Barefoot Innovation Podcast

In this episode Colin explains his motivation in undertaking a fintech startup after years at big companies. He talks about why Varo’s initial focus is simple, transparent mobile tools for millennials. He talks about the power of starting from a clean slate, with no legacy of what he calls “bad revenues,” and no challenges caused by having data “trapped in silos,” which is a major problem for banks. He also has thought-provoking advice for both banks and regulators.

Regular listeners know I’m spending two years as a Senior Fellow at the Center for Business and Government in the Kennedy School. As I started into my fellowship last year, I had the great fortune of linking with Brigitte as my faculty advisor for the book. She is part of the movement in economics that’s rethinking the classical theory that assumes that everyone behaves rationally. That work goes to the very heart of the condundrum in consumer finance, where both policymakers and industry have to grapple with the fact that consumers don’t always make the choices that are best for them. Understanding the many reasons why that happens, and how to elicit better decisions, is one of the keys to improving consumer financial health.

Funding Circle was created because the founders were small business owners themselves and learned how hard it is to access finance, even for a successful business. Even when a loan was approved, they found the process difficult, or the terms unattractive. Sometimes they even felt misled. After opening their 96th loan rejection letter, they decided this was a systemic failure – that the traditional bank loan system was broken – and they set out to build a new solution. The financial crisis created fertile ground for them, as so many business suddenly had trouble accessing capital (the number of small businesses has dropped every year for the past 8-10 years). And their timing fit with the emergence of marketplace lending as a new model.

In our conversation, Lauren talks thoughtfully about what worries her about consumer finance today and how she thinks we should address emerging problems. We had a wide-ranging discussion, including about what would happen if traditional payday lending was no longer an option (she'd like a "Goldilocks" approach on loan length). She also discusses her concerns about both easy credit and fast credit; partnering between banks and marketplace lenders; using alternative data in underwriting; and the future of overdraft products as we move toward increasingly fast - and even real-time - payments.

Today we have our first-ever episode on Insure-tech. Happily, it also turned out to be one of the most fun, funny and thought-provoking shows we've ever done. I'm pretty sure it's the first one where we've talked about the internet of things, and CRISPR gene research, transportation as a service, and drones.

Today we’re going to pick the brains of two of the most impressive leaders anywhere in the compliance world. Yvette Hollingsworth Clark is the chief compliance officer of Wells Fargo, and Kathryn Reimann leads this work for Citigroup. I’ve known them both for years, and I was lucky enough to catch them together while we were all at the same event, and carve out some time to talk.

We got together in Washington to mark the fifth anniversary of the CFPB's opening its doors, on July 21, 2011. I had the pleasure of serving on the Bureau's Consumer Advisory Board, or CAB, for its first three years. It's been fascinating to watch the launch of this agency, which is the first in many years to be built from scratch, as opposed to something like, say, Homeland Security, that amalgamated existing agencies. As Director Cordray says in our discussion, the CFPB has actually faced many of the same challenges as private sector startup. There are obvious differences, of course, but they still begain with a small team, like founders, and went through the stresses of very rapid growth amid having to deliver against a lot of tough deadlines - and under a bright floodlight of scrutiny.

Part of what makes Bee interesting is it's specific hybrid model of personal touch and high tech. They’re trying to put the human beings where customers need them the most – in explaining and opening the account. And then they’re trying to drive down costs overall by not providing branches and tellers for routine functions. Bee’s team goes in person into underserved neighborhoods in New York and San Francisco, and they set up eye-catching mobile kiosks, which they compare to food trucks. They get people interested and then help them through a thorough process of thinking through their needs; opening an account; setting up and learning to use the app; and then, often, letting the new customer stay on to take advantage of the Bee wifi hotspot.

Blythe Masters says she began as a skeptic because, like many people, she equated the blockchain with Bitcoin and, given Bitcoin's colorful developments, dismissed both. However, after leaving her long career as a senior executive at JPMorgan Chase, she took a closer look and became a convert. Today she's leading one of the most exciting and best-financed

Barefoot Innovation has been in hiatus in recent weeks because my father passed away. He was 95 years old. His name was Glidden Sweet Doman. And he was a remarkable innovator. He’s being widely remembered as the last of the great helicopter pioneers and he was also an important inventor in wind energy. Those two industries share the same technology – the wickedly complex science of rotor dynamics. I kept noticing parallels with the themes we discuss on Barefoot Innovation. It occurred to me that it would be fun to do a show inviting insights from someone who, nearly a century ago, began innovating in a field that’s very different from finance, but that was being similarly transformed by new, fast-changing technology.

I am constantly amazed by the fascinating and unpredictable course of our conversations on Barefoot Innovation - and what a fun one I had with Raul Vazquez, CEO of Oportun. I always like to ask my guests to tell us how they, themselves, keep up with technology. With Raul, I asked this just as I thought we were wrapping up, and the question launched us on a whole new conversation. He's definitely my first guest to bring up potential uses of virtual reality in financial services, not to mention the first to describe virtually interacting with bison. He thinks we're heading to a "transformative" ability for "anyone, regardless of their incomes" to be able to immerse themselves in a virtual world to try out products and experiences

Betterment aims to optimize investment through automation that produces sound advice for the long term, and that also makes the process both easy and more affordable. It builds around what Jon considers the MOST important advice -- which is too often overlooked, namely -- "How much to save?"

A year later, we all found ourselves back at the same conference where we'd recorded that program. Shamir has now taken on a new role, leading the open platform innovation of the very innovative bank that bought Simple, BBVA. Josh, though, is still CEO of Simple (a fact that he says tends to surprise people). So on a very rainy afternoon in Southern California, he and I found a place where we could duck out of the weather (you may hear the deluge in the background), and talked about how Simple has progressed in the year just past.

My guests are Ryan Falvey, who heads the lab, plus four of last year’s 9 winners. They are Sheri Atwood of SupportPay; Jerry Nemorin, of LendStreet, and Quinten Farmer of Even. They explain how the competition works, what their looking for this year, and, from the standpoint of last year’s winners, what they have gotten from participating in the program.

I have known Susan Keating, NFCC's President and CEO, for about 30 years. I've been wanting to record a Barefoot Innovation episode with her, because the NFCC is on the front lines of the topics we're exploring here. They work directly, personally, with the people who are not thriving in our consumer financial system. The reasons people don't thrive are complex. We've talked about a lot of them, and I find it's easy to get excited about new technologies or regulatory challenges impacting them, and to lose sight of the real people who are immersed in these struggles.