Transcript
Welcome to Money Isn’t Everything. I’m Mary Wisniewski, Cornerstone Advisors editor-at-large. Every other Thursday, we bring on a guest who is shaking up financial services in some way, and we get into the why, how, and possibilities.
This episode is a conversation with Frida Leibowitz. I found out about her by watching her demo a product at Finovate a while back, and she really struck me. She’s the CEO of Debbie, and she’s doing something really cool, namely reinventing rewards.
Debbie rewards consumers for paying down debt and saving, and partners with financial institutions to make it happen. She also has experience having worked at Goldman Sachs’ Marcus.
In this episode, we’re getting into some of the challenges of building Marcus. We’re also getting into how to develop an uplifting money app and how credit unions can attract younger consumers as members.
Let’s just get on with it. Here’s my conversation with Frida.
Frida, welcome to the show, Money Isn’t Everything. So excited to have you on.
Thank you for having me.
Yeah, it’s a pleasure. I can already tell.
I wanted to get right into your background of having worked at Goldman Sachs and, presumably, having unlimited resources to build Marcus. Clearly, you’re no longer there, but I’m wondering what that experience might have revealed to you and what you’re building now.
We’ll get into Debbie very shortly, but let’s start there.
For sure. I kind of like to say that me even getting to Marcus was totally, I guess, some twist of fate or something weird. I wasn’t planning on it.
I was actually an intern in investment banking that same summer that Marcus was launching. I heard about it and thought, “Hey, I’m way more passionate about this than I am investment banking.” That’s kind of how I ended up there.
At that time, Marcus was this really cool startup inside of Goldman. It was a small group of people who were just starting the thing, and they came from different areas of finance or tech.
You’re right, we had this idea of unlimited resources. You could build a startup, but you have Goldman behind you. You’ve got this huge balance sheet. You have all these resources. You can hire quickly. You can grow quickly.
It was really exciting and awesome at first, but it’s as much a curse as it is a blessing. When you have too many resources and you’re just focusing on, “What’s next? What’s next?” and growth at all costs, you run into the same exact issues that all the other startups who didn’t have unlimited resources eventually ran into.
You realize that it’s not a sustainable way to build.
I think it was a very exciting time, and at first Marcus was a very exciting project. It had a lot of promise. I can talk a lot about the things that maybe didn’t go as well and also the reasons why I eventually left and didn’t really see myself growing with Marcus.
But it was a cool experience building a startup with unlimited resources. It also taught me how important it is to actually have limited resources, and I think that has proven true for me as a founder now having to build with limited resources.
Yeah, I think that’s really fascinating. I definitely do want to get into some of the lessons learned because I’m sure you’re applying them now at Debbie.
But just to set the stage for listeners, Debbie is a really interesting product. I heard you demo at Finovate at least a year ago, I’m pretty sure, and I was like, “Hey, this is really cool.” You are really rethinking a business model in a way that will surprise financial services.
Give us the elevator pitch of Debbie, what you’re doing with paying down debt and savings, and the rewards program.
Yeah, for sure. Debbie is reinventing how rewards work in financial services.
Today, the best example of rewards that we know is credit card rewards. We are getting rewarded for spending more, and that is not serving the 90% of Americans who are not super secure financially and don’t really need to be rewarded for spending more money.
So, we decided to completely flip that.
Debbie is the first rewards program that works with financial institutions to actually reward you for positive financial behavior.
Imagine that every time you pay down your debt, you get points. Every time you add money to your savings account, you get points. When you reduce spending in certain categories, you get points.
The idea is to align those activities with activities that are also eventually profitable for the financial institutions, but are really focused on long-term, simultaneous growth as opposed to being taken advantage of and the old-school model of banks charging people high fees and keeping them in debt forever.
Well, you queued me up perfectly because we’re doing a segment called “That’s What You Said.”
I’m dating it back to Reddit, when you wrote in a thread, I think it was just a thread, “We’re proving that rewarding users for positive financial habits is much more effective than punishing them for bad ones, like using late fees, credit score hits, etc.”
Clearly, that’s what you’re still doing.
