The Pomp Podcast - #416 Zuben Mathews on Solving Financial Stress with Technology

Episode Date: October 27, 2020

Zuben Mathews is the CEO and Co-founder of Brigit. Prior to founding Brigit, Zuben was the Managing Director of Mergers & Acquisitions at Infosys. He started his career at Deutsche Bank, where he created and led a principal investment and banking group, the Strategy Partnership Group, mostly focusing on financial technology and software companies.  In this conversation, we discuss the current financial stress for the lowest socioeconomic classes, what Brigit’s goal is, how the product works, and how positive the impact can be on someone’s life when you use technology to relieve their financial stress.  ======================= Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Try CoinList Pro and be first to trade on network launch. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100. ======================= Athletic Brewing is re-imagining beer for the modern adult. We love beer. But we also love being healthy, active and at our best. No matter your motivation, if you want to keep a clear head and drink healthier, we are here for you. Athletic makes non-alcoholic beer that you don't have to compromise to enjoy. The beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out http://www.athleticbrewing.com for more details and free shipping nationwide. ======================= Pomp writes a daily letter to over 80,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Zubin Matthews is the CEO and co-founder of Bridget. Prior to founding Bridget, Zubin was the Managing Director of Mergers and Acquisitions at Infosys. He started his career at Deutsche Bank, where he created and led a principal investment and banking group, the Strategy partnership group, mostly focusing on financial technology and software companies. In this conversation, we discuss the current financial stress for the lowest socioeconomic classes, what Bridget's goal is, how the product works, and how positive the impact can be on someone's life

when you use technology to relieve that financial stress. I really enjoyed this conversation with Zubin, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is CoinList. CoinList is there to serve all of the early adopters of crypto. Smart crypto investors know that being early is critical to success. CoinList is built for early adopters. Since 2017, CoinList has been providing early access to the highest quality projects before other exchanges. So CoinList Pro has all the features you've come to expect from professional crypto exchange including advanced order types apis secure wallets and low fees but you also get first access to a bunch of different projects that coin list has so in crypto it pays

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So go to athleticbrewing.com, use code POMP25 for 25% off your order and help them out, which helps me out. So lastly, don't forget that I write a daily letter to over 80,000 investors about business technology and finance. I break down complex topics into easy-to-understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get in this episode with Zubin. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital.

All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. all right guys bang bang i've got zubin here super excited to uh to have him come on uh i am a small investor in the company he's building but uh he's a fascinating guy so thanks so much for uh for

doing this man oh thank you for having us i really do appreciate it yeah let's jump right into your background i think that you um you're building a technology company today but you you've got kind of a unique background for somebody doing that so uh maybe walk us through yeah i mean the sad part, when you talk about unique backgrounds in finance, I actually do have a finance background. So we are a fintech company. I'll tell you a little bit more about that. But my background is quite frankly, pretty simple. I'm an immigrant. I came here to study, unsurprisingly, economics and finance and went straight into the banking and technology world. Did a lot of time in investment banking, specifically working with technology and financial technology companies.

And quite frankly, when it comes down to thinking about the idea that we're here to talk about, a lot of the genesis came down with my experience being an immigrant, literally not having a credit score, having to eat Snickers at night when I was waiting for my paychecks to come through, all very true stories. And then fast forward, I guess, more than a couple of decade plus later, I want to use that experience and my learnings to actually help solve what unfortunately is a very deep problem in our country. Yeah. And I think when most people hear finance and Wall Street and banks and all this stuff, they usually think of a very specific type of consumer. They usually have disposable income. They're making investments. It's something

that maybe you would find on Twitter or on television. The user base that you guys are helping and the initial product is really kind of finding product market fit with is a very different type of individual or family. Can you kind of talk through who is that user and maybe walk us through just like what are the financial challenges that they face on a day-to-day basis that people may not understand. Yeah, sure, absolutely. So look, our user is the average American. I mean, people forget that the average American

makes about $45,000 a year, lives paycheck to paycheck. We have 100 million Americans. The wealthiest country in the world has 100 million Americans living paycheck to paycheck. And what that fundamentally means is that they are living in financial stress. Can you imagine like having to go to McDonald's

for an example and having to check your bank account to make sure you don't overdraft and pay a crazy fee? So literally, our user base is that 100 million Americans making approximately the average amount. They're spread throughout the country. California is the largest state with Texas in terms of number of users, and guess what, the population. And the average American is about 30 years old, which again, looking at everything that we've talked about, is the core user that we're here to serve. We're not here to serve, as you pointed out, the Twitter profiles of millionaires. In fact, millionaires are useless. They will find our product completely a waste of their time and money. But on the flip side, for the larger population that we have, we actually serve a deep need. The second part of your question was, I apologize, what was the second part of the question?

