Interview with Brigit Co-founder, Zuben Mathews

And FDIC Report: How America Banks, Unpacked

Reality Check: Some Surprising FDIC Stats

If you follow me on LinkedIn or Twitter, you already know how excited I was about this report and data set. If you’re in US consumer financial services, the executive summary is well worth a read.

The Numbers Are In, And People Don’t (Generally) Hate Their Big Bank

97.3% of banked households were “very” or “somewhat” satisfied with their bank.

92.1% thought their bank communicated fees “very” or “somewhat” clearly.

If you inhabit the fintech startup ecosystem, it’s easy to get the impression that most consumers “hate their big bank” and are besieged by “hidden fees”.

While this may be true for some populations (lower income, high income volatility), the reality is, most consumers are satisfied with their primary bank and believe fees are communicated clearly. Several people raised the point that, as a survey response, this is only measuring users’ perception of fee transparency.

Even if perception doesn’t match reality, this data point still undermines the use of “no hidden fees” and “transparency” in challenger bank marketing positioning.

31.1% Use Peer-to-Peer Payments*

Including services like Venmo, Cash App, and Paypal. Unlike, other “non-bank financial services,” usage has a positive correlation with income:

*remember, this is at the “household” level, and it’s not uncommon for consumers to use multiple services, so it won’t compare directly to MAU numbers reported by the services.

Unbanked Households Hit A Low

5.4% of US households are unbanked (~7.1 million households). A low since the survey began in 2009. A reminder that this is defined as “no one in the household having a checking or savings account at a bank or credit union”.

It’s unclear to me if a user of Chime, Dave, etc. thinks of these as a “checking or savings account at a bank” and how they would answer this question.

Of unbanked households, 56.2% were “not at all” interested in having a bank account, primarily driven by respondents who had never had a bank account.

The top cited reasons for not having a bank account: “Not enough money to meet minimum balance requirements” (48.9%) and “Don’t trust banks” (16.1%).

Notably, “bank locations are inconvenient” was only selected by 14.1% - undermining the idea of ‘bank deserts’ as a barrier to access.

Unsurprisingly, the unbanked population is lower income (household income less than $30,000) and is more likely to report ‘a lot’ of variation in income month to month; together, this makes them more likely to be hit with fees and less able to afford them.

Branches Are Dead; Long Live Branches?

Households reporting “bank teller” as their primary method of account access continued to decrease, but still comprise 21% of households.

“Online banking” peaked in the 2015 survey (36.9%) and has declined to 22.8% as “Mobile banking” replaces it, with 34% reporting it as their primary access method in 2019.

It’s worth noting that, despite the continued growth of Online + Mobile as a primary access method (a combined 56.8% in 2019), 83% of banked households visited a branch at least once in the past year, down only slightly from 86% in 2017.

Older households, rural households, and those with higher income volatility were more likely to visit bank branches with greater frequency.

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Interview: Zuben Mathews, Co-founder and CEO of Brigit

I’ve been keenly interested in how financial services can enable consumer financial health since stumbling into my first job in finance 10 years ago.

Having worked at a number of consumer lenders, I know first-hand how difficult it is to align corporate success (revenue, profits, your next funding round) with customer success.

Creating a business model with aligned incentives is exactly what Zuben Mathews is attempting to achieve with Brigit. What follows is my interview with him.

For those that aren't familiar, what does Brigit do? What motivated you to start the company?

Brigit is a financial health app helping everyday Americans build a brighter financial future. Our members benefit from a suite of transparent, fair, and simple tools to help them spend wisely, have access to emergency funds and save. These features include Budgeting and Financial Literacy tools, Instant Advances and Automatic Overdraft Protection, and Credit Monitoring and Identity Theft Protection.

We are grateful that in less than two years we have served 2 million members.

Personal Story:

Both my co-founder (Hamel) and I have personal stories that led us to start Brigit. For me it was the financial anxiety I felt in college waiting days for my paychecks to arrive. Living on the edge, I recall the significant financial stress that impacted every aspect of my life including my grades. Being an immigrant, I didn't have a credit score, and thus no Bank would give me a credit card or a fair loan. Reluctant to approach friends for money, I ended up spending thousands in overdraft fees (a fraction of the $30 Billion banks make today) and eating Snickers for several nights to avoid my hunger pangs (Their ad campaign - “Hungry, get a Snickers” really works!).

Having experienced the pain driven by a system designed to hurt the average Joe financially, I wanted to use my experience in finance & technology to help people avoid what I went through.

There are a lot of fintech startups focused on customers facing income volatility or with less than perfect credit, many of which offer loans or loan-like products. How is Brigit different?