Wow. At first, when you were like, “I’m going to read the Reddit,” I’m like, “Shoot, what did I write? I hope it made sense.”
But you picked a good one.
I’ve said a lot of things over time, and I’m like, I have to make sure the things I say now, knowing that eventually you’ll dig back into it.
But no, that was, and by the way, that stands true.
That ties back to what you asked me before about lessons learned at Marcus.
What I learned was that squeezing the consumer to a point and then using the stick to try to keep them in line by hitting them with late fees and things like that is a very short-term gains model.
What you end up having is your best customers, the ones that are doing super well, have much higher attrition. They don’t feel like they’re getting rewarded for loyalty. You’re not really growing alongside them, so they’re leaving.
The people who stay are more and more likely to keep going farther down the hole, getting trapped in these fees.
When you look at the behavioral psychology of it, consumers who get hit with fees once are way more likely to get hit with fees a second time. After a second time, they’re way more likely to get hit a third time because, at some point, you just get used to negative reinforcement.
Whereas if you look at positive reinforcement, if you were to engage in preventative measures and really give people this positive reinforcement for on-time payments, they’re never going to get sick of that. They’re going to keep coming back for that reward. That’s how our human brain works.
I’m so glad you brought that up too because our first guest on the show was Ethan, who founded Digit, who kind of set the tone of making playful encouragement messages and text messages when he launched Digit originally.
So, he sort of got that conversation going. But it’s so cool that you’re doing this at Debbie through paying down debt.
I know the bankers out there listening will be like, “Ah, what is happening here?” But it’s so important.
I think it shows what’s been missing in financial services, which is empathy, viewed through even a mobile app. If someone’s logging in and seeing that negative net worth, and it can be quite negative, why would they want to sign in again?
I’m curious about the different ways that you try to cultivate a more positive experience when it’s definitely dark. It’s an area of shame for people.
Yeah, you’re hitting the nail on the head because that’s why users actually love logging into the Debbie app. The first thing they see is how many rewards they earned.
That’s something you want to keep coming back to. You want to keep checking how much you earn, and you want to keep earning more.
I think that’s also why so many of the PFM apps didn’t really do well and didn’t really help people.
We get a lot of our users coming to us and saying, “I’ve used those, but they just make me feel horrible about myself. I see all these charts showing me that my net worth is negative, my savings are decreasing, my debt is increasing. This isn’t what’s going to make me feel good.”
The problem is old-school, traditional financial literacy. There’s this whole paternalistic approach that has been happening in financial services, especially in the financial literacy space, that’s like, “Oh, we need to educate the people. They need to face the truth. They need to know the numbers.”
The thing is, that’s usually coming from people who’ve never struggled financially.
That’s, again, what I learned when I was in the industry. I felt like most of the people that I worked with were smart people, awesome people, even compassionate. It’s not that they weren’t. They’d just never been there themselves, and they didn’t understand what it’s like or what you’re going through in that moment.
Forget about empathy just for the sake of empathy. If you really want to build a winning product, you want to get that loyalty. You want to get the ones who are doing well to stay with you and the ones who are struggling to be motivated to come out of that struggle and get back to on-time payments.
You have to think about the consumer’s experience.
It’s not mushy stuff. Them feeling good about it is actually going to translate. We’ve been able to literally create data models around this where we show all that mushy stuff translates to better on-time payments. It translates to better financials.
So, 100%, building empathy into the product is important as a moral principle, but it’s also important because we’ve built it into our business model. When we have more empathy, when the consumer does better, our business does better.
I think it’s important for all financial services firms to think that way.
No, I completely agree with you.
It’s curious too because I’ve definitely had a go at writing personal finance stories in previous years, and I’m like, “Wow, this is really not going to help anybody unless someone just has a quick question.” It’s just not helpful.
I know one of the things you said somewhere, it might have been another podcast even, was that the content isn’t around, “What is compound interest?” It’s more like what to do in a decision moment.
Give us an example of what that kind of approach looks like. What kind of content are you serving up to users?
I love it. I feel like you could just do this podcast without me. You know everything.
I don’t know everything at all.
