BREAKING BANKS - EPISODE 332: Navigating the crisis
In this week’s special edition we get up close with the CEOs of Varo and Moven on the collaboration. Then Greg Palmer and Brett King interview ex White House staffer Adrienne Harris on what life is like in the West Wing during a crisis like COVID-19.
[2:15] Marek Forysiak addresses Moven’s decision to start focusing exclusively on enterprise.
[4:05] Colin Walsh started Varo with the belief that Americans need a better bank.
[12:25] Adrienne Harris shares her views on how the fintech industry will perform during the economic downturn.
[17:10] Greg Palmer looks to fintechs to prove that they can walk the walk and put customer needs first during and after the COVID-19 crisis.
[18:30] How can fintechs help deliver money more quickly to those who need it most?
[20:00] We need cleaner, better data.
[26:05] Brett King speaks to Greg Palmer about what the fintech community is doing to help out during the COVID-19 pandemic.
[29:50] Adrienne Harris describes what it’s like in the White House in the times of disaster.
[35:00] How much of the government response is a pre-planned workflow versus in the moment?
[36:35] We discover Greg Palmer was a part of the Model UN in high school.
[41:55] Adrienne Harris talks about the work she’s currently doing.
[44:55] How did the 2008 crisis compare us for the COVID-19 crisis?
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Brett King: (00:04)
Welcome to Breaking Banks. Now, this is a special edition of Breaking Banks. Coming up in the show we have Adrienne Harris, who as many of you guys will know, was an adviser to the Obama administration, a special advisor to the President on banking. And we’re going to get into how she would be responding to the coronavirus crisis, if she was still in the White House today, and how they would go about gaming that and dealing with that crisis. It’s a really interesting discussion coming up.
Brett King: (00:34)
But before that, I wanted to bring a couple of friends onto the show. As you guys have seen, we’ve had some changes in with the Moven team as well. So we’ve got Marek Forysiak joining us, who’s the CEO of Moven. Marek, welcome back to the show.
Marek Forysiak: (00:48)
Thanks, Brett. Thanks for having me on.
Brett King: (00:49)
And also Colin Walsh from Varo Money. Colin, welcome to Breaking Banks.
Colin Walsh: (00:54)
Thanks, Brett. Great to be on the show.
Brett King: (00:57)
Now let’s start off with Marek. If we can get you to jump in, first of all, is give us a bit of context of how the coronavirus situation affected the decision strategically in Moven, in terms of our recent pivot to enterprise and why that eventuated in this partnership with Varo Money.
Marek Forysiak: (01:18)
Sure. Thanks, Brett. Coronavirus and COVID-19, that really wasn’t the determining factor for us when we made our decision late last year to shift our emphasis exclusively towards enterprise. That business for Moven, which began back in 2016 has continuously grown. Recently, Moven signed a multi-year, multi-country deal with Saudi Telecom to further expand upon that business. So the momentum on enterprise has been consistent over the past several years.
Marek Forysiak: (01:59)
What COVID-19 did as we were going through a very deliberate process in transitioning and winding down our US direct to consumer business, COVID-19 really accelerated that for us. Where we wanted to be able to, again, deliberately go through a process that allowed for customers to look at other alternatives, pursue those alternatives.
Marek Forysiak: (02:24)
But as we found within all of our processes around capital and how we allocated capital, COVID-19 clearly required us to take certain steps sooner than we would have done under normal circumstances. And as you know, we announced the discontinuation of our direct to consumer business in mid March. Those actions obviously done in a way that puts the customers first. Obviously, why we’ve got Colin on board here with us.
Marek Forysiak: (02:57)
So that then, as we look to focus exclusively on enterprise, on leveraging our patented wellness technology, our exclusivity in the United States has been lifted now, which we had previously in place with TD Bank. All of those aspects were really the key drivers behind our decision, relative to D2C. But COVID-19 accelerated that, Brett.
Brett King: (03:24)
Right. And the access to US market being the largest banking market in the world is obviously a key factor as well, along with the funding accessibility.
Marek Forysiak: (03:34)
Of course. Yeah.
Brett King: (03:36)
Colin, why don’t you give us an update on Varo Money and Varo generally?
Colin Walsh: (03:39)
Sure. Well, first off, let me just say that you guys I have admired for some time. I was an early Moven customer, I read your books. So even before I started the company.
Brett King: (03:52)
Colin Walsh: (03:53)
So always have had a lot of respect for what you guys have been doing and the pioneering role that you played.
Colin Walsh: (04:00)
I started Varo about four and a half years ago. And really with a belief that Americans need a better bank, they need a fully digital bank that is going to be able to offer them a wide range of products and services, that are going to help them make a difference in their financial lives. I think you guys really pioneered a lot of the technologies around tracking, spending and understanding your financial health situation.
Colin Walsh: (04:27)
Again, like I said, we took some real inspiration from that, and focused on creating product that was going to really help people stretch their money further. So eliminating hundreds of dollars in fees and charges, giving them free overdraft, giving them that paycheck early, and start to build basic financial resiliency. It’s shocking how many people, and it’s really coming into very stark contrast right now in this crisis, just have so little put aside to help them weather through an emergency.
Colin Walsh: (04:54)
So we focused on building tools to help people save, giving them incentives to save with really good, compelling interest rates. And so really the foundation of what we’re trying to do is to help make a difference in people’s lives. And so this partnership for us is a natural, because I do think we share a lot of the same ethos and being able to provide a nice soft landing for those Moven customers to join the Varo community is a great way as you transition your business more towards enterprise mode.
