into, and there wasn't a lot of options for you to move from one bank to another, and if you did, it was mostly because you were moving physical location to another place.

Millennials and Gen Z live in an entirely different world for financial services. Their student loans are with one company. Their mortgage may be with another company if they have a mortgage [chuckling]. [Niki: Right]  Their savings may be with another company. They may want to do money management through a different app. They might do peer-to-peer transfers through a different company.

So, they're not using one singular financial institution for every part of their financial life. They live a global kind of financial world, right? And the inability to be able to port their data from institution to institution greatly hampers their ability to manage their money and at a time when they don't have a lot of it.

It really doesn't give a lot of space for them to grow into having sustainable long-term habits that will allow them to be financially stable.

So, I think it's really important for millennials and Gen Zers to have open baking as an option.

Niki: And I think the other thing is that, I mean, this is obvious, but I'll just state it, they’re so on their phones [Amena: Yes] that they need apps to work and interact with each other. I, this is, I had a checkbook ledger until last year [chuckling]. I know, it's embarrassing. [Penny laughs]

But that's because, that's because I know! [Penny: still laughing] Amena just made a face. Everyone, she just literally, like, almost swallowed her tongue.

Okay, but here's why. When I was in college, which I just had one bank, I was always down to if I go under my minimum amount of money, I am doomed. And so, I would just check it. And so, it was sort of this like almost traumatic response that I would have this ledger [Amena: Mm-hmm], which is obviously old school, but not different than staying up at night because you are stressed about savings and affording your rent, and you're not getting a raise in all of this.

So, I think the anxiety exists still, but it's now in a digital world where they want options. And I also think they're more likely to manage their own money.

Amena: Yeah. I think it's also a trauma response, right? Millennials lived through the financial crisis. Gen Zers lived through the pandemic. They've seen banks fail. They've seen people not have access to their money when they needed it. And they've seen how their parents maybe had great... 

relationships with financial institutions, but when they were down on their luck, those same financial institutions were not supportive of them and their families or their communities.

So, it's definitely a bit of a trauma response as well to keep your money in a lot of different places so that you know that you always have access to at least something.

Niki: Yeah. So, I want to talk just quickly about a concept Buy Now Pay Later, which I think trends younger, but Penny, you'll know the answer on this? How that fits into this ecosystem of how generations and, and maybe it's not just younger people using this, but what are some of the trends you're seeing that are consumer-focused among, sort of, your members?

Penny: Yeah. I would say, y'know, just to back up on Amena's point, we've seen, the data has showed, is that nine out of ten people that use fintech say it actually helps them better manage their money, better save money, and help them plan, because we are seeing that transition happening.

You've seen it again, globally first, and now it's coming to the United States, of that notion. Y’know, you used to keep your ledger to make sure because you were paid on a Friday, and oftentimes, y'know, you sometimes wanted that lag to occur [chuckling] so that when you sent the check in and had it dated on Friday-

Niki: It's in the mail! [chuckling] Another thing people don't use anymore.

Penny: But now we're fast-forwarding into, y'know, having the Fed have FedNow for the instant payment, having products such as earned wage access for you to be able to access your wages on a daily basis to be able to smooth and transition over, kind of, what it means to, y'know, to make your payments on time.

And you've also seen fintechs entering into the market. It's, it's not by mistake that overdraft fees [chuckling] are going away from the major financial institutions because fintechs were offering products that allowed them to be able to not incur a fine tax, to be able to manage their money, to ease that transition between a clearing of a paycheck, and so you're starting to see others that through the competition from fintech that change their own behavior, which is only beneficial to consumers.

On the “Buy Now Pay Later”. It's another payment option that is available when you go out. Now, when you check out of any e-commerce or other places, you have now many, many options. You can go through your card network, your Visa, your MasterCard. You can go through Cash App, PayPal, Venmo. You can go through Buy Now Pay Later.

It's recognizing that everybody has different needs at the time. And if they want to, y'know, pay payments over time, that fits their budget need. That is now a viable option for them to do.

Unfortunately, most Americans don't have 400 dollars in savings for an emergency. A product such as Buy Now Pay Later allows them, y'know, if you are a, an employee who's car-dependent on your job, you get a flat tire or a major issue, y'know, it used to have to, you had to have cash right then and there to either pay for the tow, pay for the car service, the transition.

Now, you have the ability to maybe plan that out, and so that 400 dollars expense can be expensed over three, four payments that fit your own payroll, that fit your own budgeting needs instead of instantly having to rely on a cash check, [chuckling] or a payday lender, or a really high interest bearing credit card, other things.

It's not for everybody, but it's for those, but it's a great payment optionality.