You could just be like, “Mary asks a question. Mary answers the question.”
But no, that’s the thing we talk about all the time.
Traditional financial literacy is very focused on educating you with the numbers. Traditional financial literacy will say exactly what you were talking about, like, “What’s compound interest? How does APR work?”
You need to know your stuff, the technicals.
When the truth is, the technicals aren’t going to help you make better decisions, just like knowing how many calories are in a cookie isn’t going to stop you from eating a cookie. That’s just not what moves the needle for most people.
For us, the Debbie curriculum really is a lot more about: What did you see at home growing up? How do you control your impulses? What are different mental strategies for how to trick your brain?
We give people tips like, “Hide money from yourself.”
These are real things that I did when I started. I literally would take some portion of my paycheck, move it to a different bank account that was really hard for me to access, and I purposely made it hard for me to access.
That’s how I played tricks on my mind to pretend the money isn’t there and put it away.
Those are real things that people actually use, and that actually gets them places. It moves the needle for them.
I think focusing on these things that were previously seen as emotional, behavioral things is more and more proving to be what statistically moves the needle for people.
I think that’s just really cool.
Here’s a perfect place to talk about customer acquisition, which still has to be tricky, as it is for any startup. How do you go after this particular market?
Yeah, great question. So, we are a B2C play. We partner with financial institutions, primarily credit unions right now.
Some of our users actually come directly from their credit union if they’re referred by them. The credit union will also have, many times, a really strong presence in their communities and locally.
We have universities, for example. Michigan State University Federal Credit Union is one of our partners, so they have access to the campus. Sometimes we’ll get people that way.
But we also do a lot of our own direct-to-consumer acquisition.
There’s been this big scary thing in fintech in the last couple years, especially since everything kind of collapsed. Everyone’s so scared of CACs and this and that.
But the truth is, when you figure out how to create a better working capital model and create a really low CAC by reaching product-market fit earlier, it works.
Going back to that idea of having little resources, we had to figure out how to get a lot of users cheaply, quickly, get paid for them fairly quickly, and have a more efficient working capital model so that we could reinvest the money and get more.
How it works at Debbie is, first of all, our CAC is pretty low because we’re telling people they can earn free money.
We figured out how to offer them free rewards, straight-up free cash, for good behavior. The financial institutions actually pay for it.
We figured out this model where you’re getting all this benefit for free, and the financial institution is sponsoring you. We’re figuring out how to align incentives there.
Selling consumers free money isn’t difficult. That part, we’ve gotten the CAC really low.
Then on the working capital model piece, the way it works is that from the second you enter Debbie, if you don’t already come through one of our partner credit unions, you’ll be paired with a credit union in our network, and they’re going to pay for that acquisition immediately.
That means as soon as you sign up, Debbie gets paid back.
We spend money, we acquire users, we get them in, but we immediately get them sponsored by a party.
We’re really creating a more efficient marketplace model where that match happens immediately.
Since we’ve moved to this model, that’s helped us grow a lot faster and be able to turn over.
I imagine you’re solving, I mean, we haven’t talked about what your average age is here, but credit unions are well known for having older members. I think our data shows late 40s.
Is this a need you’d be solving for your credit union partners?
100%. Yeah, exactly.
When we started talking to credit unions, we realized that they’re awesome. They’re not-for-profit financial institutions. They offer all these great services, and their tech isn’t so awesome.
But they’re working on it.
Their marketing is really lacking. They have nothing.
Right. Way to say it.
Some of them are getting really good. Our partners, I would say, are doing a much better job now with their digital presence.
But exactly what you’re saying. The stat that I have is that the average age of a credit union member is 53, and they’ve really been struggling to figure out how to get those different consumers.
Tech is one piece of it, but the other thing is credit unions need to figure out how to be more special and how to play their game.
Their whole thing is that they care about people. They’re not-for-profit. They want to invest in people’s financial wellness.
We’re like, “Perfect. This is a match made in heaven.”
Young consumers need help right now. They need someone who’s going to care about them, who’s going to sponsor their financial education and all this other stuff.
When I say financial education, I mean that more behavioral side, improvement, and getting to a better place.