Brett King: (05:23)
Marek, talk to me about the decision-making process within Moven. Obviously, I was involved but from your perspective, why was Varo the right choice for our customers to give them that soft landing?
Marek Forysiak: (05:34)
Sure. I think Colin even alluded to some of those, right? Their principles behind how they want to serve consumers in the US are consistent with our principles, right? And Brett you know our slogan, it’s around how you spend, save and live smarter.
Marek Forysiak: (05:52)
So those are consistent ethos. Those are principles that clearly Varo shares with Moven. Our customers have come to appreciate that type of an experience that we help with them. Again, how can we help four out of 10 Americans save to deal with these types of issues that are ongoing today?
Marek Forysiak: (06:15)
Clearly Varo understands that. And again, they’re digital only, Brett. You know this. We wanted [crosstalk 00:06:22] provide that same kind of a utility.
Brett King: (06:25)
So let’s get into that a bit. So Colin, obviously, you guys are seeing an uptick in applications right now for Varo accounts or acquisitions of Varo accounts because of the whole COVID-19 thing. Where do you see the financial wellness piece fits in to Varo customers, given the context of what’s potentially a depression?
Colin Walsh: (06:49)
Yeah, it’s never been more relevant. And one of the things that is somewhat unique about us compared to many of the other fintechs out there is we’ve done a lot of the heavy lifting over the last three years to actually become a full national bank. And so we’re just months away from actually being able to operate as a bank and being able to offer an even wider range of products for customers, beyond just the deposit taking and savings and transaction accounts into the lending space as well.
Colin Walsh: (07:16)
And I think right now more than ever, customers need help with financial wellness and thinking about how they access money quickly, and having instant access to money and having features that allow them to do that. And having money moving through digital channels in a safe, convenient way, where they don’t have to necessarily rely on cash or they don’t have to be in person.
Colin Walsh: (07:37)
And then being able to think about basic things like how they’re going to pay their bills, and how do they augment their cash flow if they need to? And so I think we’re going to be very well placed to really help across a number of pain points. And as I mentioned, I think those are going to really come into focus as we head into this economic dislocation for so many consumers, that are going to need a bank that’s standing behind them.
Brett King: (08:00)
Marek, just to wrap up, what do you think Moven has learned from the direct to consumer operation in the US and the work we’ve done with other banks around the world that might help Varo and other Moven clients to help their end users cope with the COVID economic crisis?
Marek Forysiak: (08:22)
Yeah, I think it all comes back down to the fact that processes need to be digitized end to end, as it pertains to servicing customers today, how we want to service customers differently going forward. What we see around the world in Moven Enterprise is global in nature, our clients span multiple geographies, they’re digital products and services, you know this Brett, they’re end to end. Across the board in the US, you see continuous media breaks without citing specific examples right now. They’re being headlined across the board.
Marek Forysiak: (08:58)
So institutions in the US, Varo understands this. Why it’s imperative for Colin from day one to own the whole stack allows for him to be able as a business to digitize his processes, products and services from end to end. That’s going to have to be the way organizations look into the future. That’s what we’ve learned at Moven, pioneering as a neo bank, end to end digitized products and services.
Marek Forysiak: (09:28)
Colin recognizes that, it’s what he’s doing with his organization. And it’s what we see around the world. We need much more of that Brett here in the US.
Brett King: (09:37)
Great. Well, Colin, how do people find out about Varo Money?
Colin Walsh: (09:41)
Yeah, so you can download Varo, V-A-R-O mobile banking in the Apple App Store or the Google Play Store or visit us at varomoney.com.
Brett King: (09:50)
And Marek, what about Moven Enterprise?
Marek Forysiak: (09:54)
Well, Moven, you just go moven.com and you’ll be able to see all of our solutions that are available to clients now, enterprise clients to include the US now.
Brett King: (10:04)
Great, for both of you, thanks for joining the show. And Colin, on behalf of the team at Moven, we look forward to continue to work with you guys to help Americans live healthier financial lives.
Colin Walsh: (10:14)
Likewise, we really look forward to it. Great chatting with you.
Marek Forysiak: (10:17)
Thanks, Colin. Thanks, Brett.
Brett King: (10:20)
Okay, so coming up now is a piece we recorded earlier this week with Greg Palmer from Finovate and Adrienne Harris, who was a special adviser to the President on banking during the Obama administration. She was very kind to give us some time to talk about what this means for the United States banking sector.
Brett King: (10:41)
And in the second part of the show, you’re going to hear from her, in terms of how she would have been responding to this from within the White House, if she was a part of the current administration. Or, if this had happened on Obama’s watch. A really interesting special edition for you guys today.
Brett King: (10:57)
Here’s Greg Palmer from Finovate.
Greg Palmer: (11:00)
Welcome to the Finovate podcast. This is Greg Palmer. Joining me today we have Adrienne Harris, currently a professor of the practice at University of Michigan and a former special assistant to the President for economic policy in the Obama administration. Adrienne, thank you so much for joining me on the show today.
Adrienne Harris: (11:17)
Thanks for having me.
Greg Palmer: (11:18)
So just to give a little bit of background here, this is a continuation of a discussion that I had with Brett King. And this is actually going to be joint aired on Breaking Banks and the Finovate podcast. But we’re talking to a lot of different people about how this current period of turmoil will affect the fintech industry.