We are different in every way including our product features, business model but most importantly the way we think about our customers. These apps you mentioned and even banks profit from their users’ financial stress. They want their users to remain financially unhealthy because they make more money when their users struggle.

We on the other hand believe in empowering our members. This is why we take a holistic approach at solving the financial health of our members and use technology to give meaningful insights at the right time, leading to better financial outcomes. We are helping our members manage their spending, making it easier for them to earn extra cash, and helping them avoid predatory fees. We don't believe the problem starts and ends at providing advances alone. Though that is needed from time to time, we want to make sure our members have additional tools that help them to avoid borrowing in the first place, instead helping them to save.

In addition, our business model is aligned with our users' incentives to borrow less and save more. Unlike traditional banks or lenders who profit off of people’s misfortune, Brigit’s company’s financials improve only as our members' personal finances improve. We have a flat monthly subscription and we never charge any other fees including no hidden fees, late fees, instant transfer fees, interest, or bully people for “tips.”

"Financial education" and "financial health" have become popular themes both in fintech and more broadly.

Is Brigit intended to improve its users' financial education or financial health?
If so, how does Brigit achieve this? How do you measure this improvement?

Our aspiration is to improve financial health in the country. We help our members achieve their goals via numerous features in our product including providing financial literacy & budgeting tools.

We believe an improvement in financial health leads to a reduction of financial stress. For our users, the average American, this stress is caused due to a lack of money between paychecks, high fees for borrowing or overdrafting and an inability to save.

Financial education delivered in the right format at the right time is a fundamental tool to help people improve their financial situation especially long term, thus it is an important tool Brigit uses to help our users improve their Financial Health.

Measurement

We measure the success of our company based on the financial improvement of our members. For example, according to 3rd party research, we have helped our members save $514 annually from excessive fees, and 91% of our members have experienced a “significant” reduction of stress since joining Brigit.

What is the biggest misconception people have about Brigit's target customers?

Brigit has cleared misconceptions such as people who live paycheck to paycheck are irresponsible and would be better off if they only stopped going to Starbucks etc. Such statements are made by the privileged class. The fact remains, despite America being the wealthiest country, we have over 100 Million Americans living paycheck to paycheck with an average pay of about $40,000 annually.

Some might call Brigit's approach a payday loan in disguise or an end-run around legislation to protect consumers.
How would you respond to them?

First and foremost, we believe people should be skeptical about any new product that is this different, especially in a world where the “system” including the banks that are supposed to help people in need have taken advantage of people's misfortunes. An overdraft is a 5000% APR, a Payday lender gives you $300 knowing that on average you will pay $520 in interest alone, all while credit scores are archaic and discriminatory.

We at Brigit take a holistic approach to Financial Health and spend a significant amount of our resources delivering a product that includes Budgeting, Financial Literacy, Identity theft protection in addition to providing Emergency Advances.

If we were only interested in making deep profits like the Banks and other lending apps, we would take the easy route that lenders and banks take to incite people to borrow more and more often. We are different - we have linked the financial success of our company to our members' success and aligned our incentives with them. Due to our transparent & flat monthly subscription model - that includes all our features, we do not benefit if our members borrow more and more often. In fact the company benefits as our members save, borrow less and achieve their financial goals.

In addition, our radically different approach has attracted social impact investors and advisors including the Omidyar Network, Corey Stone (former CFPB) and other well known advocates of financial improvement for the underserved population.

Have you had any conversations with regulators about Brigit's approach? If so, what has the reception been?

We maintain an open dialogue with regulators, industry experts and other organizations who can have a positive impact on the financial health of our nation. In short, most true experts have a deep understanding of the problems that exist and are focused on protecting the consumer which is our focus as well.

Given this alignment on consumer protection, yes, the reception has been extremely positive to Brigit. The fact that we save our users over $500 annually, encourage savings and promote financial literacy with a business model that is transparent and aligned with our users incentives helps us truly stand out.

In addition, we have made our data and findings available to several research & non profits organizations including FinReg Labs, and are working with the Financial Health Network as well as Commonwealth.

At a flat $9.99/month (including instant transfer), do the unit economics work?

Transparency and a fair pricing model is an important part of our ethos. We never charge any additional fees for anything including instant transfers as you pointed out.

We are in it for the long run and we and our investors including Lightspeed, DCM, NYCA... believe that an aligned business model with our customers is the right model for our business.

Anything I haven't asked about readers should know about Brigit?
Are we hiring? Yes! At all levels. Please apply at Brigit.com :)