Just what are the kind of the financial challenges that they face on a day-to-day basis? Yeah, sure. Look, financial stress, right? So our goal here is to target what we can do to help people reduce their financial stress. The name of the company is Bridget, which basically means you want to bridge your gap between your financial now and your financial future. So what are the main reasons why this segment of the population actually has that financial stress?

It's pretty simple. If I'm getting paid in two or three days and my bills come today, that's a serious worry, right? I want to make sure I have money to pay my bills. Quite frankly, if I have kids, I want to make sure I'll be able to feed them. These are not unreasonable requests, especially if you're a hardworking American, which most of us are, and I'm getting paid in three days. That stress leads to a bunch of crazy, crazy fees, which your historical lenders, and quite

frankly, the banks that we all bank with, take advantage of. One great example is the overdraft fee, which if you think about what that means in an APR perspective, like your credit card, for example, is about a 30% APR. An overdraft is a 5,000% APR. we have 30 million Americans approximately spending almost $1,000 a year in these fees on average. It is insane. So that kind of fees really add up. And we've seen in our user base, we've helped our users save about $500 annually in those fees. But whether it's late payment fees, overdraft fees, all of that caused by financial stress is a problem. The second thing that is

important for our user base is eventually being able to save. And 60% of the country has less than $500 in their bank accounts. That's a problem. Not to mention being able to build someone's credit score. So all in all, I'm sorry, I'm rambling a little bit, but it's the core problems and making sure our user base and this segment of the population has access to money today, especially if it's just waiting four days or whatever it is to get paid, make sure that it can eventually build a savings and not have to pay these crazy fees. And obviously, fundamentally important for people's credit in the future is improve your credit score. Yeah. One of the things I remember you kind of talking through when we first met was

you said, look, the craziest part is that the top four banks, I think it was like $8 billion off overdraft fees. But what happens is they're not necessarily overdrafting people who quote, unquote, don't have the money. It's just that they don't have the money on the right day, right? So it's for people sitting at home who are kind of wondering, well, what do you mean? It's something where on the 13th, I go grocery shopping. On the 14th, my car payment hits. On the 15th, my Netflix hits and I don't get my paycheck until it clears on the 15th, right? And so therefore, actually on the 14th or the 13th, I overdraft because I have the money in the sense of I'm getting paid and I'll be able to cover those bills. It's just there's a mismatch of

actual days, right? And so you can kind of very quickly see how you may actually get multiple overdraft fees in a month by simply needing to go buy groceries two days before you get your paycheck and it causes this big kind of financial stress that then compounds over time and you can get in a really bad place pretty quickly. Yeah, you're dead right. Quite frankly, we can get multiple overdraft fees and an overdraft fee in the US on average is $35 in one day. We've got over 100,000 users who spent over $1,000 in overdraft fees just last year. And exactly as you put it, it's kind of a penalty for not having money at that point in time with your bank. And the penalty is not a dollar here and there like, oh, we'll help you

got the penalty, as I pointed out, is $35 per transaction. And it's very easy to have multiple transactions or multiple fees in the same day. And one of the things I think that also caught my attention was kind of after you told me about this problem and kind of how pervasive it was, I went and I did a bunch of research, right, on how is it that the overdraft fees are actually getting levied, right? And some of the things I found were like very, very surprising and concerning. So things like if I swipe three times on my card, and the first two purchases could be covered by the amount my bank, the third one may not, but the third one's big enough, the banks actually sometimes can reroute the sequence of transactions in order to increase the probability

of overdrafts and just some like very nefarious type stuff. And so it just seems like this is a problem that most people don't even aren't even aware that that's what the banks are doing. Yeah, I mean, look, the reality is we have government agencies that are meant to protect us from that. Unfortunately, banks are sneaky, especially, well, I don't want to call out anyone, but I'll call them out. You use an example of rescheduling or re-turing is what is the technical term. And quite frankly, Wells Fargo got fined $10 million. dollars. And honestly, $10 million, I know it sounds like a lot of money for definitely for myself, but for a large bank, it's peanuts, especially when you're making, in the case of Wells Fargo, $2 billion a year from those fees. And let's just be clear, that $2 billion is not being paid by the Twitter people of the world. Even if they overdraft, they will give them more benefits, but it's being paid by the average American. And that's why overdraft fees, and I