Greg Palmer: (11:34)
Obviously, a couple of really big shocks to the system taking place right now with COVID-19, with what looks like an impending global recession, and this is going to have far reaching implications within the realm of financial technology. And so we’d like to just get your thoughts, as someone who’s seen this from a policy standpoint in the government office, and also now in an academic setting, what are you seeing, how do you feel like this is going to start to affect fintech as an industry?
Adrienne Harris: (12:02)
Yeah, absolutely. It’s a great question and one that a lot of people are asking, to your earlier point. I think people will remember that fintech as we think of it today really did come about after the last big crisis we all lived through, which was the financial crisis. And so as a space, it really hasn’t yet experienced this sort of turmoil, put aside even just the public health aspects of it, but the financial and economic turmoil, that we’re all experiencing. fintech really hasn’t been through this sort of challenge.
Adrienne Harris: (12:34)
And for a long time, people have been speculating about and wondering how the industry was going to deal with any kind of economic downturn, much less one of the size and scope that we expect to experience in the coming months. I think there’s a lot of open questions here. Often, people have been speculating about how the lending piece of fintech is going to do in particular, because of the new underwriting models that have been employed in the space, and how they’re going to perform when we saw an economic downturn.
Adrienne Harris: (13:05)
I think that is first and foremost on a lot of people’s minds, especially as we see the trouble that small businesses are having, and that a lot of individuals are having as well. I think that’s high on everyone’s mind.
Adrienne Harris: (13:17)
And then there’ll be a number of other business models, as we think about early access to earned but not yet paid wages, and the set of apps that really are centered around people’s financial health. There’s going to be a lot of questions about how they can perform, and to the extent that many of these companies are still either pre-revenue or not yet profitable, and still relying on venture dollars, I think we’ll have to wait and see how the capital flows change over the course of this crisis.
Greg Palmer: (13:48)
Well, a couple of really interesting pieces to pick up there. Obviously, the capital one is crucial, particularly for the fintech standpoint. But I’d like to come back to some of the earlier pieces, it looks like this is an area where fintech can help, where there’s a lot that as an industry we have to offer to people who are struggling right now, people who need a little bit of help. And certainly it looks like technology can help do some really nice things and help cover people in a time when they really need it.
Greg Palmer: (14:15)
But to your earlier point, this is really uncharted waters for all of us. This is something where over the last 10 years, we’ve had this really nice period of expansion where things have all been going swimmingly and fintech has been allowed to push forward in this environment, and still do some really cool things. But it hasn’t been tested in the way that maybe it needs to be tested to get that resiliency in there.
Greg Palmer: (14:37)
Does the fact that it’s now getting tested in that way, in that this way that is really a shock test, this resiliency test, does that mean we’ll come out of it on the other side in a better, healthier place, despite some of the painful moments we’ll obviously have to go through to get there?
Adrienne Harris: (14:54)
That’s certainly the hope. fintech really did come about with this promise that it was going to be better for consumer financial health, better for market health. And to your point, because it hasn’t been tested, there is this open question. But it certainly is the hope that these tools that have been developing through a period of growth over the last 10 years, will demonstrate to their customers, to regulators, to other stakeholders, that they did actually help make a difference and maybe prevent things from being as bad as they otherwise might have been.
Adrienne Harris: (15:26)
So really, that is the hope. And I think there’s a lot of tools that we have now and a lot of data that we have now coming into this corona crisis that we didn’t have when were going through the financial crisis. I really do think it’s a matter of how quickly fintechs, their incumbent partners and government institutions are able to deploy and leverage some of these new tools, in order to mitigate some of the economic harms that we know we’re going to see.
Greg Palmer: (15:54)
Right, right. Well, and certainly this is something which should be right up fintech’s alley. Over the last 10 years, we’ve heard from a lot of fintech founders this idea, we want to put the customers first, we want to give customers the ability to have more control over their finances, regardless of where they are physically. We want to give people tools that they didn’t use to have before.
Greg Palmer: (16:13)
I know quite a few fintech founders who are I think doing a good job of putting the customer first and looking at them and saying if we can help these people out, we’ll have a profitable business. But also, we can do something that will really benefit the globe and people all around the world. And now I think there’s an opportunity for them to prove it, and really demonstrate that they can back that up.
Greg Palmer: (16:34)
On the flip side, I think the reverse can also be true, that a lot of companies who are talking that talk, might not be able to walk the walk. And so I think there probably will be some companies that are going to struggle over the next couple of months or potentially even longer than that, as we look to see how these challenges unfold. And so as I said it could be painful, but calling those companies out and elevating the ones who are able to really deliver may ultimately be good thing for the industry.
Greg Palmer: (17:04)
So in looking at this from the global good perspective, where do you see areas where fintech really has the most power to do good in this type of situation, when we’ve got such a major shock going on?
Adrienne Harris: (17:17)
I think you’re absolutely right to highlight here that there’s a lot on the line for the space in general. And it is a space that has had a bit of a halo around it, because of its ethos around doing good. And to the extent companies are able to do that, they’re going to continue to have that halo, but where people fall down, I do think it will have a little bit of a blowback on the industry writ large. And we might see some of the frothiness come off, when it comes to investment capital.
Adrienne Harris: (17:46)
In terms of the biggest opportunities for doing good, as I mentioned, we have data now about people and about their finances like we’ve never had before. And we should be able to leverage tat data and the insights that the fintech companies have been able to glean from that data, to really help people manage through this crisis in a way that is particular to their individual circumstances. I think that would be an incredible tool to be able to leverage, to help people in this very difficult time.