Credit unions really want to access those young consumers, and that’s how we get it done.
Yeah, that is how you get it done.
Would you ever work with a bank?
Great question. Yes, definitely. It’s on the roadmap.
If the right partners come along, I would say it has to be a very mission-driven bank.
It’s not because we’re not for-profit. We are for-profit. We care about that.
But we really do believe at our core that the mission-driven piece is why our brand has been so strong. Even though we’re small, we’re mighty.
It’s the reason why I wake up in the morning to build this thing. I think that the day that Debbie won’t stand for the mission is the day that I will not be motivated to do this anymore.
I think the rest of our team would probably say the same.
Right. No, I get that.
When I’m working on certain projects, I’m like, “Yes, this is what’s working.”
What about, I mean, Mint just closed down, and I know we were kind of saying the gaps in traditional PFM, but did you get customers who left Mint?
Great question. We’re not really an alternative to Mint. Actually, a lot of our users were using it. It’s a complementary service.
We don’t really offer as many of those PFM services. More and more, our users are asking us for it, so we’re probably going to build more of it.
But I don’t see us becoming, we’ll probably partner for that. I think it’s a different focus area.
I think that’s another lesson learned from the Marcus days: stay focused. Build one thing and build it really, really, really well. Don’t try to become the one-stop shop for everything.
Well, let’s talk about that more because you’ve mentioned limited resources being actually kind of a benefit.
Let’s unpack that a bit. What have you found from working at Goldman Sachs to now building Debbie? How are the limited resources helping?
Yeah, great question.
It keeps you focused. When you have limited resources, you don’t have a choice. You have to do one thing, and you have to do it really well.
At any point in time, you’re a small team, so you’re working on one or two things at most. If those things aren’t working, you switch very quickly.
You don’t have time. We’re startups. We’re literally looking at our burn and our runway every week. We’re like, “Okay, this is how much time we have left.”
If something isn’t working, you’re going to move very quickly and switch it up.
I think that very well-funded startups are absorbed by this to an even higher degree. When you have all this money, you have a lot of time for your mistakes to keep sitting there. Maybe you’re waiting. You’re not really as motivated.
The other thing is what happened to Marcus. There wasn’t really a focus.
I joined when we just had one product in market, and that was the consumer personal loans. Before we even had a chance to become really good at that, we had already acquired Clarity Money. We started doing savings accounts with GE.
It’s not that they weren’t good products. It’s just that you’re not going to become an industry leader in any of those categories if you are doing all of them at the same time.
It doesn’t matter how much money you have.
That was crazy to me. It’s something I remember that we talked about a lot. It doesn’t matter how much money we have. You just can’t do all of it at the same time.
Yeah, wow. It’s one of those things that totally makes sense, but it still sounds surprising because you think resources are usually the thing that helps something succeed.
Yeah. But focus, as an organization, you have to stay focused.
At some point, more resources don’t actually help. It creates a lack of focus and too much going on.
I’m not surprised that this happened at Marcus. Listen, Marcus came out of Goldman. Goldman is run by investment bankers who want to close deals. That’s their model.
They’re like, “Okay, we close deals. So, let’s do acquisitions. Let’s partner with Apple. Let’s buy some stuff. Let’s acquire things. Let’s partner with companies.”
It’s a different mentality when you’re building a startup. You can’t think like that. You’re not constantly running, making deals, and partnering with everyone. You’re staying very focused.
Well, in staying really focused, one thing I was reading about that sounded really cool is your community of people trying to help each other through Debbie.
Tell me some of the stories that have happened there. They’re sharing tips, right? Am I understanding that right?
Yeah, they’re sharing tips.
This is one of the proudest moments I think that we’ve had as a team because, when we started, anybody who’s tried to launch a community knows it’s very, very hard.
There are also so many communities out there already. People have so many different apps, social media forums, WhatsApp groups, whatever else they’re in.
It’s very hard to create that organic interaction.
I remember, now I can admit this because it’s a while later, but in the beginning, I literally created multiple profiles, like Facebook profiles, and I made them talk to each other.
I literally was talking to myself and just started it so it looked like people were talking in the group.