we talk about payday loans, etc, all day long, the fact that it is quite frankly, a tax for the average American versus people who are well off is just fundamentally wrong. And the profit margins for these banks on overdraft fees in particular, are absolutely through the roof, we think it's closer to 80, in many cases, 90% profit margins, which really shouldn't exist in the world that we live in. Yeah, let's talk a little bit about Bridget and the product you guys have built, maybe walk us through kind of if I'm at the average consumer, I know that I've been getting hit with these overdraft fees. I want to protect myself. I come in, I sign up. What do I get from a product standpoint and what does it cost me? Yeah, sure. So as I pointed out early,

we at Bridget here are helping you, specifically the average American, improve their financial health. In the specific example of the overdraft, all you really need to do is you download the app, Bridget.com, or your app store or Play Store. And we ask you some very few questions, including your name, verify your cell phone number. And we ask you to link your bank account, which is something that you've been doing, for example, at Mint over 10 years, almost standard for many fintech. At that point in time, we evaluate your spending patterns and we're able to either, and we don't use credit scores, very important because we pointed out part of the financial stress is people not having good credit scores. And at that point in time, you can

actually request for up to $250, assuming you're qualified. And that's sent into your bank account within two to three minutes, if you so want. We, unlike other companies, also have one additional feature, where you just turn on the app in the feature. And if we see that you might actually run out, where those banks are going to make that $35 sneaky amount every single time, we'll pre-fund money into your account. So you don't have to worry about it. Again, going back to the financial stress. So besides this feature, when we want to help our users, and we talked about the problems users or Americans face, the next step there is we've helped our users save over $500 annually. And in terms of a business model, we have a flat business model where we charge $10 a month, no additional fees.

There's no late payment fees. There's no transfer fees. There's never an additional fee. But besides access to the capital or those automated advances that I just talked about, we have budgeting tools that will help you when you have money in your account, budget and extend it out in a more responsible manner. We give you financial insights. It's very targeted, personalized tips on what you can do to actually maybe save a little bit of money or, quite frankly, earn a little bit of money as well through our jobs application. And given COVID, what we saw was we saw a lot of fraud, specifically in this segment

of the population. So for the same $10 subscription, we're giving a million-dollar identity theft protection included in the package. That's what we're doing today. So in essence, access to cash when you need it, especially to bridge those evil fees. ability to budget better, and the tools that go with that and financial insights, including from financial literacy, as well as the fact that we're giving access to the million dollar cash, the million dollar insurance that we just talked about.

Yeah. And what's so interesting to me is like the technology you're building is you really are having one, a holistic view of these users, right? They don't have 10, 20 different bank accounts and investment accounts and all this stuff. Like they literally are living paycheck to paycheck with a single account, you have kind of a view into that. And so you can be very, very accurate with understanding their spending patterns, the probability that they're going to go and swipe their card before they get their paycheck, like all of these things that as you get better and better over time, for 10 bucks a month, if you prevent one overdraft fee each month, they're already in kind of profit, if you will, right? If you think from like an ROI

perspective. Yep. I appreciate you selling us because that's absolutely true. I mean, it's fundamentally true, right? Remember what we talked about. Most of our users don't actually end up overdrafting once. They end up overdrafting multiple times in a month. And remember, if you do three times, that's already a hundred dollars. You're paying us 10 bucks. You're automatically saving 90 bucks, not to mention the level of stress that's reduced. I know I can't quantify that per se, but that's a fundamental game changer on what you can do with the time and mental well-being. You can actually budget better. You can actually go through financial classes or spend more time with your kids in a stress-free manner. If that's not worth 10 bucks, don't forget

we have these other features. I'm not sure what is. And to add a little bit more color, according to the Omidyar Network, which is a philanthropic research organization, according to their numbers, we're saving our users $500 a year in fees. And that is, especially when you're making $40,000 a year, quite frankly, you could be making a million. We think it's a lot. Yep. Talk a little bit about kind of as you solve this problem,

there's obviously incredible demand for the product and you guys have done a great job kind of onboarding those people and starting to save money for them. How do you think about the rest of the product suite, right? So Bridget is kind of, you described it in terms of bridging people from where they are now to this financial future.

