Steady's COO on Finhealth, Helping Users Earn & Shaquille O'Neal
Steady's COO on Finhealth, Helping Users Earn & Shaquille O'Neal
CFPB Warns Small-Dollar Lenders, Goldman Cleared on Apple Card Discrimination, IL Gov Bans Loans Over 36%
Hey all, Jason here.
The conversations in fintech around financial health tend to revolve around borrowing, spending, saving, and investing — no doubt all important topics. But that leaves out perhaps the most important part of the equation — earning.
This week, I’m pleased to bring you an interview with the COO of Steady, an app focused on helping users improve their financial health by connecting them with employment and income opportunities and even help them find government resources for which they may qualify.
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COO of Steady, Oz Uzuner, on Financial Health, Helping Members Earn More, and Shaquille O’Neal
Ozgur Uzuner is Chief Operating Officer at Steady, an app that helps its over 2.5 million members build a better financial future by connecting them with income opportunities, employer and income insights through its income tracker, tools and education that encourage financial health, and even government support.
Prior to Steady, Ozgur spent 4+ years building and running the small-dollar lending business at LendUp (where, full-disclosure, he was my boss). He is a growth guy at heart and is really passionate about scaling and operating mission driven businesses.
What follows is our written interview.
Jason: What does the 'typical' Steady member look like? How are they using the app - are they looking for supplementary income, or is it users' primary means of earning?
Ozgur: A typical Steady member looks like an individual who is looking for income opportunities, primarily in the gig economy as well as shift/hourly work. Steady members get access to over a million job/income earning opportunities which are tailored to their needs based on their profile.
Also, Steady members who connect their bank account get access to our income tracker, which provides financial insight and recommendations based on community data.
Jason: What is a typical Steady user's relationship to financial products - are they more likely to use a 'challenger' bank like Chime or Varo? P2P payments, like Cash App? Be "underbanked" (use non-bank financial services like money orders, small-dollar loans)?
Ozgur: Based on our data we can see a large percent of our members using challenger banks like Varo & Chime. We built our proprietary technology in-house that enables us to clean the raw transactions we see in our members’ connected bank accounts, and we generate insights on income vs. other categories such as lending. And you are right, we are seeing a decent number of transactions for non-bank financial services.
Jason: Part of Steady's value proposition is enabling its users to improve their financial health. Do you have a sense of what that idea — 'financial health' — means to your users? How does Steady measure if it’s succeeding in improving users' financial health?
Ozgur: Absolutely, financial health definitely starts with earning “Steady” income. We are measuring our impact on our members’ financial health regularly and share that analysis here, based on our data Steady members increase their income by $5,500 per year.
Jason: COVID and the ensuing economic climate have had enormous and sometimes counter-intuitive impacts on the economy, financial system, and employment. What have you noticed from your vantage point at Steady? How has it impacted Steady's users -- and your business?
Ozgur: Thanks to our proprietary technology we have been able to track Covid’s impact on our members’ financial health very closely. Unfortunately, we have been seeing a consistent drop in our member’s income due to Covid and the current economic climate. We publish a weekly update on our website where you can see the latest stats showing COVID 19’s impact on our members and the industries they work within.
Jason: Having worked on both the “lending” and “earning” sides, you have a pretty unique perspective of low/moderate and income volatile consumers; what is the greatest misperception you've heard of this segment? What more can be done to better serve these consumers?
Ozgur: Great question! As we both know, unfortunately being poor is expensive, meaning the cost of getting access to credit increases significantly when people don’t earn enough income. And the expensive options they generally use to get access to credit end up hurting them even more, especially in the long run.
I decided to focus on the income side of the equation, as I firmly believe that if we can help people earn more and steady income, using data & technology, their financial health will improve a lot faster. I think any business/product out there helping people to make better income decisions can generate a material positive impact in this segment’s financial health.
A lot people think that this segment is not good at managing their finances, which leads to income volatility, which is a misperception, as 1000s of Steady members we did research with showed us that they have various ways to manage their income effectively, as long as they are able to earn that income!
Jason: How is acquiring users for Steady different than other products you've marketed? Any learnings on channels that particularly out-perform or under-perform?
Ozgur: Let me put my growth head to answer this question!
Based on my 10+ years growth experience I can tell you with great confidence that key to a successful growth strategy is defining your product-market fit, building a successful BI/Analytics ecosystem (to support your tracking/attribution) and testing every variable possible.
We definitely had great success with online channels like Google, Facebook, etc. and have been building partnerships with other companies/products that are catering to our target audience. I would suggest our fellow growth hackers to stay away for “incentivized” app install networks which might help you make your top of funnel metrics look good, however, likely your unit economics, retention etc. KPIs will show you a very different story.
Jason: You've also progressed in your career from marketing to management - currently as COO. How did you make this progression? What skills from your marketing background prepared you -- and what skills do you wish you had learned sooner?
Ozgur: I have a bachelor degree in economics, and I’m pretty good with numbers. I believe the path to a successful career in marketing/growth and C-level roles starts with an analytical mindset and believing in the power of data & insights.
Making my decisions based on data, prioritizing my work on a regular basis and getting things done on time helped me throughout my career. I wish I was introduced to OKRs format/framework a lot earlier in my career as it drastically changed the way I operate my teams/business.
Also this article, ‘Give Away Your Legos’, has been very inspiring when I made a lot of decisions that helped me move my career from marketing/growth to management.