Adrienne Harris: (18:17)
Another one of the things that people often point to about fintech is just its speed and the nimbleness to it. So now there’s all this conversation about how quickly or slowly the government will get these stimulus checks into people’s hands. And this is really a place where fintech can help deliver, either underwrite small business loans faster, and very literally deliver money more quickly to people as we think about the payments mechanisms, that mostly live inside fintech and don’t yet live inside the incumbent institutions.
Adrienne Harris: (18:52)
I think those are just a few of the tools that are really going to help us as we come through this crisis and some of the big opportunities for fintech. But I think I’ll go back to this point around data. There’s so much data now that exists that we didn’t have before. We didn’t have in a usable format before. And of course, subject to all the concerns we have about privacy and how that data gets used.
Adrienne Harris: (19:18)
But you really can imagine that fintech has a great role to play here in thinking about how we use that data to really provide individualized and accurate solutions for people.
Greg Palmer: (19:29)
I think data is crucial. And this is also one of the pieces which I’ve heard some other people say as well, the idea that the data that we have up until this point in fintech is somewhat flawed, because it all comes from a market where things are expanding, things are growing. And so that’s the only data that a lot of our models have. But now we’re going to get a new set of data, some more potentially useful data. What happens in this kind of stressful situation? And that data should make fintech stronger, should certainly make solutions stronger.
Greg Palmer: (19:59)
I like the piece about injecting liquidity as well. We know that this is something which is unfolding very rapidly, speed matters here. And just in case it ends up mattering, we’re recording this, by the way, on March 31st. So the comment about the checks, how quickly they get out there, we’ll see, depending on when this airs, it may already have happened, it may still be a couple of weeks away. But to your point, being able to take that money and get it into people’s hands faster is absolutely a real benefit that would come from this.
Greg Palmer: (20:26)
I think the other piece that I’m really… and I hesitate to use the word excited because this is something which obviously has so many negative components to it, that I don’t want to sound gleeful about how it’s all unfolding. But I am excited to get past this hurdle that we’ve had where a lot of people have said, we don’t actually need a fintech solution here, because what we have is working well.
Greg Palmer: (20:47)
And this is one of those really common objections that you hear from banks or other financial institutions, who are maybe hesitant to engage with new technology. And now we sort of have this outside force coming in and saying, actually, you do need to engage with technology, you do need to do something a little bit different, because the set of circumstances has changed. And so that something, which I’m really excited to see as well and see if there is maybe a behavior shift that comes about as a result of this and if people embrace technology a little bit more.
Adrienne Harris: (21:17)
Yeah, absolutely. And I think, maybe it is true and I’m sure reasonable minds can disagree, that the system works fairly well. But that’s not to say that it couldn’t work better, and there are not improvements to be had. And then what you end up with is a bit of a debate about whether this precise moment is the time to really test out some of those new technologies and new functionalities.
Adrienne Harris: (21:41)
But in truth, those of us who have been in the fintech space for a long time, know that some of these things really aren’t that new and can actually be very easily leveraged and integrated with existing systems and used to the benefit of consumers all over the world.
Greg Palmer: (21:59)
Yeah, absolutely. I think it is maybe easier than some people in the industry make it out to be, although not to downplay the risks and things like that, which can also happen. So we’re coming up on the end of our time, at least from the Finovate podcast standpoint.
Greg Palmer: (22:13)
I want to just finish one question, we talked about some of the potential positives that could come out of this for the fintech industry. Obviously, there are quite a few potential negatives for individuals in the space, and also for people going about their daily business. But what new pitfalls do fintech companies really have to be aware of now, that maybe they didn’t have to worry so much about in January of this year?
Adrienne Harris: (22:38)
Yeah, I’d sort of put these pitfalls in two buckets. One bucket is the business specific set of pitfalls, right? People are going to realize that their underwriting algorithm actually doesn’t work as well or that the business model is not as robust as they once thought, because it’s only been tested to your earlier point in expansionary times. So that’s sort of the micro or business level set of pitfalls.
Adrienne Harris: (23:02)
I think the more macro set of pitfalls is, as I alluded to earlier, today, fintech has largely enjoyed a halo with respect to the view from the policymaker and regulator standpoint, just because of the time that it came about, and the messaging around how it was different from traditional financial services institutions. I would say, to the extent that fintech companies fall down on the job, given this crisis, I think they’re going to find themselves subject to increased scrutiny from policymakers and regulators as a result. So there’s a lot at stake here for them.
Greg Palmer: (23:40)
That’s a very good point. And it’s one that I think not a lot of people are necessarily thinking about right now. But what we do now will set the stage for how regulators and policymakers think of fintech and how it’s perceived. And so for every company that fails or that doesn’t pass the test that’s being met right now, it just makes it easier and easier to justify harsher rules, harsher regulations and things like that, which will be potentially very long lasting.
Greg Palmer: (24:05)
There is the bell for us. That concludes the Finovate portion of this. Now what we’re going to do, because this is really interesting, there’s a lot of pieces still to cover and we’re going to pick this up on a Breaking Banks podcast as well and continue this. So anybody listening on the Finovate podcast from here, please do check out Breaking Banks as well. We’ll get into this conversation a little bit more deeply with Brett King as well.
Greg Palmer: (24:27)
Adrienne Harris, thank you so much for joining us. I look forward to continuing the conversation with you in just a few moments on Breaking Banks.
Adrienne Harris: (24:49)
Thank you. Likewise.
Brett King: (24:49)
Welcome back to Breaking Banks, this special edition of Breaking Banks. I have Greg Palmer co-hosting with me. Greg, you’ve been running a series now, speaking to a bunch of people on coronavirus impact in the fintech space. And of course, you’ve seen a lot of these companies demo over the years and so forth.
