Mike Brock, GM, TBD, Block
Brooke Major-Reid, Chief Capital Officer, Affirm
Adam Nash, CEO, Daffy 
Ksenia Yudina, CEO, UNest
Moderator: Brian O’Keefe, FORTUNE


Brainstorm Tech 2022: The Future Of Fintech

Conferences

Brainstorm Tech 2022: The Future Of Fintech



welcome. So mike I know you have a bone to pick, let's start right there. Okay. Uh T. B. D. Is part of block formerly square, incredibly successful. Fintech company T. V. D. Is frequently described in the press by my media brethren and sisters as a Bitcoin centric subsidiary of Block or Bitcoin focused subsidiary block. Uh and you don't agree with that, So set the record straight. What is, what does T. V. D. What does it mean? Uh or why would people call it a Bitcoin centric subsidiary? What I what I would agree with is that Bitcoin is the technology that we most believe in as a future um basis for building a new financial system. But we also believe that stable coins are a very very important part of the future. What I actually quibble with is when people say that we're building everything that we're doing on Bitcoin and and and the reason why I quibble with that is I think what people are doing is they're taking a lot of the patterns that they've learned from this web. Three discussion of like trying to put all of these uh technologies and products and services onto Blockchain and that's not what we're doing. Like we don't think that that's the right approach for everything like we are focused very very heavily on building decentralized systems which serve um the goal of being able to let people own their identity and own their data and we don't believe that that all of that has to be done on the Blockchain, in fact, we think Blockchain is a pretty terrible tool for that. What we do believe in though is that like we think Bitcoin as as Jack often says, is that we think it's the true native currency of the internet. We also believe stable coins Yes, on Blockchain are a way in which to uh put forward financial empowerment for individuals all around the world. But the story of decentralization is a much broader conversation and we're making large investments in those technologies throughout the ecosystem and many of them have nothing to do with Blockchain. So what's an example of the kind of decentralized services that you want to build? You know, that would be the first big targets? Yeah, I I think I think this, I think the first of all, I think the most important application that needs to be solved is identity. I um the identity is at the heart of everything we do on the internet, at the heart of our life is at the heart of how we use money, how we identify ourselves, how we um identify businesses and institutions and create secure like transactional relationships between each other. And this is this is a problem that has really not been solved in a decentralized way and I think it is ultimately the key for moving towards a more decentralized future and once you have those base layer of technologies that allow us to own our identity and then ultimately own our data attached to that identity, then you can really start thinking about reimagining financial services, social media and all of these other areas that I think, you know, a lot of us would would like to see more democratized and more decentralized. Um I don't think you get there without decentralized identity. And so we've been really laser focused on that. Um we've been actively contributing uh around the D. I. D. Specification um which is an open standard which has been submitted to the W three C. Were also participating with decentralized Identity Foundation um and working towards a common standard that all individuals, companies institutions and even governments can use um in order for us to break free of this paradigm that we have today of like log in with google, log in with facebook, log in with amazon. Like I don't think that that I don't think that that's the right frame for a competitive, more democratic future. So you mentioned Web three and you know, you recently announced uh along the lines of what you're describing with the decentralized um Platform, you just you announced that you were creating something called Web five, which is intriguing because, you know, we're only getting our brains wrapped around Web three. And what happened to Web four? Why Web five? Why are we jumping right to Web five? And how did you pick that? Well, I mean we we wanted we wanted to do something that would get people's attention to start talking about. Um and and I think what we really wanted to do is draw attention to the fact that if what you're really trying to do is thinking about think about decentralized applications and services, then you really need to like think very deeply around things like like like like how how are you going, how is what is customer experience going to look like? What are your customer acquisition strategy? Like I don't believe Toca nomics is something you want to expose to a customer. I think, I think the average consumer wants to pick up their phone, use an app very simply not think about micropayments and all the stakeholders hold their capitalism stuff that like people think that at the average consumer is like somehow like crying out for I think they want something that's simple, that works. That's even simpler than their current experience today where we can one click on board to a financial service or one click on board to healthcare service and have our information be transmitted to our doctor about our health records that we control. These are all things with the Web Five technologies that we believe can be accomplished in a way more technologically sound way than trying to find ways to stuff it onto the Blockchain. And with Web five, I think we forced open a lot of those conversations around Are the technologies of the Web three community are using to try and reinvent these things actually fit to the purpose of the problems they're trying to solve. And we