That’s what it takes in the beginning. Listen, if anybody wants to hack it, I think that’s how it worked.
That’s really funny. I have a quick aside.
I used to have to run a debt collection social media site. This was a bad thing that they did versus what you did, which totally makes sense. They would pose as attractive women to get someone to accept their friendship.
So, that was just another thing.
No, no, no. Never that.
All of my fake friends were just mine. I only had them actually linked to my Facebook profile and talk to my Facebook profile or to each other.
Right. You’re illustrating how to have a conversation or how to be vulnerable in something that’s probably...
I’m always one of those, it’s funny because I tell my team this, I can be a good liar short-term, but I always have to eventually confess.
Eventually, I had to tell everyone, “Okay, these were not real people. I just had to create them so we could start having a group.”
Now I feel a little bit relieved when I confess. I’m like, “Okay, yeah. I told everyone the truth, so now it’s better.”
But what ended up happening, which was super cool, is a few months in, our users just started talking to each other and helping each other and being there.
Even to the point where if someone had a question about the product or they had a bug, another user would answer them.
Someone was like, “Hey, I’m trying to link XYZ account. It’s not working.”
The other user was like, “Okay, you have to do these steps, and this is how.”
I was like, “This is the power of building a community.”
You could be so much more powerful as a platform, as a company, if you figure out how to really leverage your user base and make them your best advocates.
The other really cool thing that’s happening in the community is that we have a couple of these super users now who have pretty much started, on their own, becoming these local ambassadors for Debbie and sharing it with a lot of people in their neighborhoods, especially ones who are engaging in community activities.
Once you watch that take off, you’re like, “Whoa.”
I feel like a really proud teacher. I’m watching everyone else just do the thing and then become even better and be able to do way better than my little fake profiles. They’re doing a way better job.
I’m curious, do you have one piece of advice for, probably more of a credit union than a bank, that sincerely wants to help people improve their financial outcomes?
I know there have been a lot of attempts in the past that have spectacularly failed, and they’ve spent all kinds of money.
With these two things sort of weighing on each other, what would you say to the credit union that still wants to do something but maybe feels a bit defeated at this point?
Yeah. A lot of us are going to feel defeated.
There have to be a few delusional founders like us who are just going to be like, “Well, we’re still going to try to solve this problem, and we’re going to figure it out.”
I think we are figuring it out. It’s really promising. Our users really are paying off three times more debt. They’re adding 15 times more money to their savings accounts. These things are real, and it’s working.
But if you’re feeling defeated, and this is like with any failures, really try to understand why things failed.
If you’ve never been in debt yourself, if you’ve never struggled financially, if you’ve never been in a place where you didn’t have enough money in your savings account for an emergency, then at least go out there and talk to people.
You have access as a credit union. You definitely have people in your community, in your membership base, who have been there.
Try to understand why they would or would not do something.
It all ties back to behavioral economics. It’s very simple concepts. It’s not rocket science.
As soon as you understand behavioral economics and incentives, where the incentives are today, and also think about it from a young person’s perspective.
I was at a credit union conference last week, and I think some of the older population couldn’t understand why young people really need to travel all the time.
Put yourself in the young person’s shoes. What are they doing? What are they experiencing? What are their friends doing? What’s interesting to them right now?
Failure is frustrating when you don’t really understand why or you don’t know how to come back from it.
At least from my perspective, the more I’ve dug into my failures and understood them, the more I felt in control again and felt that I could fix it.
The more you understand why existing solutions or older solutions have failed, what people are feeling, what’s motivating them, and tie that back to basic behavioral economics concepts, the more you’ll feel like, “Okay, I know what can work in the future.”
Yeah. I feel like one of the disconnects too is, tell me if this is your customer base too, but there are a lot of gig workers out there, and a typical bank or credit union really doesn’t know how to offer tools that help someone with volatile income.
It’s been a problem since gig working started. Do you feel like this heightens the disconnect?
100%.
Volatile income, but also more and more complex situations.
We’re adding another question to our onboarding because this keeps coming up for us. We’re adding a question about relationship status.