Niki: I'm really glad you said that because I think that there's this idea that Buy Now Pay Later is just a way to buy things people, y’know, indulgent products people can't afford, but you just gave a really good example of needs.

And if you are car-dependent and you can't pay for your emergency purchase, or if you just need something in that time, but y'know you're going to have the money later.

You made such a good point about the way that people are moving the competition between interest rates. They might be better somewhere else that you have this flexibility. It puts pressure on the bigger financial institutions. They've got to lower overdraft fees because if you don't have an overdraft fee, you're going to move to another place.

There's some friction right now between some of the apps that use data. Actually, I'm just going to stop talking [chuckling] and have Amena explain [everyone laughs] it.

Niki: The end!

Amena: Yeah. So, I think one of the things that is making open banking not only a regulatory issue but also an industry issue is that data is like the new oil. It's, it is so important to a lot of companies’ bottom line. And between financial institutions, as Penny said, they're trying to keep as much of it as they can to themselves.

And one of the ways that open banking works is through screen scraping, where, basically, an API looks at how a website is structured and replicates that so that you can put in your login, your password. Most of us have done this on many different apps. And it allows you to access your information from maybe your traditional financial institution and port it into another app so that you can manage your money better.

Well, there's been some [pause] chagrin about this. It has worked this way for quite a long time, but now, as we're moving forward and data is becoming so much a part of companies’ bottom lines, there's been a question as to whether or not that should be done. Right now, it's legal, y’know; most people use it on a regular basis and companies a lot of times have agreements with each other on how that scraping should work.

But... I think now there's been more of a push for traditional financial institutions to keep that more in their pocket and create companies that will specifically allow their institutions to scrape without allowing everyone else to be a part of that.

Niki: So a concrete example of this, you about a week ago [Amena: Mm-hmm] explained what screen scraping is to me because I'd never heard that term, and it sounds like a negative term, but it's actually positive. [Amena: Yes. For consumers]

For consumers, it's positive. And I had just had the experience of getting kicked out of my Venmo and having to reconnect it to my USAA account, and I kind of freaked out because it had been connected forever, and I'm always completely concerned that TikTok has infected my phone.  [Penny laughs] I really don't even use TikTok, but I have these ideas.

I'm like, “Well, why do I have to?” And it created this friction where I had to pause and then I had to input my data again, and then you explained that that's kind of what's happening is making it a little more friction so that you can't use services that aren't offered by that main institution.

Amena: Exactly because they prefer that maybe you use the service that is already on their platform.

Niki: Which would make it easier! So, let's talk quickly, Penny, [Penny: Mm-hmmh]What's happening around open banking? What's the state of play?

Penny: Yeah. On open banking- it's actually right now a regulatory issue. So it's, it's primarily with the CFPB. And so they're in the final rulemaking. They will give notification of what the final rule will look like, we're expecting, some time this fall, October, November. And at the same time, the House, in particular, has been, y'know, kind of working through to, been mindful of letting them put that rule out before weighing in, but simultaneously, back to Amena's point, y'know, one of the things that we don't have here in the United States is what we call the data privacy rule.

What are the- How do we share data? How do we ensure that it's protected? How do we ensure that there's safety and soundness?  For the data, that it's not used in nefarious ways, that it has the consumer protected and small businesses protected at all times.

So, that is something that the House has been working through right now. It's gone through the House Financial Services Committee. It's now on Energy and Commerce. We - it has been a long time in coming. So right now, unfortunately, our companies and most every company is subject to potentially 50-51, District of Columbia, Puerto Rico, and other different data privacies.

And so, we've been advocating for, along with a lot of other people, for a federal preemption so that there's one standard for how you share data. So that there can be consistency, that it doesn't matter if you cross the 14th Street Bridge to Virginia [chuckling], there's one set of rules, and if you go north into Maryland, there's another set of rules.

There's a lot of people involved, but we're hopeful that, y'know, that we can start to finally see the US adopt a data privacy rule.

Niki: Absolutely. So, I mean, [chuckling] we've been talking about, [Penny: Yes] we've been talking about federal privacy laws for years now. It kind of reminds me of Infrastructure Week, which became like a joke in this town, right?

[Everyone laughs]

And then, they did it! I remember when Infrastructure Week actually arrived. I couldn't believe it. So, I think you're right. We might be closer than we have been, but partly because it benefits both consumers and companies to have that. It's actually in everybody's interest to have a federal standard.

Penny: It's also in the security interest of the United States.

Niki: Right!

Penny:  It's in the security interest, it's in the financial security, it's in the, y'know, all criminal, it's, it's, it's in all aspects of our lives as we are now kind of digitized ourselves with kind of all the footprints that we're putting online. We need to have a federal data privacy law that clearly spells out what you can and cannot do with that data.