Brett King: (25:08)
Let me ask you this question before we go back to Adrienne. What’s the Finovate community doing for fintechs right now?
Greg Palmer: (25:16)
So there’s a couple of things obviously, from Finovate’s standpoint, obviously, we’re an event first and foremost. And if you want to talk about an industry that’s being hit hard by everything that’s going on right now, events, physical events are really part of it.
Brett King: (25:28)
Greg Palmer: (25:29)
One of the things that we’re trying our best to do right now is to still find ways that we can engage the community, offer support, share knowledge, because what we really see our role in the space is just a gathering point and a place to exchange ideas, to stay up to date on new technologies and look at how people are using those technologies in new and exciting and fun ways. And so we’ll be figuring out how we can give people a taste of that. While we’re not able to hold events in person, hopefully by the time we get to September, our big show in the fall in New York, we will be able to meet in person again.
Greg Palmer: (26:04)
But until that point, we’re going to be engaging digitally, looking to share best practices, to get advice out into the hands of people and just trying to make sure that people are able to get that support, get those ideas that might help them navigate these troubling waters. There is a lot of change happening right now. But there are also a lot of really intelligent people who have some strong things to say.
Greg Palmer: (26:26)
And their advice is potentially more valuable now than it ever has been. And we’re going to be looking to make sure that that advice gets out there and gets heard as widely as we can.
Brett King: (26:36)
Excellent. Now, Adrienne, you’ve got a unique perspective on this coronavirus event because you worked in the Obama administration. Now, if my memory serves correctly, you were at US Treasury. Did you transition into the administration on day one, or was it a little later? I can’t recall.
Adrienne Harris: (27:00)
It was actually a little later. So I worked on the first Obama campaign in ’08. But then went back to my life in New York as a lawyer doing mostly financial services regulatory work, and really with a specialization in derivatives. And then for the second term, I came down to the Treasury Department working in the deputy secretary’s office. And then they brought me over shortly thereafter to the White House to be a special assistant to President Obama and to manage the financial services and housing finance portfolios there.
Brett King: (27:27)
Yeah, because we actually met at US Treasury. Do you remember that?
Adrienne Harris: (27:36)
I do, I do remember that. And then I remember coming to the White House as we were really starting our thinking about fintech and the future of financial services.
Brett King: (27:41)
Exactly. It was a very cool day for me.
Brett King: (27:44)
Let me ask you this question. If you were in the administration today, what would your day look like? What would you be doing in the midst of this crisis, given these complexities around the bailouts and so forth?
Adrienne Harris: (28:03)
Yeah, most days in the White House are pretty crazy. But then when you have events and circumstances like these that we’re all experiencing now, they get even crazier. And I think a lot of what you’re seeing happening with the banks are lots of customs that started maybe just before, and we really ramped up during the Obama administration.
Adrienne Harris: (28:21)
Which is to say the way banks are now stepping in, and I say banks broadly, but the way financial institutions are stepping in, in the wake of this disaster, and offering forbearance on loans, waiving fees, are all things that we used to coordinate in the face of, at the time, it was mostly natural disasters, right? You’d have a big hurricane somewhere and you’d coordinate with the banks to make sure that they would offer forbearance for mortgage holders and the like.
Brett King: (28:49)
Like [crosstalk 00:28:50].
Adrienne Harris: (28:50)
So those are a lot of the things we used to do and that you see banks doing now, along with state regulators, who are stepping in and offering guidance to the banks, partnering with the banks around how they should think about giving people some relief and support during this time.
Brett King: (29:06)
We also work on the board of the financial health network together. And Jen has been very vocal over the last few days of the challenges that low to middle income households in America are facing right now. But one of the key problems that the administration would have to deal with, if you’re in the administration, is just getting people paid. Getting this money to them.
Brett King: (29:28)
And of course, people that currently don’t have bank accounts in the United States, which depending on how you look at the numbers is somewhere between 15% to 20% of the population. They can’t exactly go down to a cash checking facility today and convert a government check into cash to survive. So did you guys have contingency plans in place for that sort of thing?
Adrienne Harris: (29:56)
Yeah, I think when we were still early on in the days fintech, even you know as well as I do how fast the space has moved even in just the last few years. But I think this has been one of the things those of us in policy world have talked about, real-time payments, forever, because even those who have bank accounts, and are able to use their mobile check depositing to put the check in their bank account are still going to experience some delay until their funds are available to them. And then when they have to pay their bills, there’s going to be more delay, even if they’re paying them online or digitally.
Adrienne Harris: (30:33)
So this is one of the things we thought about is, is really the importance of real-time payments. And again, to your point, the way we deliver lots of government benefits to people, it is typically a cheque and that goes out in the mail. The Treasury Department at the time did a lot of work on delivering digital money onto prepaid cards for people and spent a lot of time exploring that delivery mechanism.
Adrienne Harris: (31:00)
But now there’s even so much more we can do with fintech, helping people get their money instantly, predicting how much money they might be getting either from their employer or from the government, and helping to advance those funds with low or no fees. And all that technology is available to us now. And it’s just a question of, can we integrate it with the policy machine in a way that’s effective for consumers?
Brett King: (31:28)
Now, one of the other aspects of this is, I guess that there’s the potential for being overwhelmed, because so much is happening and your workload increases so significantly. So in situations like this, how did you handle bringing in other personnel to assist through this process? Did you have them identified beforehand? Or was it just handled in real time?