There are so many different relationship statuses now, way more than there were 30 years ago, and that is important because it actually impacts people’s finances significantly.
It matters if you’re in an, we have one of the options as, “It’s complicated.”
If you’re in an “it’s complicated,” you are going to have other considerations and other things.
There are so many more variations in situations. Some people have gig economy jobs and regular jobs, or they have that plus an hourly job.
Even though I know we’re getting very advanced with this AI, ML, blah, blah, blah, blah, blah, it’s great stuff, which, as you can tell, I’m a bit of a skeptic on just the extent of how far those can go.
I think they can be tools to empower people, but I don’t think they can know everything.
At the end of the day, we still need to figure out how to empower people to make their own decisions because they understand their situation best.
You won’t understand it.
What you need to do is set them up for success. Put the right incentives in place. Show them the path. Be able to offer them solutions for different things.
But you’ve got to empower them to guide themselves because only they know all the intricacies of whatever is going on in their lives.
I love that. I love that because you’re removing the patronizing thing that often happens. It’s like, yes, the person does know best.
Yeah, exactly.
Also, you’re removing all this pressure from yourself. I think if we had to figure out exactly what everybody needs to do and build these really...
I think right now we’re just not there where we’re able to fully understand someone and everything that’s going on in their lives and all the situations.
We also get people who tell us that they’re dealing with mental health issues. That directly ties to their finances.
People who deal with disabilities. I actually just had a user feedback call, and they gave me this whole overview of how disability benefits work.
They’re actually really complicated, and it takes a long time to get your money sometimes. They have to wait a long time to get their payments.
There are so many factors that can impact someone’s financial life.
So, yeah. I’m more in the camp of empower the people.
Empower the people.
I’m glad you mentioned the mental health thing too, and the disability thing, because I feel like that’s slowly but surely bleeding into fintech and probably digital banking in years to come, which will be a curious experience to witness.
I feel like that’s going to be an important emerging trend.
I know we’re coming on time, but I wanted to open it up to you. I have one last question, but is there anything else you’d like to share with the listeners while we’re on today?
No. I think that, depending if you feel like it will be helpful to you, you can always go sign up at JoinDebbie.com.
I’m still paying off debt, still working on my habits, so I’m sure there are a lot of people who could benefit. If you just want to educate yourself, then go for it.
If you are a bank or credit union, please reach out to us.
We actually just today signed our fifth credit union partner.
We started off the year with two, and now we’re more than double. It’s very exciting. We’re really growing.
Any bank or credit union that’s looking to attract and engage young consumers, please reach out to myself or find us on the website.
What’s the best way? Should they go on LinkedIn? Should they go on your website? Is the contact info there?
Any of the above. But the easiest way to book a demo is just go to JoinDebbie.com/partners.
Well, okay. Last question then for you. What is the image on your phone’s lock screen?
Oh, that’s a great question. I don’t even remember now. I’ve got to check that.
I know. Check that.
Actually, in work mode, it’s a picture of my motorcycle.
I love that that’s your work mode photo.
Yeah. I don’t know why, but let me see if I can pull it up, if it’ll show it. The motorcycle. I guess you can see it now.
Oh yeah. How cool.
You ride a motorcycle?
I ride a motorcycle.
I said, “Drive.” It just shows my lack of...
So far, I’m a roller skater, so...
That works.
Yeah. Something on wheels.
Something on wheels. Like inline, right? Skating is the one with the...
Roller skating is four wheels.
Oh, four wheels.
Four wheels, yeah.
So, you know, we could race one day and you’ll win.
Actually, I’m like a grandma rider. I always say that. I’m such a careful rider. I just do my thing. I’m going slow. I don’t go crazy at all.
Well, that’s probably safe, though.
Yes.
Frida, thanks so much for being on Money Isn’t Everything. It has been a true delight, so thank you so much.
Thank you for having me.
Okay, the biggest thing I learned today is unlimited resources can be a curse, scrappy startups build communities by talking to themselves, and I don’t know anything about motorcycles.
If you enjoyed the show, and I really hope that you did, give it a rating and subscribe because I don’t want you to miss the next guest.
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