Niki: I mean, the devil's in the details, but yes, we are hoping for it!  [Penny: Yes]

Okay. So, I want to go back to CFPB, and Amena, can you explain the genesis of this agency?

Amena: Yeah. So, the Consumer Financial Protection Bureau is a creation of the Dodd-Frank Act, which was passed in 2010 as a response to the 2008 financial crisis.

And, of course, Chris Dodd was a Senator; Barney Frank, a lion of the house, right? [Niki: mm-hmm] And they worked together to create basically a new paradigm for how financial services should be regulated after this, y'know, horrible crisis that impacted the entire world. And one of the things that grew out of that was the Consumer Financial Protection Bureau.

And it was actually an idea of Senator Elizabeth Warren, along with several other academics and consumer advocates, and it took probably about a decade for it to become a bureau, an agency with some teeth, which is what we're dealing with right now with Director Rohit Chopra.

I would consider him as one of the first directors of the CFPB because previous directors really spent most of their time in court. [Niki: Okay?]

So, they were fighting over whether or not the structure of the agency with a sole director was constitutional. They were fighting over whether or not the funding structure for the bureau was constitutional. And there's been many fights, many iterations of these fights, over the last decade. And we thought we got to kind of,[chuckling] a stable place. The agency is going to exist. It's going to exist in this structure. There's not going to be many changes.

And so, that has allowed the agency to be much more proactive or aggressive, as some of my industry colleagues would say, towards the industry and focusing on consumer protection.

And one of the reasons it was created, if I just go back, is the idea that many of the other financial regulatory agencies were viewed as being captured during the financial crisis. So, they had people that had worked in industry that went to the agency, and maybe this was the reason why there wasn't as much oversight of the financial services industry during the crisis.

So, this was supposed to be a very independent agency that didn't have that kind of background or history. And, now we're in court again.

Niki: We're in court again. [chuckling] So, just to back up really fast, you mentioned something that I think is critically important to probably why we're in court again, which is the concept was a Senator Warren concept.[Amena: Oh, yes!] 

Which makes it incredibly politicized [Amena: Very partisan] Right? It's super partisan. Even, and, and in fact there are, in my opinion, I personally, this is my opinion, no one here is saying this, there's a lot of overreach from that agency, in my opinion, and yet it's meant to be a check based on a disastrous situation, which actually Penny was right on the front lines of [Penny: [chuckling] Yes], which is the financial, which actually maybe you can mention that?! Right on the front lines of a disastrous financial situation, this was meant to be a watchdog to help consumers, but it's become just a hot potato because it's so partisan.

Penny: Exactly

Niki: And we are; this episode goes live two days after oral arguments on whether or not this agency is going to be funded, because, to your point, Amena, we are, it's Groundhog Day. [Amena: Again]  It's, again, so we're back.


Penny: Yeah, no, and look, we, those of us that, y'know, Amena was on the Hill, I was on the Hill during the financial crisis and those were incredibly heady days as you did not know, y'know, whether or not the, the global, actually not just from a US but from a global perspective, kind of where we were going to be on an hourly, daily basis [chuckling]. And luckily, y'know, we were able to put together the right structure to be able to put not only the United States but the rest of the, y'know, hopefully shoring up the rest of the world to put them on a financial path.

So, I think the concept of the CFPB is in the right vein. The notion that consumers should be protected against predatory products, that they should have a place where they can go to file complaints, that they, y'know, if their credit rating is is what they feel is skewed or hasn't been captured correctly, there's a place for them to go.

It has been a very politicized and depending on who the director is, is dependent on the direction of the agency. In, in much more wild swings or pendulum swings than any other agency, independent or not. Currently, we have a very activist director, and, but prior to that, Mick Mulvaney came in and said, “I basically don't want to do anything and I think this is a waste of taxpayers money.”[Niki laughs]

And so, y'know, [chuckling] and so he had a very, there was no action.

Niki: Limited!

Penny:  A very, very limited agenda as to what he was charged to do. So, y'know, part of this court case is not only deciding the funding structure, because it's a little bit, it's not unusual, but it is unique, in that it is not subject to congressional appropriation.

So, Congress isn't saying, “This is how much we're going to be funding you for.” They are funded by the Federal Reserve, which is an independent body similar to the FDIC and the OCC, Office of the Comptroller of the Currency.

So, this case is deciding whether or not the funding structure is correct. It will have wide implications if it's found to be unconstitutional, then you bring in these other eight financial institutions as well as to whether or not their structure is correct or how/if they should be subject to federal appropriations.

And as you all know, when you do have federal appropriations, when Congress is funding you, your agenda could swing even more wildly.

