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While there are tens of millions of Americans still struggling with their financial health the reality is that fintech is starting to have a significant impact here. Some companies are reaching scale and are helping those people living paycheck to paycheck save huge amounts of money in aggregate particularly when it comes to punitive bank fees.
My next guest on the Fintech One-on-One podcast is Zuben Mathews, the CEO and Co-Founder of Brigit. As a college student, he lived the challenges of not having enough money and was motivated to do something about it. Today, Brigit is helping over one million people become more financially healthy, and in the process saving them over $1 billion in overdraft fees.
In this podcast you will learn:
- The problem Zuben had in college that led to the founding of Brigit.
- How he got the company off the ground.
- His thoughts on the impact of overdrafts and NSF fees.
- What Brigit’s app provides and how it helps consumers.
- Why they decided to make subscriptions their primary revenue stream.
- The top use cases for their wage advances.
- How they are measuring their impact on the financial health of their users.
- The mechanics of how their advances work.
- The data they look at in their underwriting process.
- How their users are becoming more educated about financial health.
- How their credit building system works and why it is different.
- How they help people earn more income.
- The astounding amount of revenue they are earning per employee.
- Why they decided to call the company Brigit.
- Zuben’s vision for Brigit.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 507 – ZUBEN MATHEWS
Peter Renton : Welcome to the Fintech One-on-One Podcast. This is Peter Renton, Co-Founder of Fintech Nexus and now the CEO of the fintech consulting company, Renton & Co. I’ve been doing this show since 2013, which makes this the longest-running one-on-one interview show in all of fintech. Thank you so much for joining me on this journey. Now, let’s get on with the show.
Today on the show, I am delighted to welcome Zuben Mathews. He is the CEO and Co-Founder of Brigit. Now, long-time listeners of the show will know that I am very passionate about financial health. I love featuring companies doing good work here, particularly helping those living paycheck to paycheck. And that’s where Brigit lives. And they have done some great work over the last several years, helping millions of people.
On the show, we get into all about what Brigit offers. The founding story is really interesting as well. We talk about the overdraft landscape. We discuss earned wage access in general and particularly the CFPB’s stance on this. We talk about how they measure whether their customers are becoming more financially healthy, which I thought was really interesting, and much more. It was a fascinating discussion. Hope you enjoy the show.
Welcome to the podcast, Zuben.
Zuben Mathews: Thank you Peter for having me here. You’ve been doing this for quite a long time. You’re a true fintech expert. So always a pleasure to talk.
PR: Always great to talk with you as well. Thank you. So let’s kick it off by giving listeners some background. I know you’ve been doing Brigit for a while now, but tell us a little bit about one, how you came to be in this country, and then two, some of the career highlights to date.
ZM: Sure, in terms of how I came to the country – clearly, I’m an immigrant, hence the nature of the question – I came here when I was 18. I’m starting to date myself. That’s over 20 years ago, to study college. I was fortunate enough to get a full tuition scholarship at the University of Chicago. That’s where the thesis of Brigit started to come about because, as an immigrant, fortunately, I had, as I mentioned, a full tuition scholarship. I had two jobs, part-time jobs, and I was living within my means while my single mother was sending me money. Yet somehow, even 20 years ago, I couldn’t get myself a credit card because I didn’t have a credit score, and my expenses were always a couple of weeks ahead of my income coming through. So that is the core genesis of what Brigit is today and what we’re trying to solve for. But to answer your other question regarding my career, I learned a lot from personal experience while in college. I studied economics at the University of Chicago. Following that, I worked at an investment bank where I learned to understand financial statements, looked at software and fintech companies, and learned from an investor point of view what people were looking at when they were investing or buying companies. At the same time, I got to truly understand the inside workings of a bank. My education and my coming here as an immigrant to the United States 20-odd years ago, with the same fundamental problems that existed then – again, an inability to build a credit score because you need to be in the credit system or just needing money before my paycheck would come through – is the core thesis of my learning and what Brigit is today.