Adrienne Harris: (31:52)
For us, we were constantly working with, reaching out to, collaborating with a variety of stakeholders. Whether they were policymakers and regulators, innovators, traditional institutions. So we had those relationships really well built in, just into the day-to-day work we were doing. And so when it came to disasters like this, and I almost hesitate to say disasters like this, because most of the things we dealt with post-financial crisis as we think about the natural disasters where we were activating with financial institutions were more localized, obviously, than the pandemic we’re dealing with now.
Adrienne Harris: (32:30)
But because we had those long standing relationships, because we were constantly engaging with and collaborating with people across sectors and our counterparts in other parts of the world, when crises appeared or happened, we were very quickly able to engage our friends and the people we had relationships with, to mobilize them to work towards solving problems and mitigating disasters. I think it was really to the credit of the leadership that we had, that that was just part of the culture. Is that you had those relationships with a variety of stakeholders, because really hard problems require a lot of stakeholders coming in from different perspectives, all with the aim of making things better for the American public.
Greg Palmer: (33:15)
So this is really fascinating for me, it’s a side of the equation that I don’t really get to see that much, but hearing about what goes on behind the scenes, inside the government agencies, just fascinating from my standpoint. And one thing that I’m curious about, how much of this is a pre-planned workflow that you say, okay, we know if something like this happens, here’s the steps we need to take, here are the people that we need to reach out and talk to?
Greg Palmer: (33:38)
How much of it is set in advance versus how much of it has to be figured out based on the specifics of each situation? Because obviously, there is a big difference between a localized natural disaster and something that’s this broad and this far reaching. But there’s still I would imagine, be some maybe best practices isn’t the right word here, but some sort of playbook to follow. At least I hope there is to some extent.
Adrienne Harris: (34:02)
Yeah, absolutely. I’ll speak for my time in government and for our administration. We certainly did do a lot of role playing. And we’d have these tabletop exercises that were professionally facilitated around any number of scenarios, natural disasters, cyber disasters. And so you do have a sense of who is supposed to do what, who is communicating with whom, what the best channels of communication really are.
Adrienne Harris: (34:35)
And you do do a lot of role playing and tabletop exercises. I’m sure you guys and those listening will have seen some of the press around the transition exercise that took place between the administrations, around a pandemic. I was not part of that exercise. But those are the things that are often happening in government.
Adrienne Harris: (34:56)
Now, the real life scenario is going to, the fact pattern is always going to be a little bit different and then you have the added adrenaline of it all. But these are things that certainly the civil servants and the political appointees are preparing for and thinking about often.
Greg Palmer: (35:14)
I’m imagining like a model UN meeting on steroids, right? Like the club that you would have in high schools where you say, okay, everybody represent a different country.
Brett King: (35:23)
Were you in the model UN?
Greg Palmer: (35:27)
I guess I gave that one away. Didn’t I? So that’s what I can relate it to. And I think a lot of fintech companies do this type of thinking, the idea of, if the worst should happen or if this type of crisis happens, here’s how we would try to engage with that.
Greg Palmer: (35:45)
But at the same time, I think to your point, the actual reality of it, when it happens, I’m sure you can never feel completely prepared. And you mentioned having that adrenaline come through when it’s all of a sudden for real, we’re taking this outside of the way Greg used to spend his time nerdily in high school, and now it’s very real, a very real policy that will touch a huge number of people. How do you keep a level head in that type of environment? Obviously, you only can do so much.
Greg Palmer: (36:14)
But I think this is something a lot of people are struggling with right now, in a leadership standpoint, in companies, in fintech companies or in banks, trying to figure out what’s a logistical path forward that is calm and logical. Any advice that you have on how you can keep things moving in that way, even when it’s such a scary and tumultuous time?
Adrienne Harris: (36:36)
Yeah, absolutely. I think practice makes a big difference, because even though the fact pattern will be a little different in reality, and you have the added adrenaline of the real situation, the more you practice something, you have that muscle memory of what you’re supposed to do. You remember some of the protocols, you have enough of that brainpower and that team established where you can adapt where you need to.
Adrienne Harris: (37:02)
And so like many things, it really comes down to leadership. Has the leadership identified a goal, a North Star toward which everybody can orient their thinking and their actions? Are you as a worker bee, an executive, are you able to look at your leadership and see modeled for you the behavior you would want to see modeled?
Adrienne Harris: (37:27)
I think that’s true in government just as it’s true in the private sector. You want to see your leaders focused on their goal, which in this case is mitigating the health and economic consequences for the public as much as possible. Making the right decisions, running a process that’s going to surface all the information that you can at the time and making the best possible decision for your constituency and executing quickly and as flawlessly as you can.
Adrienne Harris: (37:59)
But it really does come down to that tone from the top and then that trust in your team and the relationships that you’ve built as you execute.
Brett King: (38:07)
Is it hard to be sitting on the sidelines right now?
Adrienne Harris: (38:13)
Yes and no. Public service is such a great thing to do and it was such a privilege to serve in the Treasury Department and in the White House. And so I miss it all the time. That’s sort of my nature is I want to be helpful. And I think that’s true for a lot of people in public services, we just want to be helpful. So it is, in some ways, hard to sit on the sidelines.
Adrienne Harris: (38:36)
But I think, at least for me, and I know for many of my former colleagues, we found other ways to be helpful. I spend time these days on the phone with lots of friends all over the country in state government, helping them think about ways to leverage fintech and helping inform their thinking around financial services, given these challenging times. I’ve been advising a number of fintech companies on how they can best serve their customers, and also be mindful of their business models and how they should be engaging with government actors around these things.