Y'know, if there's a bank merger you don't like, [Niki: Right] could you petition against it? y'know, what is that influence of it? So, it's going to be fascinating oral arguments to hear. I think we're all going to be on pins and needles just, just are fascinated to see kind of what the arguments that they lay out and, kind of, where the court decides.

And it could, it will have wide implications.

Niki: And to Amena's point, they're back in court. So, [Penny: yes] [Amena: Back in court]  I always think this: whenever anyone says we're going to set up a new federal agency, there was talk of it for privacy, there's talk of it for AI, and I'm like, “I don't know. I don't think that-”

Amena: I mean, Homeland Security?!

Niki: That's true! [Amena: Mm-hmm] Okay.

Amena: Yeah. But people still don't like that [Penny: chuckles], so, and that's 20 years in the game!

Niki: But a very good counterpoint that it did get done. But yeah, it's just so hard to do this, so we'll be paying attention to that.

I want to just end on, I think one of the things you both do that I find really important; we're all kind of across the political spectrum, but I think that one thing I find important is taking consumer choice, consumer data, consumer options, and none of us want anybody to have predatory practices against consumers, but also we're all at tech companies, and have worked at tech companies, and innovation is really important. Keeping winning the game, right? Making sure that we're able to innovate and create new products and have the ability to do that. So, it's a balancing act.

But I thought the last thing I'd ask is, what's one thing that you're hopeful about in the next year that you're, you hope to see that would be important to you, either in your jobs or just personally in this space as people who are following fintech so closely.

So, Amena, do you want to start?

Amena: Yeah, I think there's been more of a focus on financial education. The OECD and the European Commission just put out a study on financial competence and how to increase that in children in, in Europe. And I think there's been more of a focus on that from the CFPB as we go into an election year. Y'know, bless us all after the debate last night [Niki: chuckling]

But, but I do think that that is so important for the vitality of the country overall and just our economy because the children are our future, right? But also the young adults are [chuckling] And also people who are in their middle age.

Everyone is kind of grasping at straws to figure out what is the best way to manage my money in a way that's going to protect me, protect my family, protect, y'know, the folks that I love the most.

So, I think, the move toward providing more clarity on financial education from regulators, from policymakers, I think is a big, a big deal.

Niki: I agree! I think it's so important and definitely, when you're sort of casting about trying to figure out, I have often an emotional relationship with money. [Amena: mm-hmm]

I mentioned how I operated in college, so it's not always rational, and I know that rationally I should be doing different things. Y’know, I should not be keeping money in paint cans or in my mattress. 

[Everyone laughs]

It's just this sort of emotional rather than rational thing. And I think it's really important to at least understand that and then unpack it for people so that they can build wealth, but even more than that, just get through the day.

Amena: Yeah, exactly!

Niki: Penny?

Penny: I would say, y'know, what I'd like for us to see, I just spent two weeks kind of traveling outside the United States and, y'know, it used to be that you used to have to get traveler's checks or, y'know, figure out how to change, exchange your money. I literally went two weeks and never used cash.

Everything was tap to pay. Everything was card-based. Everything there, the ease of which you could pay for your mobility, your restaurant or everything was, was amazing. And y'know, I hope that United States catches up with the rest of the world and is able to have that frictionless payment that has the safety and soundness of our regulatory bodies.

But doesn't, y'know, we're not continuing to be entrenched into old ways where, y'know, right now at a restaurant, y'know, you give your card, it disappears to some back room [Niki: Right!] that you're not sure if it's actually going to come back or not.

So just, y'know, really want us as we have always, always led the rest of the world in so many different ways, and we still are on the forefront of financial services, we continue to provide a frictionless experience for the consumer with the safety and soundness of our, of our government.

Niki: That is such a great point to end on. I actually have a friend who lives in London, and she came to the US and forgot her credit card, and she said, “Y'know, “Why do you, you invented Apple Pay. [Penny: Yeah] Why are you guys not using it?”  [Penny: Yes, exactly] That was a really [Everyone laughing] [Penny: Right?] excellent point. So, she just didn't even bring it because she never uses it. So, I think that's right.

So, financial education, making sure people know what they're doing and making smart choices and having options. And then making sure we're competitive as a country and keeping up with everybody else.

These are great points. Thank you so much for taking the time to come on.

Penny & Amena: No, thank you.

Niki: You're both experts, but I also consider both of you friends. So, I really appreciate you coming in today.

Penny: Thanks so much.

Amena: Thank you.


Niki: On our next episode, I’m joined by fellow podcast enthusiast and Head of Global Government Relations at StubHub, Laura Dooley. Brace yourself: I’m sure I’ll talk a lot about T. Swift in the episode, and honestly, not sorry because she’s breaking records, and I am here for it!

Be sure to tune in two weeks from today.

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