PR: Did you always, like when you were in college, did you say, I am going to start a business one day to do this or did that evolve over time?
ZM: No, I think it definitely evolved over time. But the one thing that I did was read a whole bunch of Wired magazines and spend a good amount of time being educated in the overall technology world, including the fintech world, while I was in college. I got this entrepreneurial bug and thought, at some point in my future, I would try to solve a problem that is hopefully impactful and meaningful for the world and try to build an enduring business at the same time. What that business was, I had absolutely no idea. But what I did know categorically, as I pointed out, was my next role, in this case in investment banking, would give me the building blocks of understanding problems, figuring out market sizing, understanding what it takes to get the right team to eventually, after two decades, start what is Brigit today.
PR: That’s interesting. So, in the back of your mind, while you’re spending time on Wall Street at an investment bank, the whole time you were thinking about starting your own thing, is that fair to say?
ZM: That is fair to say, but you know, I would like to argue that I was giving it my best, and hopefully, my bosses at the time would say I was doing a great job but let somebody else make that decision for us. But yes, the core thesis has always been, hey, you get to meet these entrepreneurs trying to take those companies public; what makes them tick? What does a cap table look like? How do these people choose their private investors? But most importantly, as you’re going through that, learning, as best as you can from a third party, what it took to build what would be a, hopefully, a big, enduring company. But yes, all of those little pieces of learning over my career, including investing in some of those companies, helped us to start our company.
PR: Take us back to those early days. You’re trying to solve the problem you just talked about, helping people who don’t have enough money left at the end of a pay period. What did it look like back then? How did you assemble the team and get your first product to market?
ZM: The core pain point that I described, which is making sure you had money between paychecks, and not being able to get a credit score because you’re not in the credit system here in the United States. That problem has existed, unfortunately, for decades. My fundamental thesis, again, as an immigrant coming to the United States 20-odd years ago, is the baseline of the credit system or partially the entire economy is the historical FICO score. And I wanted to point out, and I saw this very categorically, that 20 years ago, I was living between my means. I was earning much more than I was saving, including the fact that my mother was sending me money like clockwork, and I had that scholarship. So if you look at me from a cashflow basis, I was, and hopefully continue to be a responsible human being. But I couldn’t enter that credit system because everything was anchored on FICO. And Peter, I will still tell you that I would spend a thousand dollars a year, give or take, on overdraft fees because I was too ashamed to ask people for money. Again, the math would show over a period of 30 days, I was living between my means. That core pain point that I felt, and the reality is every now and then, I would go downstairs to the vending machine and have a Snickers bar for dinner. Again, not wanting to overdraft. That fundamental pain point continued to exist when we started the company about seven years ago. We talked about both of us being immigrants. The United States is the single wealthiest country in the world, yet we have three-fourths of our population living paycheck to paycheck. So, all I’m trying to point out is that deep pain point I went through 20 years ago was the core building block of what needed to be solved when we started the company. How I ended up getting lucky enough to find the team, it started obviously with my co-founder. I echo that part of the problem was FICO is really, really helpful for maybe buying a very expensive apartment that’s secured in New York or somewhere else, but really not good at looking at different parts of the population. So my co-founder, who is quite frankly brilliant, Hamel, had worked in understanding cashflow, cashflow analytics, and cashflow underwriting well before most people had in 2017. After lots of trial and error, I found him because he had done some work in cashflow when he worked at Palantir. So that was the thesis of saying, “Hey, here’s a deep pain point. Here’s how I envisioned the product to work, but I need someone who has actually lived and breathed cashflow.” And again, going back seven years that really didn’t exist much.
PR: I want to talk about overdrafts just for a second, because it’s been really interesting to me that we have seen a real shift in the traditional banks and their attitude towards overdrafts. And a lot of it’s been driven by the CFPB, but I think a lot of it’s been driven by fintech, where there are better options available now. I’d love to get your sense of how you look at the overdraft landscape today versus maybe, it wasn’t even five years ago, when there was no one talking about overdrafts, trying to get rid of them or trying to change from the traditional banking level anyway. What’s your view on that today?