I don't know how much you want to talk about like other products you guys may go build or other areas of that financial stress that you think can be solved with technology? Yeah, well, I mean, again, so I don't want to give away too much, but let's just talk about our overall use, right? Again, I hate to say this, this is most of us in the country. We are living in this massive state of financial stress. By the way, 80% of Americans are in a constant state of financial stress. That impacts our job, it impacts our overall mental health, etc, etc. So subsequently, What are the areas that we can target that can have the best impact for that?

We will still continue to be focused initially on the fact that we'll be able to bridge the gap between people's paychecks with the right amount of money at the right time, done in a transparent, reasonable, and fair manner. It's very important. Those principles are very important to us. Going back, going into the additional product suite, we want to make sure that the $500 we're helping users save in fees, we actually help them save in a bank account. Now, I'm not saying we're building the bank account per se, but we want to make sure that

we give people incentives in the right manner to continue to save. And that's important for their own well-being. How does that relate into actually helping them build their credit scores? That's another area that we'll definitely be focused on in the future. Financial literacy is absolutely key. We're fortunate to have some well-known investors, including Will Smith and Ashley Kutcher and Kevin Durant, and they've all signed up to do some content for us, again, personalized for our user base. So we're looking forward for that in 2021. Absolutely. And so when you look at

this segment, it feels like most people have said, one, they're just in a different space financially, and it's very hard for banks, let's say, maybe to make money there. And so they're usually not the focus for whether it's FinTechs or banks or whatever. You guys have built a very unique kind of business model here where for that $10 a month, you can kind of continue to add all of these features behind that subscription. Talk a little bit about just the education as well, right? So it's one thing to build technology products and say, Hey, here you go. This is going to save you money or whatever. But also I know that you guys have done a bunch of work around just like, how do you actually educate these folks? Are you talking about budgeting

tools and some of this other stuff and how important that education is to drive people to change behaviors or do the things that can get them in a good position? Yeah, I mean, our thesis is financial education and literacy, unsurprisingly, is fundamentally key, but you can't force feed that to people, right? It's just, it's that, it's force feeding, giving the right amount of information at the right time, similar to our other credit product we talked about, is fundamentally key. So if you overburden someone who's already financially stressed and say, oh, here's a

a two-page dossier on how you can budget better very few people are going to have the time or the energy to actually go through that so we we look at the way we think of financial literacy in bits and pieces so for example right we see someone saying hey last week you spent x amount of money and you're taught on a particular item and you yourself and personalized believe that items in is an extra piece that is more like luxury item we politely remind you that we remind you of that There are other situations, especially what happened with COVID, where we'll give you specific insights about your own spending. So, for example, in the event that you had potentially lost your job or were in volatile territory, we would literally know that you had an AT&T account, or in my case, a T-Mobile account, and pop up a piece of content and say, hey, here's a phone number you can call. It's AT&T. Here's a small script. And within 20 minutes, you have 80% likelihood of them giving you a 20% discount or $20 discount or monthly, actually.

So those are some of the small pieces of information we want to give you at the right piece of time. Over a period of time, as an individual starts to save a little bit more and have more cognitive load, we do have more repositories already available, which are the one-page summaries of what you could do to actually improve your financials. Another example is actually when you get paid. So a lot of people don't realize this, that they can actually change their pay schedule

from instead of getting paid randomly on a Wednesday to a Friday, that actually might have a fundamental improvement overall in terms of normalizing their income and being able to pay bills better and on time. Yeah, it's absolutely incredible. And I think that the description you've used around this financial health app, where you literally are taking a holistic view of technology, education, incentives, how does that evolve with something like the macro environment, right? So it's one thing just

to say, hey, we want to go ahead and we want to solve the problem for the folks that we've identified in this user base. But COVID obviously has had the biggest impact on that population as well. So people are losing jobs, they're seeing their hours cut, like all these problems. Talk a little bit about just has anything changed or have you guys kind of thought differently as COVID and some of the economic impact played out? Sure. I mean, in terms of thought differently, I mean, the reality is obviously this is a pandemic

and most of us are going through a pandemic for the first time, but we have gone through economic shocks before, even in my lifetime, multiple times. So what's happened for us in many cases is that this has just been an exhilarant and a reprioritization of certain things. So for example, for us,

