Name: Balancing the Ledger: How Automation is Ushering in the Third Wave of Fintech
Uploaded: 2019-11-12
Duration: 11 min 11 s
Description: Jason Brown, cofounder and CEO of Tally, stops by the Fortune studios to discuss new products and the future of financial technology.

[ MUSIC ] Welcome to Bouncing The Ledger where tech and finance intersect. I'm Jen Vietnam. And I'm Robert Hackett. And today we have Jason Brown, the co founder and CEO of Tally. Thanks so much for being here, Jason. Thanks for having me. So, Tally specialises in financial automation and you also do some debt repayment, can you tell us a little bit about how that works? Yes. We are a financial automation company which means that we are building a service that can do all of your financial thinking and your financial work. We started about four- and- a- half years ago building what is now the first and only automated debt manager And it helps people get out of credit card debt faster, and save money along the way. And then we recently added an automated savings service that helps people save towards goal, or build a rainy day fund And ultimately what we're working towards is to be able to do all of the financial thinking and work for consumers so that they can, set really big objectives like I want to be a homeowner. And along the way, we're getting rid of their card debt, saving a down payment, improving their credit score, and then eventually financing a home. So it's about being able to Really take that, that emotional and cognitive load off consumer shoulders and, and do that in an automated fashion with software. So walk us through exactly how this works. So with tally you just download the App, scanning your cards and then we actually take responsibility for paying your cards for you. And then you pay tally and the advantage there is anytime we detect you're getting charged interest by the cards. We actually sweep over your balances overnight and move them over to Tally at a lower rate. And we guarantee your not gonna have any late fees. The way our algorithms manage your cards, they get you out of debt quite a bit faster. And our average customer saves over $ 5000 in interest. So it's really about taking that burden away but also making people better off financially. How much debt does your average customer have? It looks pretty close to the American average which is about $ 15, 000 of debt. Another fine tech start ups out there, they advise you on what credit card you should actually use. Credit karma, nerd wallet, things like these. Do you give recomendations and take affiliate marketing in some of the ways that these other start ups do? Well, there's there's two things I want to jump in there first around business model is we think it's critical to only ever make money if we're actually delivering economic value to consumers, and not to make money through advertisements or things that are not aligned so we'll never do any kind of advertising or anything like that. Separately I think the thing that is pretty fascinating is there's really three ways of consumer fit tech, the first wave was post financial crisis and this was the emergence of the online lenders, student loan lenders, and after that came mobile tools. And that's really where we're at right now. So that's where you've got Credit Karma, a lot of the neo banks Online stock trading. And these are just really easy to use mobile tools that you can open up the toolbox and do your financial work. The place that it's going is it's going to a world where there's an intelligent service that actually Is doing that thinking and work for you and instead of you having to spend your time and figure out what should I do? It has already figured that out based on your goals. So you just communicate in human language about what you as a person want and then it actually does those things for you. So our view is very strict which is automation means we do all the thinking and work. And if you look at, for example, the Tally home screen, It's a picture of a person with their feet on the table drinking coffee. There's no ads, there's on drop- downs, there's no recommendations, or charts. We've built a system that can actually do it all for you. And that's really what we're focused on. I'm interested in the shift you described toward full financial automation. One of the major issues we see in technology right now is you've got these companies like Facebook and Google. And they've got these black boxes, they serve you recommendations and whatever they like and you don't really know exactly what they're doing, whether it's you know, in your interests or in their interests. So when it comes to financial automation, how can someone be certain that a startup such as Talia is providing, you know the best possible recommendation for them. Same thing for robo- advisors and people making investment choices on behalf of other people. Yeah, well, I think it really starts with the business model. I mean, when you have an ad- supported business, your customers really advertisers and and the product is the consumer, and that puts you in a difficult situation because you're not always going to do what's best. If you shift it and say well the customer is my customer, and I will align my business model with Delivering them value then you bring the incentives in line with each other. So again, taking a look at Tally cards, we only can make money if we're actually saving a customer money on interest. So people are using Tally that let's say don't have any interest charges They get to use Tally for free and they get all the benefit, which we're fine with. But anytime we can see hey we can save you money, we're going to do so. And then Tally will actually earn revenue. So I think it has to do with just the general focus around what is best for the consumer mathematically and doing that. And I think that's the power of Having computers do your financial work, cuz let's just take a real human financial adviser, right? They're supposed to be doing what's best for you but are they getting fees and incentives from different financial products