ZM: I think the government and the regulators or just people in consumer advocacy are trying to do the right thing, but there are always levels of detail that people need to understand. So obviously, five years ago, banks were making $30 billion a year on overdrafts helping people bridge their paychecks. The reality is Chase still makes about $2 billion approximately a year on overdrafts. And if you don’t mind, I’m going to break down two different aspects because they generally get lumped together. One is overdrafts. When a bank provides a service, in essence, a short-term, let’s call it a short-term loan, to bridge the gap between people’s paychecks, which is bridge the gap between expenses. And the other one is an NSF fees, a non-sufficient funds fees. So one of the fundamental positives that’s happened over the last two, two and a half years is that certain banks, including Chase, if you could believe it, have removed NSF fees, which is, in essence, a tax for not having money and not giving you a service, which is completely ridiculous. I’m very happy that that particular fee is starting to erode from banks because it doesn’t cost the banks even a penny to have that particular thing happen. It’s great that’s been removed: charging $34 in an NSF and not providing a service. Now, unfortunately, what people don’t realize, including some of the regulators is a lot of these banks, and I’ll give Capital One as an example, when they said, “Hey, we’re going to remove overdraw fees”, again, a significant win on paper for the end customer because you’re taking away fees. Unfortunately, when you start to go a lot deeper, what certain banks did that eliminated fees also eliminated the service, which is providing in essence, a short-term loan for people who needed it the most with or without credit scores. And by doing so, these individuals had to find other forms of credit. And again, let me be fundamentally clear: an overdraft is a ridiculously expensive form of any kind of credit, insanely expensive, but it is convenient and accessible to a large segment. The dirty secret is these banks are, using Capital One as an example, they’re not able to make enough money without overdraw fees for certain segments of the population. So even though they say they’re removing overdraw fees, they either eliminate that feature completely for the people who need it the most, because it’s no longer profitable for them, or they reduce the size of what they offer. It’s not necessarily a slam dunk as some of the press make it sound to be, and as much as we would hope it would be for consumers.
PR: So then maybe let’s dive into Brigit for a second. Explain exactly what you’re offering and how it works.
ZM: We’re the most downloaded financial health app in the United States, very much focused on financial inclusion. It’s a suite of tools that provides Americans the ability to get money between paychecks. So, an overdraft alternative that we just discussed is to be able to build their credit score by saving. It’s kind of a nifty feature instead of actually spending. So that helps you build your savings and build your credit at the same time. We also have a whole bunch of financial tools, literacy, and financial insights to enable you to save more money or earn more money. That’s the core thesis of what we are.
PR: What is the app providing today? When you download the app, obviously you can get an advance. You can get an instant advance, right? But how does it work?
ZM: Yeah, perfect. So you can download the app or go to the website www.Brigit.com, and as soon as you do that, you get prompts to connect your bank account. So we either have direct bank connections or use Plaid. We know your income, your income volatility, and your ability to get money between paychecks or an overdraft alternative or cash advance, as we described. We’re also one of the only companies in the world that can predict when you need money, and we can pre-fund money into your account using our algorithms. This is an opt-in feature. The system realized last week that my Con Edison bill, the electricity provider here in New York, was significantly higher than my previous month. It alerted me, but it also gave me a piece of content that said, “Hey, these are the three to five things you can do to reduce your electricity bills.” So truly actionable insights are provided at the right time, combined with the ability to get money between paychecks and build your credit score through savings, are the main features that we provide through Brigit.
PR: Interesting. Is your business model based on people paying a subscription fee? How are you making money?