Jason: The 'hottest' areas in fintech, which tend to attract the most investment, are focused on helping users borrow or spend money. There are fewer focused on helping users save money. Steady is designed to help its users earn money. How has this distinction impacted Steady's business model and ability to raise capital?
Ozgur: I think we are in a pretty unique position given the technology we built to help our members earn more and steady income, which gets better as we add more members to our community. Like we discussed earlier, one of the most important decisions you can make in your life is about income and our goal is to help you make the best/calculated income decision.
Our primary stakeholder is not the employers, like most of the alternatives/competitors in market, but our members and our ability to digest our members’ data at individual as well as community level to provide ways to increase their income puts us in this unique position. Hence the success of our business model so far and our ability to raise capital to do bigger & better.
Jason: OK, I've got to ask - Shaquille O'Neal is a spokesperson for Steady. How did that come about? As a marketer, how to you assess the effectiveness of an initiative like that?
Ozgur: Shaquille O'Neal has been with us from very early days, and he is an investor rather than a spokesperson as he genuinely believes in our mission and is really passionate about it.
Our CEO had a relationship with him before Steady, and I think this was a natural match given our mission and Shaquille O'Neal’s passion about helping people. On the marketing side we definitely use our testing framework and use data/insight to see what resonates with our members.
We also conduct regular user research to better understand the effect Shaquille O'Neal is having on the marketing/growth/UX side.
Jason: Anything I didn't ask about Steady that I should have?
Ozgur: Thank you so much for this opportunity, and I think you asked great questions already. Our mission and ambition is to become an income advisor using the power of data, technology and community and thank you again for talking to me and giving me the opportunity to briefly share our story.
NYDFS: No, Goldman Didn’t Discriminate Against Women Applying for Apple Card
It all started with a tweet:
@dhh, or David Heinemeier Hansson, is the well-known founder and CTO at tech company Basecamp and creator of programming language Ruby on Rails.
Steve Wozniak, Apple co-founder, responded that the same happened to him and his wife, quickly turning the incident into a major media story and, eventually, investigation by the NY Department of Financial Services, regulator of Goldman’s Goldman Sachs Bank USA, a New York State-chartered bank.
A year plus later, and the NYDFS report is in: no fair lending violations found. This shouldn’t come as a surprise to anyone familiar with the mechanics of credit risk underwriting and line assignment and the Equal Credit Opportunity Act (ECOA).
For people interested in income/wealth inequality and fair lending issues, the full report is worth a read for its background on discrimination in lending and how the current framework may perpetuate historical discrimination.
For example, the report states (emphasis added):
“Even when credit scoring is done in compliance with the law, it can reflect and perpetuate societal inequality. It is not unlawfully discriminatory for a lender to consider income, assets, credit history, and similar factors to predict likelihood of default of an applicant.
However, because these same variables often reflect the nation’s long history of racial and gender discrimination, even the exclusive consideration of such financial characteristics does not prevent that history of discrimination from affecting credit scores and, consequently, access to credit.
Lack of access to affordable and quality credit perpetuates inequality by imposing on those with fewer resources higher costs in paying for necessities, and inhibiting the ability of the poor to build wealth.”
CFPB Blog Puts Small-Dollar Lenders on Notice
Earlier this week, interim CFPB Director Dave Uejio published a short post on the agency’s blog effectively putting small-dollar lenders on notice.
While the agency eventually did issue a final rule on small-dollar lending under the Trump administration, it lacked key requirements on assessing affordability and repeat borrowing opposed by many in the industry.
Interim Director Uejio’s post demonstrates the CFPB, under Biden, is still focused on the affordability problem (emphasis added):
“Years of research by the CFPB found the vast majority of this industry’s revenue came from consumers who could not afford to repay their loans, with most short-term loans in reborrowing chains of 10 or more. One-in-five payday loans, and one-in-three vehicle title loans, ended in default, even including periods of reborrowing.”
While re-introducing rulemaking around the ability to pay provisions of the original rule could be a lengthy process, Uejio doesn’t rule it out. But even without new regulation, the bureau has other tools at its disposal — including the somewhat vaguely defined “abusive” prong of UDAAP. The CFPB recently rescinded guidance that somewhat limited how it could apply this authority.
Again from the post, Uejio states (emphasis added):
“…the Bureau believes that the harms identified by the 2017 rule still exist, and will use the authority provided by Congress to address these harms, including through vigorous market monitoring, supervision, enforcement, and, if appropriate, rulemaking.
The Bureau continues to believe that ability to repay is an important underwriting standard. To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.”
IL Gov Signs Bill Banning Loans Above 36% APR, Limiting Options for Small Loans
Illinois Governor JB Pritzker has signed the so-called Predatory Loan Prevention Act, which caps rates on consumer loans at 36% APR. On the surface, capping APRs sounds like a win for consumers; however, the reality is a bit more complicated.
Most consumers using credit products that charge over 36% are doing so because they don’t qualify for a sub-36% product. Capping rates at 36% won’t change that — it just means those consumers have fewer legitimate borrowing choices.
As has been well-documented, even for well-qualified borrowers, small-dollar loans can carry a high APR. Because fixed costs are relatively high as a proportion of the loan size, the breakeven APR on small loans is high.
Capping APRs at 36% is a de facto ban on smaller loans — potentially pushing consumers to borrow more, as only larger loan sizes are available, or to access credit via expensive sources like bank overdrafts.
When California capped charges on installment loans at 36% interest, there was an uptick in high APR tribal installment loans in the state; tribal lenders, which don’t have to comply with state laws, often have fewer borrower protections than state-licensed lenders.
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