think the answer is no. And that was the basis for the narrative around Web five got it Brooke, I believe that today is prime Day. And the reason I know that is because I've seen about a billion tv ads for it. But the reason that I'm asking you about that is because last year a firm announced a partnership with amazon and so this is your first prime day and I'm wondering how's it going? Are you getting live updates? You know, our people like blowing up your firm account on prime day? Yeah, no, we're super excited about it. I think once it was announced the, the possibilities around what partnering with an amazon would look like. I think you leave that to the imagination and to have our first prime day, The entire company is extremely ecstatic and we are getting a lot of great traction. And also in terms of just demands using a form at the checkout. And so it's something that when you think about momentum and scale, um, it's, it's definitely something you lead into and with something as massive as, as prime Day, we're all kind of looking at the metrics and making sure that we are optimizing for consumers in all the ways possible with a partner like amazon. So a firm is basically described as a bin al pay later, You know, digitally could for people who are not familiar with it. Could you just give like a very quick description of like the service you offer right now and sort of where you're going with it? Yeah, I know, absolutely, I I'd be happy to. So do you think about buy now pay later? It's, you know, ranges from just providing um loans for folks to at the checkout to really purchase things that are actually either considered purchases or more um you know, everyday purchases. The thing with the firm is that what we are aiming to do is create honest financial products that improves lives. So when you think about transparency and all the things that folks want in their financial partnership with companies, it's really around kind of that trust. And so what a firm is building is more than just you know, products that people at the checkout use or merchants are, are satisfied with. It's a platform that engages the consumer in their financial activity day to day. So where we are today is that we offer um, you know, loans to check out in terms of you know bi weekly To all the way to 60-month loans. So zero all the way out um interest bearing 60 month loans. And we actually create an ecosystem where you're providing value for the customer in terms of meeting them where they are, but also for the merchants in terms of, you know, providing access to consumer base, fewer abandoned carts um hire a ov um check out so where we're headed with it is using that interaction and, and and really leveraging the transparency and the honesty around what we're providing to create an ecosystem around payments and all the things that we know consumers want to kind of aggregate their financial life. So when mike is talking about is laying out the framework of a decentralized way of handling transactions and breaking the paradigm we have now do you see an intersection with the kinds of services you're providing and that kind and that kind of uh framework? Yeah, I totally do. And I think the interesting thing about is that we're uniquely positioned given the fact that we underwrite each transaction. We are actually engaging in a way that is using technology um in terms of underwriting and all the things that you want in terms of proper risk management and and the, the identity piece and ensuring that you're actually not thinking about the customer, just another credit score. You're really taking that information and decision ng in a way that is informed but also beneficial for the customer in terms of who can repay the loan at the transaction level and engaging with them in an honest transformative but also a very simple transparent way Cassina. I mentioned in the introduction um the amount of money raised by Fintech last year, one of those companies was your company. Uh You raised $26 million B funding raised last year. Um so I just wanted to like unesco is an app that you've created a service to save money for your child's future. What was the back story for? You know that motivated you to create an app to create a new way of doing this? So the motivation was actually coming from three directions. First I graduated from U. C. L. A. Anderson with about 200,000 in student debt and a lot of my friends were affected by the same issue uh and I really saw an opportunity to change the future of the next generation by providing the right tools to the parents right now to save for the kids future. Um Second I'm a parent myself, so I understand that for any parent, the kid is number one priority and once you have a child, our priorities changed from ourselves. It's not about our retirement anymore, it's how can I provide for this little human that really needs my help. Um but most importantly I spent four years at Capital Group, which is the parent of american funds and is number one provider of 5, 29 U. T. M. A. S in the nation and I was working with individuals, learned about pain points, learned about what was broken in the industry uh and that existing solutions pretty inaccessible for average americans, people that need it, the most existing solutions are very expensive, They require a lot of paperwork. Uh they're very inconvenient. So my inspiration was to create something that will be intuitive, simple and accessible to people of all economic backgrounds. Great, if anybody has a question, raise your hand will get you a mic. We do have one over here, so we'll get a paddle over there. Meanwhile I want to ask you. So you were very familiar with the 529, the standard sort of education savings fund paradigm. How did you consciously create your app to differ from the existing, you know, uh structure? So one interesting observation about 529 is that 70% of people still don't even know about uh about this excellent tool to save it, invest for