ZM: Yep. We have a million paying subscribers, and yes, we are a subscription-based company. That’s the predominant form of our revenue. The reason why we did that is simply because it was fundamentally the most transparent form. Anyone who’s signing up is signing up for two things. One is they know exactly how much they’re paying and when they’re paying for that particular service, and what they’re getting in return. At the same side, it is aligned to our user’s incentives. And let me explain. Most of our users, unfortunately, do come in at a point of stress where they need money between paychecks, but they end up staying to build their credit score, get significant financial insights, et cetera. So, as someone goes from using an instant cash product and overdraft alternative to budgeting more effectively, to saving a little bit more, going on that path of financial wellness, subsequently, our costs also reduce. So we are fundamentally aligned with the user’s incentives. The reason why we decided on the subscription fee, besides the reasons of transparency and user alignment, was one of our early advisors, Corey Stone, who was initially at the CFPB and had written all the overdraft research for his team, pointed out that this is the fundamentally clear way to offer a service with a true incentive, to improve people’s lives.
PR: Interesting. So then, when people take the advances, what is the typical use case? You have a good window into how these people are using their money. What are they using the advances for?
ZM: It’s responsible use cases. And that’s exactly the reason why we started the company. So whether it’s a combination of needing gas, when you talk to the users, to go to work, being able to pay their rent, or being able to use their phone. Those are your top three use cases. And I hate to say this: food.
PR: Right.
ZM: And the point that I’m trying to make here is going back to this journey 20 years ago, or even seven years ago, again, sorry to point this out, but we are the wealthiest country in the world. And the number of people living paycheck to paycheck, besides it being three-fourths of our adult population has only been increasing year over year.
PR: Yeah. I know, it is crazy. So you have a million paying customers. You said they’re doing responsible things, and they’re saving more. I’d love to get a sense of how you measure whether they are financially better off than they were when they started.
ZM: I appreciate that question. The good news is we’ve got a number of social impact investors who also have research organizations. One of the things I’m most proud of, and we hit this number earlier this year, according to one of these research funds, since we started the company, we’ve helped save our users over a billion dollars in overdraft and late payment fees. That makes me fundamentally happy. That makes our team truly excited. Our core goal again is to use cashflow next-generation data to help solve these problems where we can help people earn more money or save more money. That is a point that makes me happy. We also use third-party agencies to help us understand what percentage of our users feel they’re achieving their financial goals, specifically because of Brigit. And that number has been 94 percent or more of our users. These are the reasons that get us excited to go to work and why we are excited about what we do. So those are some of the ways that we measure. And when we look at the period of the last two years, because of our product, our users saved about $300 – $400 a year because we’re helping them save or earn more from the core products. And the last thing I’ll say is the main reason why people leave Brigit is because they don’t need our product anymore, be it for needing money between paychecks because they’ve been able to save that $300 – $400, as I mentioned, over the course of a year. They can use it for anything, as far as I’m concerned. Anything is better than, I don’t want to point out Chase, but paying Jamie Dimon’s bonus, for example. But that is on us to continue to provide more and more value for the end customers. But it is also positive. When you look at people’s lives, the main reason they churn is because they don’t need our products, because they have improved their financial lives.
PR: So the advances though, are they tied into a paycheck? Or how are you how are you ensuring that you get you get that money back?
ZM: Yeah, they’re not tied to a paycheck per se. I want to be very careful in how I say this. We anticipate when people are going to get paid. Subsequently, we very clearly tell people how much they’re able to borrow, and when they need to pay it back. We also have extensions where they can actually extend. It is tied with the expectation that a person is employed and how much that person is making, hence the earned wage advance aspect. But again, I want to be very clear that people have no one they’re going to when the money is going to be taken out and have the ability free of cost to extend that as well.
PR: I’m curious about how you feel about the earned wage access industry, which has had a lot of activity and a lot of focus on the regulatory front, with the CFPB coming out with proposed rules. What’s your official stance on that? Because you’re a little different to some of the other players. I would love to get your perspective there.