to kind of nudge you in one direction or another, whereas Tally effectively has an audible log in every decision that the system made on your behalf, we can justify why mathematically that was the best thing to do at the time. And even 100 years from now, when I'm dead and gone, if, let's say, auditors wanna come in and look at what happened? There's actually a trail on every single move, so that's one of the things that I get excited about, is moving actually away from human advisors and to computer systems where you have that kind of mathematical accountability. Because at the end of the day, computers optimize towards goals. And if the goal is make this customer better off, then you really shift the power, if you will, to the consumer. Earlier this year you raised about $ 50 million from venture capitalists including entries in horowitz. And you also launched an automated savings product. Can you explain a little bit about how that works, and is this a sign of other areas that Tally will launch going forward? Yeah we were really excited to have the support of [ UNKNOWN ] and Angela Strange joining the board. She's A huge proponent of making people's lives better from a financial standpoint. So that's been exciting. And yeah, so tally say was really born out of, Hey, we just built this automated debt management system that's working really well. We have 99 % retention, monthly of our users. They're out A third of our growth has been organic. So we saw the power that automation can bring. But solving credit card debt is only half of the issue. For most people, it's either getting out of credit card debt or it's building up a cache buffer so that they have the ability to Handle uncertainties, and when we would talk to our customers we found that universally, every single one says you know what, I know I should save. And we really dug in and said well why aren't you saving? It came down to two things, it's either hard or it requires sacrifice, and so we said okay, well we can solve the hard part by automating it. And let's just make it completely free so that there's just no reason not to have Tally. You know, setting money aside for you every week so you can make progress. But we had to think really hard about how do we make it go from feeling like a sacrifice to feeling like something rewarding or luxurious when it happens and we actually stole a page out of the credit card playbook ironically, which they have very successful systems that Pay you points to spend. So their incentives are to get you to spend more and more. And we said, what if we flip that on its head and we actually design a system so that every time Tally sets money aside for you, you actually get points for the moment? So now the actual act of having money being set aside for you Feels rewarding and you can literally in the app you can go to redeem those points for gift cards from top retailers. So Uber, Amazon, whatever your most interested in. And so we're able to take those good intentions that That we all have which is to make ourselves better off. And make it so that there's now, there's nothing that's hard about it and it actually feels like a rewarding experience. To the account rewards them with points but it doesn't actually pay interest if I'm correct. Yeah. That's interesting to me when a lot of other FinTech, you know betterment, wealth front Credit Karma sofa, have launched high yield savings account that usually pay above 2 % interest. What was the decision to. you know, forego that. Do people not actually care about interest on their savings? Well, so, again, what matters a lot is who your consumer is. With our focus being squarely on getting a complete financial automation, we believe it will first happen with the middle 50 of Americans who have more generally standardized jobs. Okay? When you look at normal consumers They do not care about 30 cents a month in interest, or 50 cents in it. It only matters if you literally have five or $ 10, 000 in savings. Where you're like suddenly now, the interest each month Months turned into dollars. And so what our insight was, is that for most people APY on their savings account, it does not make them save more. It's not solving this issue or the fact that they need a cash buffer and they don't have it. We said we need to bring all the incentives to be in the moment, the moment that that money goes out of your checking account and into the Tally save account. That's the moment where we want to say, hey, you should feel really good about yourself. Because that's what matters most is the actual saving itself. So we decided that we are gonna put all of the economics, if you will, upfront so that people would get immediate payout, rather than having to wait years to get $ 10 in interest. Giving all the insight you have into people's bank accounts and credit histories, how are you feeling about the economy? Are you nervous? So from a consumer standpoint, all the data that we have suggest the consumer is very strong. Unemployment is extremely low. We see people getting jobs or even changing jobs and getting more money. So So the actual raw underlying consumer here is very strong. If we do have a recession, I do not believe it's gonna originate from consumers. I think there's obviously a lot of uncertainty around trade and the administration. So if something does happen, it's gonna come from this kinda external and above, instigator, but I think it's I'd be more nervous if consumers were struggling, but at least for now they are stronger than they ever have been. So, I think that we'll be in a good position at least for the next 12 or 18 months. It sounds like they're saving? They are saving. Great, well thanks so much for being here Jason. Thank you so much for having me. I'm Jen Wieczner And I'm Robert Hackett. For more Balancing the Ledger, come to Fortune. com We'll see you next time. [ MUSIC ]

Balancing the Ledger: How Automation is Ushering in the Third Wave of Fintech

Finance

Jason Brown, cofounder and CEO of Tally, stops by the Fortune studios to discuss new products and the future of financial technology.