Adrienne Harris: (39:05)
Everything from that, to helping a friend who started a nonprofit that was delivering mask making supplies to people who know how to sew. And figuring out the logistics of how they can get the supplies they need, get the masks sewn and then get them delivered to the people on the front line.
Adrienne Harris: (39:21)
So although I miss government a great amount, a great deal-
Brett King: (39:24)
You’ve been keeping busy.
Adrienne Harris: (39:25)
I am still finding ways that I can hope to add value.
Brett King: (39:29)
You speak about you’ve got practical experience on the legal side and so forth. But obviously, these days, you’re doing a lot more work with entrepreneurs. So do you feel that you’re morphing your role from that very process driven stuff that you’ve had to learn to be more entrepreneurial through this?
Adrienne Harris: (39:51)
Yeah, it’s an interesting question. I think despite starting my career as a lawyer, I was always entrepreneurial. And so it was harder for me to learn to abide by the processes than it has been for me to adjust out of the world of process, back to a more entrepreneurial style.
Adrienne Harris: (40:13)
But I’m glad I now have both skills. I will say as much as I used to push against some of the process, I did really quickly come to learn how important it is. And now I’m glad I can leverage that, those sets of tools as well.
Brett King: (40:26)
So on the fintech side, maybe can you give us an update of what you’re working on?
Adrienne Harris: (40:30)
Oh, man, really lots of exciting stuff.
Brett King: (40:33)
I know there’s a few things.
Adrienne Harris: (40:35)
Well, in addition to our work together, Brett, for the financial health network, which is always wonderful to engage with and as you mentioned, Jen is such a phenomenal leader and voice in the space, but I’m working with a number of companies. I sit on the board of a prop tech company, fully integrated, realtor, mortgage lender title company.
Adrienne Harris: (40:55)
Working with a number of financial health companies either related to credit, helping people better their credit scores. Working with a company that sells into banks, to help them provide financial health scoring for their consumers.
Adrienne Harris: (41:10)
And then I’m doing some stuff more on the institutional finance side as well, which I find really interesting, including how to make it more efficient for private equity funds to create a secondary market for some of their holdings. I’m doing a lot of interesting stuff in a variety of spaces and it keeps things really interesting.
Adrienne Harris: (41:28)
And as you know, I’m also as part of my work at Michigan, working with the Gates Foundation and with Michael Barr who’s at the university. He’s the Dean of the Ford School of Public Policy. And together, we are studying the future of central banks, with an eye toward thinking about what central banks look like 50 years from now and what more they could be doing to assist with building inclusive economies all over the world. So that’s a fun project as well.
Brett King: (41:54)
Do you think we’ll have a global central bank in 50 years time?
Adrienne Harris: (41:59)
Maybe, a global currency here, a global digital currency. Obviously, the [crosstalk 00:42:05]-
Greg Palmer: (42:05)
We already have one, it’s Bitcoin.
Brett King: (42:10)
I’ll leave that Bitcoin comment, Greg. But I’m really interested in coming off the back of this, unlike the 2008 financial crisis, which definitely was, obviously had economic shocks. But this is showing more of a systemic failure of capitalism, per se. That when you run systems that have very small margins, because you’re looking for that optimal productivity or efficiency, then when you have an event like this that we anticipate it, but we just didn’t prepare for. That’s one aspect of it.
Brett King: (42:49)
But the other aspect of it is simply that you’ve got a lot of people right now, their credit scores and their finances are just going to be decimated by this. So, is the credit score itself something that we should revisit as a result of this systemic shock?
Adrienne Harris: (43:08)
Yeah, it’s a good question. I think even before this, lots of people were looking at this question of the credit score and underwriting and how we assess creditworthiness, right? People have started looking at cash flow underwriting, mostly because we know that there’s lots of very creditworthy thin file borrowers.
Adrienne Harris: (43:26)
But I do think this is going to cause us to reassess how we think about creditworthiness, how we think about what a middle-class family looks like. I think we’re going to be reassessing universal basic income and what that looks like from a policy matter.
Adrienne Harris: (43:41)
I do think the nature of this crisis, I will say, the 2008 crisis in some ways prepared us for this. You saw Treasury and the Fed were able to activate very quickly. I think that’s largely as a result of their experience from the 2008 crisis. But this one does have some different aspects to it that we’re still going to have to take some lessons from. And it does point to different areas of fragility in the economy.
Adrienne Harris: (44:10)
And so I think it is going to cause us to look at what credit worthiness means, what it really means to be able to live the life that constituents should be able to live in economic safety and resiliency.
Brett King: (44:25)
Having a safety net and so forth.
Adrienne Harris: (44:26)
I think we’re going to be hitting a lot of these questions. Yeah, there’s probably some political candidates out there thinking like their UBI discussions are very ripe, now.
Brett King: (44:35)
Yeah, as you know, I’m in the midst of finishing off this book, The Rise of Techno-Socialism. I missed an entire chapter, trying to come up with a business model or use business case, if you like, for universal basic income, and putting all these quotes from all of these entrepreneurs. Because I knew that the UBI thing would get a lot of pushback, but in the space of like, it was 21 days from patient zero to when the stock market started its decline, right?
Brett King: (45:07)
And then we’re doing this 2.2 trillion plus bailout, and providing people with something that looks almost identically like universal basic income. So, all of this resistance to UBI as a concept, and people say, we can’t afford it and it’s ridiculous. And then three months in to the new year when you couldn’t have imagined this in December, when Andrew Yang was talking about this stuff.