ZM: Sure. For any regulation, be it state or the CFPB, I think it’s fundamentally important to look at it from two ways. One is to start off with the customer. For everything you do, you have to start with the end customer. Are these products helping people? Under what circumstances are they not helping people? At some point, you have to compare these products to other products and actually talk to the people. It’s a hint there. Gain a deeper understanding and do more analysis of how good or bad these products are, whatever that product might be. That is one area that I fundamentally believe any state or federal regulator should spend their time on. And I think, to a large degree, a lot of them do, and some don’t. The next part of it is technology. Technology is evolving every year, every day, every, quite frankly, every second with the state of AI per se. Let’s take a holistic approach to say, “Hey, what are the best products and the best solutions for the end customer, leveraging the new data and new technology that’s there and making sure that overall technology and that product is doing good for the end customer.” I think as long as both those things are followed, don’t ignore innovation because, guess what? Innovation can be fundamentally good. That’s why we’re where we are today. One hundred years ago, we wouldn’t be having this conversation, or hell, even five years ago. So, have a nice balance between starting with the end customer, servicing the end customer most effectively, and ensuring you’re using and updating your policies based on technology.
PR: With your advances, how do you decide whether or not to approve any particular customer? And I imagine they have to have a wage that’s going into their bank account, right? What’s the underwriting process like?
ZM: Sure. We look at a number of factors, including people’s paychecks, their income, how often they get paid, as well as their overall spending habits. And we use that to understand the riskiness of the end customer and subsequently allow them a certain amount of EWA advance.
PR: What percentage do you approve of those people that are trying to come in?
ZM: Well, it depends on the cohort, as you can imagine, but we have among the highest approval rates at about 50%.
PR: Okay. That’s fair.
ZM: And again, it’s based on a number of factors and most of the people we’re not able to approve are people who don’t have income.
PR: Right.
ZM: Hence the earned wage access part. But keep in mind there are a significant number of those million customers who use our credit building product, we’ve got well over a hundred thousand people using that. Not everyone is only a user because of the financial health app, and we’ve got those multiple products working cohesively together.
PR: I’m curious about whether you see people becoming more educated about finance because of some of the best practices that you’re encouraging.
ZM: One hundred percent. Again, there’s the entire app, so keeping aside the earned wage access or even the credit building part, which advises people partially on how to improve their credit score, pay more on time, et cetera. Keeping that aside, we have a treasure trove of financial content in our app, and that’s delivered to each individual at the right time. I gave you that one example of a financial tip, which is, “Hey, my Con Edison bill, et cetera, what I can do myself to save money.” So it’s more of a self-help, actionable tip. But even within the app, if the user sees – again all driven by algorithms on changes in cashflow – this person’s trying to save more, we have a piece of content that they can either access within the app or the website, or it’s delivered to them at a certain point of savings. Saying, “Hey, you were able to save this much money this month, here are two or three other things you could do to help build a nest egg.” So in terms of being educated about their financial habits, including being able to earn a little bit extra, and we didn’t talk about that, all of those things are part of our content library that we provide.
PR: That’s great. I want to talk about credit building for a little bit. I’m a big fan of credit builder products, but if you read the fintech press, some people are pretty negative about them because they do not provide a signal to lenders about whether this person is actually going to repay. I want to get your perspective. I’ve got my own thoughts on this, but I’d love to hear yours.
ZM: I think you’re dead right. I think there are certain credit-building products out there, and we can talk through which ones per se, maybe offline. I don’t want to call anyone out.
PR: Not naming names.
ZM: Yeah, not naming names, but who provide absolutely in exactly your phrase, no signal to the credit bureaus. And in those cases, trying to “hack the credit system” where they only provide positive reporting is, pardon my expression, garbage signals to the credit bureaus, whose responsibility is to understand and assess risk for their end customers, right? And again, there are a lot of those “hacks.” Our credit building system is different, and let me explain why. First of all, it’s reported to all three major credit bureaus. And in fact, for two of the three credit bureaus, we have relationships at the C-suite who approved and actually like this particular product because it expands the number of people in the credit system. We provide a product that has been working with community banks for the last 30 years. All we’ve done is taken that same core structure and made it mobile, where every time someone actually helps save money, so in essence, it’s a credit-building account that is reported to all three credit bureaus. The other difference is that when someone does not pay on time, we report negatively as well. And anytime someone closes their account, all that is echoed right back to the credit bureaus. So the most important point, as you’ve pointed out, the efficacy of a credit-building product is that it provides positive but equally important negative signals back to the credit bureaus, and it’s structured in an ideal process that has precedent for the last three, four or five, maybe in our case, 30 years.