is that we were very focused on building content as we just talked about and continue to be. We just had to accelerate more actionable pieces of content earlier on. The other aspect of us is making sure that the stability of our platforms, because once COVID hit, you have a large number of people, 30 million Americans who lost their job, which pushes more people to products like ours because they need more. So being able to support that push becomes fundamentally important. So the reality is in order to solve for someone's overall financial health, those principal components of financial

stress we've talked about hasn't really changed. It's unfortunate in any macro environment that we've seen or we've gone through in the past, the prioritization of what needs to get done when that indeed has changed. Yeah, it's pretty crazy. In terms of the pitch to users, so people who are listening to this who may be part of the user base that could benefit from this, what's essentially the pitch that you have for them? It depends on the user, but in short, make sure you have cash when you need it. We don't look at FICO scores. In fact, anytime you have the level of stress that you think you're going to pay a fee, come to us. Never go to a payday lender. They're, in most cases, horrible. Your friendly neighborhood bank we just talked about is horrible. But that's one

area that we could help solve the needs today. But at the same time, if you want to truly improve your lives from a financial perspective, not just today, but looking forward, as we talked about, making sure that we can help you save, budget better, learn a little bit better, and actually over a period of time also improve your credit scores join us absolutely and then from a company building standpoint um any uh kind of needs there whether it's hiring uh or financing or anything like that yeah fortunately on the financing side we've got great investors like yourself so appreciate that and and also the advice you give us uh so i think we're good on the financing side i think hiring great talent is always is always hard and very important to us the only reason

why we've had some level of product market fit and been able to help over like almost 2 million users at this point in time is because of the great team. We are hiring at all levels. So if you're an engineer, if you're in customer service, if you're a senior or junior person in operations, give us a call. That's awesome.

I always end the podcast asking the same two questions to everyone and then you'll get to ask me one to finish it up. The first one is, what's the most important book that you've ever read? Oh boy. oh boy and i knew that you would be very thoughtful about your answer this is a this is a really hard one uh

can we go to the second question okay the second one's more fun uh aliens believer or non-believer let's put it this way uh and it's also a question of how you define aliens i am not arrogant enough to believe we're the only life form in this vast vast universe uh hopefully that gives you an answer i'm not saying area 51 or not but uh hopefully that's an answer coming back to your question all right um you know there's business books there's biographies where do you go catcher in the rye oh why that one uh it it it there was no book and also it's also all times at what point in time i read read this and what my life was etc i think all those things matter and there was no book that I can I can recall that made me feel

I don't want potentially alive it made me feel part of a book than that book I love that answer it's uh it's like the personal impact it has on you right and I think that's the part that's always so hard to uh to kind of quantify or explain for people and you know just thinking about it I'm getting goosebumps just going through the story in my head because look it was also not set that far from New York and quite frankly, in the city I love, which is New York City. That's awesome. You could ask me one question to finish up. What do you got for me? What do we do to make our product better? You know, it's actually crazy. You're the first founder to ever ask that question on this podcast, which is mind blowing, but because probably the

most important question. Now, look, I think that, and you know, all this stuff, but it's just constantly trying to make it as user-friendly as possible. And it's already, I mean, obviously just given the user base, many, many, many happy customers. But I think that just kind of all of the little tweaks, it's usually not the big product like, hey, let's unveil this like brand new thing that Zubin thought up in, you know, in the shower.

And now he's going to go and tell all the users they should use it. It's little things like, can you remove one click, right? Can you, you know, change a color scheme? Like all the things that seem small end up making a huge difference in the user experience. And you guys already know that, but that's usually the answers, right? We appreciate you reminding us. Sometimes it's easy to forget. Like it's doing 50 things 50 times over.

That's where you find the big improvements over a period of time. Absolutely. Where can people go and download the app or learn more about what you guys are doing? Yeah, sure. You can go to either on the App Store or the Google Play Store. Just type in B-R-I-G-I-T. Again, it's B-R-I-G-I-T. Or alternatively, on any of your browsers,

B-R-I-G-I-T dot com. You could do live ad reads on podcasts and you would be an expert. I can't. A, I don't have a baritone. My voice is horrible for singing. But hopefully people haven't gotten too bored listening to me.

Zubin, thank you so much for doing this. I think people are really going to enjoy it. Sounds great.