Brett King: (45:34)
Suddenly, here we are with, yup, let’s pay people 1,200 bucks. So it’s surprising how quickly this could change. But do you think from a learning perspective, from a policy perspective, there’s still the challenges of the US… and coming as an outsider, I find it interesting, where you’ve got this capitalism is like at the really core and the heart of America and how America perceives itself. But there’s elements of the capitalist system that obviously need reform out of this.
Brett King: (46:10)
But from a policy perspective, how do we get united on this to say this crisis has taught us that while individuality is great and individual rights are important, we failed to address the needs of society in pursuit of those goals. Is there a way we can bring people together on that stuff?
Adrienne Harris: (46:33)
Yeah, I think, this is going to be just another event and we had sort of started moving this way as a society toward more conscious capitalism. Some people call it the stakeholder capitalism. I think this is really going to accelerate a lot of those conversations, whether they’re policy conversations or thinking about just the ways the private sector conducts itself.
Adrienne Harris: (46:56)
We saw this with the Business Roundtable and its statements a couple months ago. I think we’ve seen micro examples with some big CEOs giving up their salaries, so that they could continue to pay workers. So how we end up baking this in from a policy standpoint, it’s going to be a longer term question. But I think there’s no doubt in my mind that from both the public and private sectors, this is going to be just an important moment in how we think about a capitalist society and how we really want it to look and be shaped.
Brett King: (47:26)
Greg Palmer: (47:28)
So if we look at the banking crisis of 2007, 2008, and look at how that really laid bare a lot of the inefficiencies and the places where the system wasn’t what it needed to be, that was brutally exposed in that moment. I think what we’re seeing now is the same type of thing where we’re seeing these flaws in our current political and societal systems being brutally exposed in this way.
Greg Palmer: (47:54)
And so the question of what happens from a policy standpoint going forward, I think depends a lot on how severe a lot of the consequences end up getting. But if you look at the pieces that were set up in the United States that have made… the social safety net, such as it is, largely came about through a very painful moment in our history, the Great Depression. And FDR was able to put a lot of those things in place in that moment, and then people are-
Brett King: (48:18)
The New Deal coming off the back of the Second World War. Yeah.
Greg Palmer: (48:22)
Right. I don’t think it’s necessarily there yet, but if this turns into a crisis of that magnitude, I think it’s a lot easier to see that type of substantive policy change. If this clears up in a month or two months, we’re back to business as usual, and everybody just sits around scratching their head thinking, boy, that was weird. And we now-
Brett King: (48:43)
Except we’ll have increased the debt by $6 trillion or something.
Greg Palmer: (48:49)
I have the debts from my generation to worry about. You don’t need to worry about that-
Brett King: (48:55)
I’m not that much older than you.
Greg Palmer: (48:57)
You can put that and the rain forest in the same category, just like to be addressed later.
Adrienne Harris: (49:05)
I think part of the hope coming out of this is that this will invigorate or reinvigorate more of a common sense of purpose as we think about ourselves as Americans, as global citizens. And as we think about the role of the public and the private sectors.
Adrienne Harris: (49:17)
I think some of the most powerful things coming out of this now and that will continue to come out of this or are the ways the public and private sectors can work together. I think that’s going to go a long way to shaping how we think about capitalism in particular in this country.
Brett King: (49:32)
Well, that’s a positive note to finish on. So, Adrienne Harris, thanks for joining us on both the Finovate and Breaking Banks podcasts today. How do people get in touch with you? How do they find out and listen to your stream of consciousness on social media?
Adrienne Harris: (49:47)
Oh, man, so CodeXCoasts is my Twitter and Instagram handles and you can find me there.
Brett King: (49:56)
We’ll put it on the social media feed out.
Adrienne Harris: (49:57)
Yeah. That’d be great. But thanks for having me. It was great chatting with you both.
Brett King: (50:00)
Fantastic. And Greg, thanks for helping us out on the show this week.
Greg Palmer: (50:04)
Yeah, my pleasure.
Brett King: (50:05)
That’s it for Breaking Banks for this week. With obviously a lot of content around coronavirus right now, it’s top of mind. But we’ll be back with more good stuff on the fintech sector and how we’re coping with this in the coming weeks. If you’re a fan of the show, or it’s your first time listening, make sure you tweet us out. Say hello, let us know how we’re going. Let us know if there’s stuff you’d like to see on the show.
Brett King: (50:29)
If you’re a listener on iTunes and Stitcher or Google Play, make sure to leave us a five star review, that helps other people find us. And of course, we’ve got a back catalog of more than 300 episodes that you can listen to as well. So don’t forget to check out our other podcasts like Finovate. You can go to provoke.fm to check those out.
Brett King: (50:50)
But you’re listening to Breaking Banks. I’ve been your host Brett King, along with Greg Palmer, and we will see you again on Breaking Banks next week. Bye.
That’s it for this week. Thanks to our guests who help make the show possible. You may have a little more time on your hands right now. So you can listen to all of our more than 300 shows, plus episodes from all of our other shows, including Breaking Banks Europe, Tech on Reg, the Finovate podcast and more all on provoke.fm. I hope you’ll like them. And if so, that you’ll get all the shows five stars and share them with others. Stay home if you can, take care of your loved ones. Let’s all work together to move this industry forward and to make it stronger than ever. That’s it for this week. We’ll see you again next week with more Breaking Banks.