PR: I think it’s such an important product. It’s such an important concept, and we want to provide good signals to the credit bureaus and we want to help people at the same time. Those two things should not be mutually exclusive. It sounds like you’re threading the needle there. You mentioned earning more money. What are you doing on that front? How are you helping people increase their income?
ZM: Everything we do is trying to be personalized and provide the right message at the right time. So, unfortunately, sometimes we see some volatility in income for some of our customers. And again, using the fact that we look at their cash flows, the systems look at the cash flows in real-time, sometimes we see that. And every now and then, the system will say, “Hey, we’ve unfortunately noticed some volatility in your income. Here is a partner, a survey partner of ours, that you can spend five minutes and earn, let’s call it $5, it can help bridge your gap between a little bit of your paycheck between now and then. Alternatively, if we see wider gaps, so a larger volatility of income, we can also suggest some part-time jobs that our partners provide.
PR: Okay. So you mentioned a million paying customers. Can you give us a sense of scale as far as the team goes?
ZM: Yeah, no, we’re proud of this, and we’re happy to share some of these stats with you. So we have a little bit less than a hundred people. And last year, we did over a hundred million in revenue, and we continue to be profitable.
PR: More than a million dollars per employee. That’s a great stat.
ZM: Yeah, I mean, the reality is it’s less than 100 employees today, and last year, we were at 70. So one of the reasons why we look at that as another step that we’re proud of is because it helps show the world – investors and anybody else, partners – that the core technology, the fact that we’ve leveraged cashflow technology, and that’s really what we do. The core stack that we’ve built, and all of it is built in-house, is fundamentally effective because you won’t be able to get one and a half, two million ARR per FTE, if you’re not able to have a true scalable technology. And all of that, as I keep pointing out, without being a broken record, is it’s really based on cashflow. Everything we look at is your income, your volatility of income, and historical spending patterns to solve the deepest pain points for the widest segment of the population.
PR: Okay. So then totally random question. Why did you call it Brigit?
ZM: I appreciate you asking that question. So we help bridge your gap between your financial now and your financial future. That is the core reason why we call it Brigit. The person who helped us name it also realized Brigit also sounded like a slightly older aunt who would be more responsible about money and help guide you through that as well. Those are the two reasons.
PR: Okay. Interesting. So then, last question, what’s your vision here? Where are you taking Brigit?
ZM: It’s pretty simple. It’s fundamentally simple. We truly believe that to impact people’s lives and improve their overall financial health, you need to give something that’s fundamentally personal, where it reacts, as I pointed out. If you see someone make a little extra money, be a little bit more volatile, find ways for them to help save in the simplest manner; that is core to what we do. So we will sit on top of any bank out there and digest cash flow information with the sole purpose of making sure you have money between paychecks, whether it’s through saving a little bit more, earning a little bit more, building your credit score and refinancing whatever existing loan, all of that delivered in the most seamless manner to you, that is the core focus. And we were only at a million people today. Unfortunately, we’ve got another 100 million to go.
PR: Okay, well, good luck. I hope you get there one day. It’s been great chatting with you Zuben, it’s been overdue getting you on the podcast. So I’m glad we finally got to do this.
ZM: Thank you so much. I appreciate the time and patience.
PR: Well, I hope you enjoyed the show. Thank you so much for listening. Please go ahead and give the show a review on the podcast platform of your choice and go tell your friends and colleagues about it. Anyway, on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.