kids. Um and even those people that know they find the solution very complex and overwhelming and you know, time consuming a lot of people are just put off by the complexity of the existing process. So our solution uh actually criticized the United the transition to a different type of account that's much better for our user base. But our solution meant to help you create accounts in just five minutes versus like ours that will take you. Um you know, we were acting as financial advisors by helping you to identify the right in the petroleum for your kids that would become more conservative as you know, child becomes older and approaches college and also it was a very social experience. So you don't have to do it yourself as a parent, you can actually get help from your friends and family. So we created this gifting feature to accept gifts into the app. Like with, you know, easily sharing the link. Um and also Brands we partnered with over 150 different brands. Every time when you subscribe or shop through the app, you actually get financial rewards into your child's account. So you have some news coming up that I have to ask you about. I'm excited to ask you about in August you're gonna allow parents to buy and hold crypto in your app. Um not everyone would think that was maybe the best idea, especially after crypto or you know, Bitcoin fell below 20,000. Um why are you doing it? Uh and you know, what does the data show you about? Uh why it's a compelling and and good thing to do for, for saving for your kid's future. So we always listen to our users and trying to get the feedback before we launch any product on our app last year. We stand the survey to all user base to understand, what is it? Parents would like to see next on UNIX platform. And we asked about things like life insurance and debit cards, to manage allowances and credit cards to build the credit overwhelming feedback was that parents want to see crypto and individual stocks on the platform. Uh so that's what drove our decision. I would say that crypto is really going mainstream, more and more consumers hear about it. I want to give it a try and uh in terms of like volatility, yes, we understand that there is like some risk and volatility involved but we are here to give parents access over the long term to build a future for their kids and we believe that crypto can be a pretty transformative well building tool if you invest responsibly over the long term key part is the last part there probably but Alright, let's try to get one question. I think we have one over here just quickly stand up and identify yourself. Hi dan Dolev payments analyst at Mizuho, so I actually cover two names here and I have questions for both Mike and Brooks mike like how does the kind of going back to what you said about Bitcoin? How's the decline in Bitcoin changed the strategy strategy at TBD if any. Uh and then for you Brooke what do you think is the most misunderstood thing about a firm. Okay, let's keep it kind of tight, you know this this is gonna, I mean this is gonna sound a little bit too easy and dismissive but in but it is the truth, I don't think much about the price of Bitcoin. Um I I look at the Bitcoin infrastructure as infrastructure like as an open protocol. Um I have a belief that long term that um that Bitcoin will continue to accrue in value. Um Net net I do not generally, I'm not one of those people you see on twitter encouraging people to um buy Bitcoin or do any technical analysis. I definitely think people should invest responsibly um and should not invest more money than than they're able or willing to lose. Um but I believe that the core technology of Bitcoin which we are using to do things like secure digital identity um and also you know provide a layer for enabling uh you know completely decentralized payments is the future I believe in that technology um and the market machinations are are largely um uh like in many ways for me right now. A little bit beside the point. Yeah, no thanks for the question. Exactly, no thanks for the question. I think everybody understands the firm is the solution both for both consumers as well as merchants. I think one of the things that um we really need to drive home and make more well understood in the market is how we underwrite and the technology that goes into risk management, we are extremely front footed in terms of controlling the risk in our book and in the business and as someone who has the responsibility of managing the capital that is available to fund our business. It is impressive when I joined over a year ago to see the rigor around that and how holistic it is. So we do underwrite every single transaction, it's a very transparent process for the consumer. You sign up, you are um you know, decisions around a transaction, we know exactly what you're purchasing, but then we basically continue to monitor and look at the portfolio in a way that is very front footing in terms of managing risk using machine learning tools and continuing to create rigor around not just risk management in the book, but risk management around the profile of the products we offer to clients. So um if I were to ask you to take one thing away in terms of being mystifying something about a firm is how incredibly in control we are of the outcomes, the credit outcomes and the nature of our book that allows me to have a better time um financing the business uh despite any idiosyncratic moves in the market. At the end of the day, we control creating good product, good loans that are finance a bill in the market. Now, you made the debate as to where the spreads go or where the market goes, but at the end of the day you can control what you can control, which is uh generating good credit outcomes. So you have access to robust pools of capital. Great, well, and at the end of the day, you guys are all bringing some creativity and rigor to creating new services and thanks for sharing your stories today and thanks for being here. Okay